GOVERNMENT GRANTS

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Government Grants

1 This section specifies the accounting for all government grants. A government grant is assistance by government in the form of a transfer of resources to an entity in return for past or future compliance with certain conditions relating to the operating activities of the entity.

2 Government grants exclude those forms of government assistance that cannot reasonably have a value placed upon them and transactions with government that cannot be distinguished from the normal trading transactions of the entity.

3 This section does not cover government assistance that is provided for an entity in the form of benefits that are available in determining taxable profit or tax loss, or are determined or limited on the basis of income tax liability. Examples of such benefits are income tax holidays, investment tax credits, accelerated depreciation allowances and reduced income tax rates. Section 29 Income Tax covers accounting for taxes based on income.

4 An entity shall recognise government grants as follows:
1. a grant that does not impose specified future performance conditions on the recipient is recognised in income when the grant proceeds are receivable;
2. a grant that imposes specified future performance conditions on the recipient is recognised in income only when the performance conditions are met; and
3. grants received before the revenue recognition criteria are satisfied are recognised as a liability.

5 An entity shall measure grants at the fair value of the asset received or receivable.

6 An entity shall disclose the following:
1. the nature and amounts of government grants recognised in the financial statements;
2. unfulfilled conditions and other contingencies attaching to government grants that have not been recognised in income; and
3. an indication of other forms of government assistance from which the entity has directly benefited.

7 For the purpose of the disclosure required by paragraph 24.6(c), government assistance is action by government designed to provide an economic benefit specific to an entity or range of entities qualifying under specified criteria. Examples include free technical or marketing advice, the provision of guarantees and loans at nil or low interest rates.