Accounting Alerts

COVID-19 Accounting Considerations for CFOs: Government Grants

This Accounting Alert is issued to provide guidance in determining the appropriate accounting treatment for government grants.

Background

As a response to the COVID-19 global pandemic, governments around the world are implementing measures to help businesses and economies get through it. The nature of government grants can take on various forms such as below market rate loans, short-time working subsidies, relief funds, income-based tax credits to name just a few. While many forms of government assistance should be accounted for by applying PAS 20 because they meet the definition of government grants in PAS 20, others should be addressed by other standards such as PAS 12.

Four Key Questions for CFOs

This accounting alert is issued to discuss four key questions CFOs should consider prior to determining the appropriate accounting treatment.

  • Is the government assistance in the scope of PAS 20 or another standard?
  • What is the correct recognition and treatment?
  • Is it recognized in the correct period?
  • How should the assistance received from governments be presented in the financial statements?

Entities need to assess the economic substance of any government assistance they are receiving to determine the appropriate accounting treatment. Entities that have not previously received a government grant may need to develop an accounting policy in relation to the assistance received and how it has been reflected in the entity’s financial statements. In some instances, significant judgments from those charged with governance may be required to determine which accounting standard best reflects the economic substance of the assistance that has been received by the reporting entity.

 

See attached Accounting Alert for further details.