IAS 20: Government Grants

FR – May 2021 – L2 – Q2b – Accounting for Government Grants under IAS 20

Explain how government grants and tax reliefs should be accounted for under IAS 20

Question

Tango Ltd, a manufacturer and supplier of cashew products, has recently established a new facility in Damongo. To help in this new operation, Tango Ltd has secured support from the Government of Ghana and is unsure how the grants are to be accounted for in the financial statements. The company has a year-end of 30 April 2021, and all the following transactions took place on 1 May 2020.

i) A grant of GH¢150,000 was paid to a company to allow it to settle its outstanding accounts payable and prevent it from going into liquidation.

ii) A grant of 50% tax relief, the net effect of which is estimated at GH¢85,000 per annum, for establishing a manufacturing company in the area to provide employment for the youth.

iii) Tango Ltd receives a grant of GH¢300,000 towards the acquisition of a machine costing GH¢500,000. The machine has a useful life of five years.

Required:
Explain how each of the above should be accounted for in the financial statements of Tango Ltd for the year ended 30 April 2021, in accordance with IAS 20: Accounting for Government Grants and Disclosure of Government Assistance.
(6 marks)

Answer

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Tags: Disclosure of Government Assistance, Government Grants, IAS 20, Tax Relief
Level: Level 2

Topic: IAS 20: Government Grants
Series: MAY 2021

FR – July 2023 – L2 – Q2c – Government Grants (IAS 20)

Accounting treatment of a government grant in Pampaso Ltd after partial repayment due to non-compliance.

Question

Pampaso Ltd is a fruit processing company listed on the Ghana Stock Exchange with a financial year-end of 31 December. The trial balance for the year ended 31 December 2021 showed a credit balance for government grant of GH¢1,800.

As part of the Local government’s initiative to stimulate employment of fresh graduates from Tertiary institutions in the locality, Pampaso Ltd received a grant of GH¢3 million towards the purchase of additional production machinery on 1 January 2019. The company, accordingly, acquired additional production machinery costing GH¢3 million on that date. The condition attached to the grant was for Pampaso Ltd to employ at least three fresh graduates every year over the estimated five-year useful life of the production machinery. Since January 2019, the company has only recruited one fresh graduate annually.

The non-compliance of the company with the conditions attached to the grant has come to the attention of the Local government, and as a result, the company was instructed on 1 January 2021 to repay 50% of the grant received within eighteen months. Pampaso Ltd uses the deferred income method in accounting for government grants.

Required:
Advise Management of Pampaso Ltd on the accounting treatment of the grant in accordance with IAS 20: Accounting for Government Grants and Disclosure of Government Assistance for the year ended 31 December 2021.
(Total: 7 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Deferred Income, Government Grants, IAS 20, Repayment
Level: Level 2

Topic: IAS 20: Government Grants
Series: JULY 2023

FR – May 2021 – L2 – Q2b – Accounting for Government Grants under IAS 20

Explain how government grants and tax reliefs should be accounted for under IAS 20

Question

i) A grant of GH¢150,000 was paid to a company to allow it to settle its outstanding accounts payable and prevent it from going into liquidation.

ii) A grant of 50% tax relief, the net effect of which is estimated at GH¢85,000 per annum, for establishing a manufacturing company in the area to provide employment for the youth.

iii) Tango Ltd receives a grant of GH¢300,000 towards the acquisition of a machine costing GH¢500,000. The machine has a useful life of five years.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Disclosure of Government Assistance, Government Grants, IAS 20, Tax Relief
Level: Level 2

Topic: IAS 20: Government Grants
Series: MAY 2021

FR – July 2023 – L2 – Q2c – Government Grants (IAS 20)

Accounting treatment of a government grant in Pampaso Ltd after partial repayment due to non-compliance.

Question

Answer

Find Related Questions by Tags, levels, etc.

Tags: Deferred Income, Government Grants, IAS 20, Repayment
Level: Level 2

Topic: IAS 20: Government Grants
Series: JULY 2023

Topic: IAS 20: Government Grants

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FR – May 2021 – L2 – Q2b – Accounting for Government Grants under IAS 20

Explain how government grants and tax reliefs should be accounted for under IAS 20

FR – July 2023 – L2 – Q2c – Government Grants (IAS 20)

Accounting treatment of a government grant in Pampaso Ltd after partial repayment due to non-compliance.

FR – May 2021 – L2 – Q2b – Accounting for Government Grants under IAS 20

Explain how government grants and tax reliefs should be accounted for under IAS 20

FR – July 2023 – L2 – Q2c – Government Grants (IAS 20)

Accounting treatment of a government grant in Pampaso Ltd after partial repayment due to non-compliance.

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FR – May 2021 – L2 – Q2b – Accounting for Government Grants under IAS 20

Explain how government grants and tax reliefs should be accounted for under IAS 20

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FR – July 2023 – L2 – Q2c – Government Grants (IAS 20)

Accounting treatment of a government grant in Pampaso Ltd after partial repayment due to non-compliance.

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FR – May 2021 – L2 – Q2b – Accounting for Government Grants under IAS 20

Explain how government grants and tax reliefs should be accounted for under IAS 20

You're reporting an error for "FR – May 2021 – L2 – Q2b – Accounting for Government Grants under IAS 20"

FR – July 2023 – L2 – Q2c – Government Grants (IAS 20)

Accounting treatment of a government grant in Pampaso Ltd after partial repayment due to non-compliance.

You're reporting an error for "FR – July 2023 – L2 – Q2c – Government Grants (IAS 20)"

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