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Statement of Financial Accounting
Standards (SFAS) 20
Accounting for Government Grants and
Disclosure of Government Assistance
IAS 20 (reformatted 1994) prescribes the accounting for, and disclosure of,
government grants and the disclosure of other forms of government assistance.
Following is a summary of the more significant provisions of IAS 20 (reformatted
1994).
- Government grants are assistance by
government in the form of transfers of resources to an enterprise in return
for past or future compliance with certain conditions relating to the operating
activities of the enterprise. Government assistance, on the other hand,
is action by government designed to provide an economic benefit specific
to an enterprise or range of enterprises qualifying under certain criteria.
- Government grants should not be recognized
until there is reasonable assurance that (a) an enterprise will comply with
the conditions attaching to them; and (b) the grants will be received.
- Government grants should be recognized
as income over the periods necessary to match them with the related costs
which they are intended to compensate, on a systematic basis. They
should not be credited directly to stockholders’ equity.
- Government grants related to assets
should be presented in the balance sheet either by setting up the grant as
deferred income or by deducting the grant in arriving at the carrying amount
of the asset.
- A government grant that becomes repayable
should be accounted for as a revision to an accounting estimate. Repayment
of a grant related to income should be applied first against any unamortized
deferred credit related to the grant and the excess, expensed immediately.
Repayment of a grant related to an asset should be recorded by increasing
the asset carrying amount or reducing the deferred income balance.
The cumulative additional depreciation that would have been recognized to
date as an expense in the absence of the grant should be recognized immediately
as an expense.
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