Forgivable loan
Under IAS 20, a forgivable loan from government is treated as a government grant when there is reasonable assurance that the entity will meet the forgiveness terms. The grant is then recognised in profit or loss systematically over the periods in which the related costs are recognised. A non-government loan and a below-market government loan require separate assessment of the applicable requirements.
Worked example
A government lends $100,000 to fund a two-year training programme and forgives repayment if agreed targets are met. Once reasonable assurance of compliance exists, account for the loan as a grant and recognise grant income systematically against the related costs.
Common mistake
Automatically treating every forgivable loan as immediate income, or applying the IAS 20 government-grant rule to a private lender without further analysis.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FR | Supporting | September 2026–June 2027 |
| ACCA | SBR | Supporting | September 2026–June 2027 |