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IFRS permits the recognition of government grants once there is reasonable assurance that requisite conditions will be met, rather than waiting for the conditions to be fulfilled, as is usually the case under US GAAP. As a result, government grants may be recognized earlier under IFRS.
US GAAP
IFRS
Government grants to business entities are scoped out of the US GAAP contribution accounting model. However, business entities may analogize to the US GAAP contribution accounting model or other appropriate US GAAP based on the facts and circumstances of the grant. Otherwise, business entities may use other accounting literature, such as IAS 20.
If a business entity elects to use the US GAAP contribution accounting model for a grant that contains conditions, recognition of the grant is delayed until such conditions have been fulfilled.
Government grants are recognized once there is reasonable assurance that both (1) the conditions for their receipt will be met and (2) the grant will be received. Income-based grants are deferred in the balance sheet and released to the income statement to match the related expenditure that they are intended to compensate. Asset-based grants are deferred and matched with the depreciation on the asset for which the grant arises.
Grants that involve recognized assets are presented in the balance sheet either as deferred income or by deducting the grant in arriving at the asset’s carrying amount, in which case the grant is recognized as a reduction of depreciation.
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