ST.

VINCENT COLLEGE OF CABUYAO

Brgy. Mamatid, City of Cabuyao
Laguna 4025

GOVERNMENT GRANT
PAS 20, paragraph 3, defines government grant as “assistance by government in the form of transfer of resources to an entity in return
for part or future compliance with certain conditions relating to the operating activities of the entity”.
Recognition and measurement
Government grant, including nonmonetary grant at fair value, shall be recognized when there is reasonable assurance that:
a. The entity will comply with the conditions attaching to the grant.
b. The grant will be received.
Classifications of government grant
a. Grant related to assets
This is government grant whose primary condition is that an entity qualifying for the grant shall purchase, construct or otherwise
acquire a long-term asset.
b. Grant related to income

This is government grant other than grant related to asset.

Accounting for government grant

Government grant shall be recognized as income on a systematic basis over the periods in which an entity recognized as expense the
related costs for which the grant is intended to compensate.

PAS 20 provides that “grant in recognition of specific expenses shall be recognized as income over the period of the related expense”.

PAS 20 provides that “grant related to depreciable asset shall be recognized as income over the periods and in proportion to the
depreciation of the related assets.”

PAS 20 provides that “grant related to non-depreciable asset requiring fulfillment of certain conditions shall be recognized as income
over the periods which bear the cost of meeting the conditions.”

PAS 20 provides that “government grant that becomes receivable as compensation for expenses or losses already incurred or for the
purpose of giving immediate financial support to the entity with no further related costs shall be recognized as income over the period
in which it becomes receivable.”

Presentation government grant

1. Grant related to asset
a. By setting the grant as deferred income.
b. By deducting the grant in arriving at the carrying amount of the asset.
2. Grant related to income
a. The grant is presented in the income statement, either separately or under the general heading “other income”.
b. Alternatively, the grant is deducted from the related expense.
Repayment of government grant
Repayment of a grant related to income shall be applied first against any unamortized deferred income and any excess shall be
recognized immediately as an expense.
Repayment of grant related to an asset shall be recorded by increasing the carrying amount of the asset.
A government grant that becomes payable because of noncompliance with conditions shall be accounted for as a change in accounting
estimate.
Grant of interest-free loan
The difference between the face amount of loan and the present value is recognized as the discount on note payable and grant
income to be amortized over the term of the loan of three years using the effective interest method.
Government assistance
Government assistance is action by the government designed to provide an economic benefit specific to an entity or range of entities
qualifying under certain criteria.
Examples:
a. Free technical or marketing advice
b. Provision of guarantee
c. Government procurement policy that is responsible for a portion of the entity’s sales.
Disclosures about government grant
a. The accounting policy adopted for government grant, including the method of presentation adopted in the financial statements.
b. The nature and extent of government grant recognized in the financial statements and an indication of other forms of government
assistance from which the entity has directly benefited.
c. Unfulfilled conditions and other contingencies attaching to government assistance that has been recognized.