- 10 Marks
PSAF – L2 – Q8.2 – International Public Sector Accounting Standards
Question
Bilateral grants were received from a number of friendly governments in 2023 amounting to NGN125 million. The Federal Government of Nigeria is unlikely to comply with some of the conditions for the bilateral grants from one country amounting to NGN15 million included in bilateral grants received. The Federal Government of Nigeria has already complied with grant conditions in respect of a grant from a Global Development Agency amounting to NGN22 million which is yet to be received. The probability of receipt of this grant in a month’s time from December 2023 is very probable.
Required:
Show the accounting treatment for the grant revenue in the books of the government as at 31st December 2023.
Answer
The treatment of grant revenue falls under IPSAS 23: Revenue from Non-Exchange Transactions.
The bilateral grant of NGN125 million received is treated as an increase in asset (cash), however only NGN110 million qualifies to be recognised as revenue since the conditions associated with NGN15 million have not been met. The NGN15 million grant should be recognised as a deferred grant in the statement of financial position.
Grants are ordinarily recognised as revenue when received, however when conditions precedent the release of the grant to government, revenue should be recognised as revenue receivable when the conditions are met. So in this case, the amount of NGN22 million should be recognised as revenue and recognised as grant revenue receivable.
Therefore, in the financial statements of 2023, the total grant of NGN132 million will be recognised as revenue. The grant of NGN22 million is recognised as an asset and NGN15 million recognised as a deferred grant.
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