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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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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.
24.7 Disclosures
24.7.1 Extract from FRS102: Section 24.6 – 24.7
24.6 An entity shall disclose the following: (a) the accounting policy adopted for grants in accordance with paragraph 24.4; (b) the nature and amounts of grants recognised in the financial statements; (c) unfulfilled conditions and other contingencies attaching to grants that have been recognised in income; and (d) an indication of other forms of government assistance from which the entity has directly benefited.
24.7 For the purpose of the disclosure required by paragraph 24.6(d), 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.
24.7.2 OmniPro comment
24.7.2.1 Analysis
See below illustration of the disclosure requirements in Section 24.6 of FRS 102. Company law in addition to Section 24,5G of FRS 102 does not allow the grant to be netted against the cost of the asset in the balance sheet. Usually deferred grants would be shown separately on the face of the balance sheet or included within the ‘provisions and liabilities’ line in the balance sheet.
24.7.2.2 Accounting policies
Example 16: Extract from an accounting policy note in the financial statements
24.7.2.2.1 Example using an accruals model
Government grants Government grants are recognised at their fair value when it is reasonable to expect that the grants will be received, and all related conditions will be met. Grants that relate to specific capital expenditure are treated as deferred income which is then credited to the profit and loss account over the related asset’s useful life (i.e. an accruals basis). Revenue grants are credited to the profit and loss account when receivable so as to match them with the expenditure to which they relate. Government grants received are included in ‘other income’ in profit or loss
24.7.2.2.2 Example using the performance model
Government grants are recognised when it is reasonable to expect that the grants will be received and all related conditions will be met. Grants that relate to specific capital expenditure are treated as deferred income which is then credited to the profit and loss account once the performance conditions of the grant have been met. Revenue grants are credited to the profit and loss account when the performance conditions for the grant are fulfilled.
24.7.2.3 Notes to the financial statements
Example 17: Extract from the notes to the financial statements – note on government grants (capital grant)
DEFERRED INCOME – GOVERNMENT GRANTS
| 2015 | 2015 | |
| CU | CU | |
| Capital grants received and receivable | ||
| At beginning of year | XXX | XXX |
| Received during the year (see (i) below) | XXX | XXX |
| At end of year | XXX | XXX |
| Capital grants amortised | ||
| At beginning of year | XX | XXX |
| Amortised during the year | XX | XXX |
| At end of year | XXX | XXX |
| Net book value | XXX | XXX |
Under agreements between the Company and XXXX Development Authority dated on various dates between XX/XX and XXX, the Company has a contingent liability to repay in whole or in part grants received amounting to CUXXX if certain circumstances set out in those agreements occur within five years of receipt of the final instalment of each grant. The amounts received under these agreements amounted to CUXXXXX. During the year the Company received a grant of CUXXXXX towards the construction of its factory.
Example 18: Extract from the notes to the financial statements – note disclosing contingent liabilities
Contingent liabilities Under an agreement between the company and the Industrial Development Agency, the company has received certain revenue grants amounting to CUXXXX which may be revoked, cancelled or abated in certain circumstances.
Example 19: Extract from the notes to the financial statements – note disclosing grant amortisation and government grants received
OPERATING PROFIT WAS ARRIVED AT AFTER CHARGING
| 2015 | 2014 | ||
| CU | CU | ||
| Depreciation | 149,999 | 170,037 | |
| Government grants – training grant | (212,000) | (225,600) | |
| Grant amortisation | (1000) | (1,000) | |
| Research and development tax credit | 13,000 | 13,000 |
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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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