IFRS – IAS 20: Accounting for government grants and disclosure of government assistance

The International Accounting Standards Committee (IASC) released International Accounting Standard 20 (IAS 20) to address the topic of accounting for government grants and disclosing them.

As government assistance often comes in large amounts and can be subject to many regulations, it is important for investors to understand how much of the company’s strength comes from outside the organization as well as what strings may be tied to such assistance.

These address government grants and other forms of government assistance. Government grants are recognized as income in the periods matching the costs for which they were designated for. Regulatory matters such as restrictions must be met in order to recognize these, as well as assurance by the granting party that they are receivable for the company.

IAS are principles based standards, rather than strict rules based standards that govern international accounting. IAS standards differ from IFRS standards in that they were introduced prior to 2001, whereas IFRS were produced after this date by the IASB, or the International Accounting Standards Board. When determining the hierarchy of these, the IAS is considered to be the building blocks in which the newer and more relevant IFRS are founded and therefore IFRS is more authoritative when these conflict.

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