GRANT RELATED TO ASSETS Grant related to assets is for purchase or construction of long-term assets. Conditions may be attached to the grant, specifying the type of asset that should be purchased with the grant or the location of the assets or the period in which they are to be acquired or held. For grant related to assets, IAS 20 allow two methods for accounting for it as follows:

Method 1 –Deduct grant from the cost of the related assets. The asset is included in the statement of financial position as cost minus the grant while the Net amount is depreciated over the useful life of the assets.

Method 2 – Treat the grant as deferred income and recognize it as income on a systematic basis over the useful life of the assets.

GRANT RELATED TO INCOME This is any other government grants, other than grant related to assets. For grant related to income. IAS 20 states that the ‘INCOME APPROACH’ should be used and the grant should be taken to income over the periods necessary to match the grant with the cost that the grant is intended to compensate. IAS 20 allows two (2) methods as follows:

Method 1 –Include the grant for the period as other income for inclusion in profit or loss for the period.

Method 2 – Deduct the grant for the period from the related expenses.