[et_pb_section bb_built=”1″ admin_label=”Header – All Pages” transparent_background=”off” background_color=”#1e73be” allow_player_pause=”off” inner_shadow=”off” parallax=”off” parallax_method=”off” make_fullwidth=”off” use_custom_width=”off” width_unit=”on” make_equal=”off” use_custom_gutter=”off” custom_padding=”0px||0px|” next_background_color=”#000000″ custom_padding_tablet=”50px|0|50px|0″ custom_padding_last_edited=”on|desktop” global_module=”1221″][et_pb_row admin_label=”row” global_parent=”1221″ make_fullwidth=”off” use_custom_width=”off” width_unit=”on” use_custom_gutter=”off” custom_padding=”||5px|” allow_player_pause=”off” parallax=”off” parallax_method=”on” make_equal=”off” parallax_1=”off” parallax_method_1=”off” background_position=”top_left” background_repeat=”repeat” background_size=”initial”][et_pb_column type=”4_4″][et_pb_post_title global_parent=”1221″ title=”on” meta=”off” author=”on” date=”on” categories=”on” comments=”on” featured_image=”off” featured_placement=”below” parallax_effect=”on” parallax_method=”off” text_orientation=”left” text_color=”light” text_background=”off” text_bg_color=”rgba(255,255,255,0.9)” module_bg_color=”rgba(255,255,255,0)” use_border_color=”off” border_color=”#ffffff” border_style=”solid” custom_padding=”10px|||” parallax=”on” background_color=”rgba(255,255,255,0)” /][/et_pb_column][/et_pb_row][/et_pb_section][et_pb_section bb_built=”1″ fullwidth=”off” specialty=”off” transparent_background=”off” allow_player_pause=”off” inner_shadow=”off” parallax=”off” parallax_method=”off” custom_padding=”30px||0px|” make_fullwidth=”off” use_custom_width=”off” width_unit=”on” make_equal=”off” use_custom_gutter=”off” background_color=”#1e73be” prev_background_color=”#000000″ next_background_color=”#ffffff” custom_padding_tablet=”0px||0px|” global_module=”1228″][et_pb_row global_parent=”1228″ make_fullwidth=”off” use_custom_width=”off” width_unit=”on” use_custom_gutter=”off” custom_padding=”30px||0px|” allow_player_pause=”off” parallax=”off” parallax_method=”off” make_equal=”off” parallax_1=”off” parallax_method_1=”off” column_padding_mobile=”on” background_position=”top_left” background_repeat=”repeat” background_size=”initial”][et_pb_column type=”4_4″][et_pb_text global_parent=”1228″ background_layout=”light” text_orientation=”left” use_border_color=”off” border_color=”#ffffff” border_style=”solid” background_position=”top_left” background_repeat=”repeat” background_size=”initial”]
[breadcrumb]
[/et_pb_text][/et_pb_column][/et_pb_row][/et_pb_section][et_pb_section bb_built=”1″ fullwidth=”off” specialty=”off” transparent_background=”off” allow_player_pause=”off” inner_shadow=”off” parallax=”off” parallax_method=”off” padding_mobile=”off” make_fullwidth=”off” use_custom_width=”off” width_unit=”on” make_equal=”off” use_custom_gutter=”off” gutter_width=”3″ custom_padding_tablet=”50px|0|50px|0″ custom_padding_last_edited=”on|desktop” prev_background_color=”#1e73be” next_background_color=”#000000″][et_pb_row background_position=”top_left” background_repeat=”repeat” background_size=”initial”][et_pb_column type=”4_4″][et_pb_toggle admin_label=”Index” _builder_version=”3.0.106″ title=”Index” open=”off”]
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.
[/et_pb_toggle][/et_pb_column][/et_pb_row][et_pb_row background_position=”top_left” background_repeat=”repeat” background_size=”initial”][et_pb_column type=”2_3″][et_pb_text admin_label=”Main Body Text” text_orientation=”justified” use_border_color=”off” background_position=”top_left” background_repeat=”repeat” background_size=”initial” _builder_version=”3.17.6″]
The below extracts and guidance is applicable for periods beginning before 1 January 2019 and are based on the September 2015 version of FRS 102. For periods beginning on or after 1 January 2019, the March 2018 version of FRS 102 applies which incorporates the changes made by the Triennial review of FRS 102. Note the March 2018 version of FRS 102 can be voluntarily applies for periods beginning before 1 January 2019. For the extracts from the March 2018 version of FRS 102 and the related guidance please click on the following link. For details of a summary of the main changes as a result of the triennial review please see the following link.
24.1 Scope of this section
24.1.1 Extract from FRS102: Section 24.1 – 24.3.
24.1 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 specified conditions relating to the operating activities of the entity.
24.2 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.
24.3 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 (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.
24.1.1.1 OmniPro comment
24.1.2 Overview
Section 24 deals with the recognition, measurement and disclosure requirements for government grants.
24.1.2.1 Definition of government grant
Appendix I of FRS 102 and Section 24.1 of FRS 102 defines a government grant as ‘assistance by government in the form of a transfer of resources to an entity in return for past or future compliance with specified conditions relating to the operating activities of the entity’.
As stated in Section 24.3 of FRS 102, Section 24 does not cover government assistance that is provided for an entity in the form of benefits that are available in determining taxable profit (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.
It is clear from the above that government grants are only covered by Section 24. Old GAAP was broader in its application as it covered the treatment for government assistance that are available in determining taxable profits.
24.1.2.2 Treatment of research and development tax credits and similar assistance
Section 24 does not deal with how research and development tax credits should be treated. Under old GAAP entities had a policy choice to set the research and development tax credit against administrative expenses or the entity could post the credit to the tax line in the profit and loss account.
Given that research and development tax credits can be repaid in cash to the entity where there is no taxable profits to utilise the tax credit and given the detailed requirements to be met before a research and development tax credit can be claimed this may suggest that this would meet the definition of government assistance and therefore could be accounted for under Section 24 instead of Section 29-income tax. Which is what has been applied in practice. If on the other hand some other forms of investment credit had very few requirements, was not taxable and could not be reclaimed in cash if no taxable profit existed then this would indicate that it would come within the scope of Section 29 and therefore would be posted as a credit to the tax line in the profit and loss. This will mean significant judgement will be required in determining the way in which these should be treated.
24.1.2.3 Governments assistance interest free loans
Any interest free loans or non market rate loans in the form of government assistance is not within the scope of Section 24 instead this must be accounted for under Section 11 of FRS 102. See 11.6.2.4.5
[/et_pb_text][/et_pb_column][et_pb_column type=”1_3″][et_pb_toggle _builder_version=”3.0.106″ title=”Practical Examples” open=”off”]
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.
[/et_pb_toggle][/et_pb_column][/et_pb_row][/et_pb_section]