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Section 24 – Introduction
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Section 24 – Analysis
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- Section 1
- Section 2
- Section 3
- Section 4
- Section 5
- Section 6
- Section 7
- Section 8
- Section 9
- Section 10
- Section 11
- Section 12
- Section 13
- Section 14
- Section 15
- Section 16
- Section 17
- Section 18
- Section 19
- Section 20
- Section 21
- Section 22
- Section 23
- Section 24
- Section 25
- Section 26
- Section 27
- Section 28
- Section 29
- Section 30
- Section 31
- Section 32
- Section 33
- Section 34
- Section 35
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- Section 1
- Section 2
- Section 3
- Section 4
- Section 5
- Section 6
- Section 7
- Section 8
- Section 9
- Section 10
- Section 11
- Section 12
- Section 13
- Section 14
- Section 15
- Section 16
- Section 17
- Section 18
- Section 19
- Section 20
- Section 21
- Section 22
- Section 23
- Section 24
- Section 25
- Section 26
- Section 27
- Section 28
- Section 29
- Section 30
- Section 31
- Section 32
- Section 33
- Section 34
- Section 35
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Section Downloads
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Contents
24.1.1 Extract from FRS102: Section 24.1 – 24.3.
24.1.2.1 Definition of government grant.
24.1.2.2 Treatment of research and development tax credits and similar assistance.
24.1.2.3 Governments assistance interest free loans.
24.2 Recognition and measurement.
24.2.1 Extract from FRS102: Section 24.3A – 24.5.
24.2.2.2.2 Fair value defined.
24.2.2.2.2.1 Fair value where non-cash items provided by way of grants.
24.2.2.3 Accounting policy choice and impact of change.
24.3.1 Extract from FRS102: Section 24.5B.
24.3.2.1 Definiton of performance related conditions.
24.3.2.2 Difference in treatment between revenue and capital grants.
24.4.1 Extract from FRS102: Section 24.5C – 24.5G.
24.4.2.1.1 Requirement to identify the type of grant.
24.4.2.3.2 Grants receivable/receivable towards the cost of non-depreciable assets).
24.4.2.3.3 Capital grant examples.
24.5 Classification in the profit and loss.
24.6.1 Extract from FRS102: Section 24.5A.
24.7.1 Extract from FRS102: Section 24.6 – 24.7.
24.7.2.2.1 Example using an accruals model.
24.7.2.2.2 Example using the performance model.
24.7.2.3 Notes to the financial statements.
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Downloads
Section 24 Government Grants Quick Guide (PDF) (104 downloads )
Summary
Section 24 deals with the recognition, measurement and disclosures for government grants. Government grants are assistance in the form of a transfer of resources to an entity in return for past or future compliance with specific conditions. It excludes transactions with governments that cannot be distinguished from the normal trading transactions of the entity.
What is new?
Government grants are recognised when there is reasonable assurance the entity will comply with the conditions to the grant and the grants will be received. This contrasts with old GAAP, where they could only be recognised when all the conditions for receipt had been complied with. This will allow an entity to recognise grants earlier.
Section 23 allows the grant to be recognised on the performance model or the accruals models. Old GAAP (SSAP 4) only allowed the use of the accrual model. The policy choice shall be applied on a class by class basis.
What is different?
Section 24 is narrower than old GAAP as Section 24 applies to government grants only. Section 24 does not apply to any other form of government assistance so judgement is required in this area where these situations arise.
What are the key points?
The government grant is recognised at its fair value when there is reasonable assurance the entity will comply with the conditions of the grant and that the grant will be received.
There is a choice to utilise the performance model or the accruals model for recognition of income.
Performance model allows recognition of the grant in the profit and loss:
- On recognition of the receivable where the grant does not impose performance related conditions; or
- When the performance related conditions are met.
Accruals model allows recognition of the grant in the profit and loss:
- Over the expected life of the asset and the amount deferred shown as a liability on the balance sheet; or
- Over a systematic basis over the period the entity recognises the cost where the grant is revenue in nature.
Where the performance model is chosen on transition, the method would need to be applied retrospectively, considering any existing grants receivable or received at the date of transition and whether performance conditions have been met.
Other standards affecting section 24 where differences arise:
Section 29 – Income tax- Where the performance model is adopted on transition there is a requirement to consider the deferred tax impact where the grant was/is taxable and any future adjustments to be made to the tax computation as a result.
What do accountants need to do?
Be aware of the differences between old GAAP and Section 23 and advise clients of the differences.
Highlight the policy choice available and advise clients on which model is most appropriate depending on the circumstances.
Where the performance model is adopted advise clients that this will require more judgement and a transition adjustment may be required. Advise clients of the benefit of this method in certain circumstances where entities are eager to show positive results.
What do companies need to do?
Be aware of the differences between old GAAP and Section 24.
Determine whether to adopt the performance model for accounting for government grants. This may escalate gains to the profit and loss which can be attractive for companies who want to maintain profits. However, they need to consider the transition adjustment if grants have been received prior to the date of transition and any deferred and current tax impact. This may have a positive or negative impact on distributable reserves.
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Examples
Example 1: Recognition as a receivable.
Example 2: Performance related model – revenue grant.
Example 3: Performance related model – revenue grant – conditions.
Example 4: Performance related model – revenue grant – no conditions.
Example 5: Performance related model – capital grant -conditions.
Example 6: Performance related model – capital grant – no conditions.
Example 6A: Performance related model – capital grant – no conditions.
Example 7: Accruals model – revenue grant.
Example 8: Accruals model – revenue grant 8
Example 9: Accruals model – capital grant – depreciable asset.
Example 11: Repayment of grant – capital grant – accruals model.
Example 12: Repayment of grant – revenue grant – accruals model.
Example 13: Repayment of grant – capital grant – performance model.
Example 13A: Repayment of grant – capital grant – performance model.
Example 14: Repayment of grant – revenue grant – performance model.
Example 15: Repayment of grant – revenue grant – performance model.
Example 16: Extract from an accounting policy note in the financial statements.
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Downloads
Section 24 Government Grants Detailed Guide (PDF) (127 downloads )
Website Links
Disclosures, Accounting Policies and Financial Statement Extracts
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Section 24 - Transition Adjutments (4 downloads )
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FRS 102 35 Part Differences Quick Guide (859 downloads )
FRS 102 35 Part Differences Guide (581 downloads )
FRS 102 Differences on Transition Checklist (1119 downloads )
FRS 102 Differences on Transition Examples Appendix (1092 downloads )
Fillable Differences on Transition Checklist (866 downloads )
Website Links
Difference Guide – Government Grants
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