Grant related to an asset
IAS 20 permits presentation as deferred income or deduction from the asset’s carrying amount. Recognise the grant in profit or loss systematically over the periods in which the related asset’s costs are expensed. Apply the recognition threshold of reasonable assurance that conditions will be met and the grant received. For a non-depreciable asset, associated conditions may require costs over a number of periods.
Worked example
A company receives a $50,000 grant for a machine with a five-year useful life. Under deferred-income presentation and straight-line depreciation, $10,000 is recognised as grant income each year, assuming the recognition conditions are satisfied.
Common mistake
Recognising the full grant immediately on receipt despite matching depreciation over five years, or assuming there is only one permitted presentation.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FR | Direct | September 2026–June 2027 |
| ACCA | SBR | Direct | September 2026–June 2027 |