Government Grants (IAS 20)

@ahmed9729 said:
Hi!

I have a question regarding Government Grants (IAS 20)
We know that we have 2 options to recognize government grants if relates to Assets, either we deduct from the purchase price of asset and avail reduced depreciation charge, OR we can recognize it as deferred income

What will happen if this type of grant is not actually provided from the government or governmental body? Will the same standard be applied then? Because I am working in a company where the grant is received from the mall management who reimburses the cost incurred on the purchase of assets, up to 1 million

Thanks for your help in advance!

first you need to look into the substance of the transaction. Now that mean that this transaction doest not meet following objectives of IAS20

“The main objective of IAS 20 is to prescribe the accounting for and the disclosure of
* The government grants – simply speaking, these are the actual resources, whether monetary or non-monetary, transferred to an entity by a government, in most cases upon completion of some conditions;
* The government assistance – these are other actions of the government designed to provide some economic benefit to an entity, for example free marketing or business advices.”

So you need to see what is the purpose of purchased property? is it land and building or some other assets?

if that is related to land or building then it must account under IAS 40 investment property.

so if you are applying cost model under IAS 40 then you have two options same as IAS 20 but if you are applying revaluation model you have to deduct grant amount from the value of asset. and ultimately when you revalue the asset it will account of the grant effect in profit and loss as revaluation effect of investment property goes to profit and loss.

I hope that helps.