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Hi
i have general questions regarding government grants:1- when government pays a large aerodynamics company to manufacture fighter jets for country’s air force , is it a government grant if not then what is the accounting treatment for these kind of transactions and grants??
2- government give subsidies to different sectors and departments/companies, what are subsidies as i hear this word very often and what is the purpose of giving subsides?
Hi,
1. No this is part of a normal business transaction as the government is paying for the goods to then use them for themselves.
2. Subsidies are effectively a form of government grant given to companies/industries to help them increase their output. I doubt that you will see the word used in the FR exam though.
Thanks
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