FRS 102: Government grants
It is not unheard of for companies to receive grants to help them set up operations (for example in a deprived area) to encourage employment opportunities or for companies to receive grants to help them with day-to-day expenses (such as new start-up grants) or to help with the cost of a fixed asset, explains Steve Collings.
FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland deals with government grants in Section 24 and while some of the concepts are largely the same as in current SSAP 4 Accounting for government grants, FRS 102 introduces the ‘performance model’ which is not available under SSAP 4. There are also some additional accounting issues relating to government grants that should be considered by firms of accountants.
Section 24 itself is a very short section and defines a ‘government grant’ as:
“...assistance by government in the form of a transfer of resources to an entity in return for past or future compliance with specified conditions relating to the operating activities of the entity”.
It is worth mentioning...