International Accounting Standard 20
The International Accounting Standard 20 (IAS 20) is an accounting regulation of the IASB . The standard has been applicable since January 1, 1984 and deals with the question of how government grants, such as investment grants, expense allowances, etc., should be dealt with in the bookkeeping and annual financial statements or annual reports of the receiving company or institution.
The IAS also describes the different forms of presentation permitted in the context of accounting or general accounting. The two most important forms of grants are differentiated according to whether they are funds for the financing of investments ( equity- like items) in the subsidized company or whether the funds serve to cover the expenditure for a certain service of the subsidized company in whole or in part (income - or expense allowances).
Government grants for the purchase of property, plant and equipment are either
- reduced by the acquisition or production costs of the funded asset or
- shown as deferred income, which is released to income over the term of the plant. In principle, only the even distribution over the useful life of the funded asset is permitted as a method.
Both forms of accounting lead to the same result of lower periodic expenses.
The immediate and complete recording of the grant as income for the current accounting period is excluded.
Another section deals with the repayment of government grants.
IAS 20 also formulates the scope of the required information on the type and scope of the benefits received in the annual financial statements and annual reports of the companies and institutions concerned. Accordingly, the following data must be disclosed for grants:
- The chosen accounting method
- The nature and scope of the grants granted, as well as the description of other public sector benefits from which the company has benefited
- Disclosure of unfulfilled agreements and other contingencies with regard to the benefits
