Philippine Accounting Standards

PAS 20 Government Grants

 PAS 20 Requirements & Scope
PAS 20 should be applied in accounting for
government grants.
 
PAS 20 also prescribes disclosure requirements
for government grants and other forms of
government assistance.
Government Grants
Government grants are assistance by
government in the form of transfers of
resources in return for past or future
compliance with conditions relating to
an enterprise’s operating activities.
 Government Assistance
Government assistance is action by government
designed to provide economic benefits when
qualifying criteria are met by an enterprise.
Examples:
Free technical or marketing advice
Provision of guarantees
Accounting for Government Grants

Recognition and Matching

A government grant should not be recognized until
there is reasonable assurance that:
• enterprise will comply with the relevant
conditions attaching to the grant; and
• the grant will be received.
 Recognition and Matching
Government grants should be recognized as
income over the periods necessary to match
them with the related cost that they are
intended to compensate. They should not be
credited directly to equity.
Grants related to income - unconditional
Government grants that compensate for past
expenses or losses or government grants
that are provided for the purpose of giving
immediate financial support are to be taken
to income immediately.
Grants related to income – conditional

• Grants in recognition of specific

expenses should be recognized as
income over the period of the related
expense.

International Accounting Standards-Training of Trainers 8

Grants related to depreciable assets -
conditional

• Grants related to depreciable assets

should be recognized as income over
the periods and in proportion to the
depreciation of the related assets.

International Accounting Standards-Training of Trainers 9

Grants related to nondepreciable
assets - conditional

• Grants related to non-depreciable assets

may also require the fulfilment of certain
obligations and would then be recognized
as income over the periods which bear the
cost of meeting the obligations. As an
example, a grant of land may be conditional
upon the erection of a building on the site
and it may be appropriate to recognize it as
income over the life of the building.
International Accounting Standards-Training of Trainers 10
Monetary and Non-Monetary Grants
In the case of a non-monetary grant, it is
usual to assess the fair value of the
asset and to account for both grant and
asset at the assessed fair value.
Presentation-Government Grants
Related to Assets

Government grants related to assets, including

non-monetary grants, should be presented
in the balance sheet as either:
• a deduction from the carrying amount of the
asset; or
• deferred income.
Presentation of the grant as an
offset against the asset

Example: Cost of acquisition: P1,000,000;

Useful life: 4 years; Government grant:
P200,000
 
Capitalize P800,000; annual depreciation
P200,000
Presentation of the grant as
deferred income
Example: Cost of acquisition: P1,000,000;
Useful life: 4 years; Government grant:
P200,000
 
Capitalize deferred income P200,000;
Capitalize P1,000,000, annual depreciation
P250,000; annual recording of Other
Income P50,000
Repayment of Grants

A government grant that becomes repayable

should be accounted for as a revision of an
accounting estimate.
 
The repayment of an income related grant
should be applied against any deferred
income balance, with any excess being
recognized immediately as an expense.
Disclosure
The following information must be disclosed:
• the accounting policy adopted for government
grants; methods of presentation
• the nature and extent of government grants
recognized; other forms of government assistance
from which the enterprise has directly benefited;
and
• unfulfilled conditions and other contingencies
relating to government assistance that has been
recognized.