FRS 102: Government grants

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Steven Collings
Audit and Technical Partner
Leavitt Walmsley Associates Ltd
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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...

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23rd Oct 2013 23:43

Thanks Steve a great summary the future performance part was new to me and I now understand that too.


It's worth noting that for charities these grants can often also be a restricted fund and so the use of it has to be separately recorded. The same distinction for company non company asset purchase also applies to charities.


It is worth looking carefully where assets are concerned as often the restriction is limited to the purchase of the asset - meaning that once the purchase has happened the whole lot can be transferred to the general fund. This saves maintaining extensive separate restricted funds. A playgroup I act for uses this treatment with grants for equipment.

However, where the grant implies an enduring restriction (so that the sale proceeds of an asset must be spent on a similar or newer asset, such as a vehicle) the restriction remains and so you would end up with a restricted deferred income account to write off future depreciation which would be shown in the restricted funds column in the SOFA.

For small non company charities the use of receipts and payments accounts will remove all this completely.



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