IAS 20: Accounting for Government Grants and Disclosure of Assistance

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IAS 20 sets out the accounting treatment for government grants and the disclosure of other government assistance. Its main goal is to ensure that grants are reflected fairly in financial statements and matched appropriately with the related costs. Under this standard, a grant is only recognized when there is reasonable assurance that the conditions attached to it will be met and the grant will be received.

Government grants are typically categorized as either income-related or asset-related. Income-related grants are recognized in the income statement over the periods in which the associated expenses are incurred. Asset-related grants, such as those received to acquire equipment or build facilities, can be either recorded as deferred income or deducted from the cost of the asset. Both approaches aim to match the benefit of the grant with the depreciation or use of the asset over time.

IAS 20 also addresses situations where grants become repayable due to non-compliance, treating them as changes in accounting estimates. Non-monetary grants like land or equipment are usually measured at fair value. The standard requires clear disclosure of the nature, amount, and conditions of the grants received, helping stakeholders understand the financial impact of government support on the entity.

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