This document provides an overview of IAS 20, which establishes the accounting requirements for government grants and disclosure of government assistance. It discusses how government grants should be recognized as income or deferred income depending on whether they are related to assets or income. It also covers repayment of grants if conditions are not met and disclosure requirements. The end of chapter practice problems provide examples of accounting for government grants and assistance related to assets, income, and contingencies.
IAS-1: Presentation of Financial StatementsAmit Sarkar
IAS 1 Presentation of Financial Statements sets out the overall requirements for financial statements, including how they should be structured, the minimum requirements for their content and overriding concepts such as going concern, the accrual basis of accounting and the current/non-current distinction. The standard requires a complete set of financial statements to comprise a statement of financial position, a statement of profit or loss and other comprehensive income, a statement of changes in equity and a statement of cash flows.
IAS-1: Presentation of Financial StatementsAmit Sarkar
IAS 1 Presentation of Financial Statements sets out the overall requirements for financial statements, including how they should be structured, the minimum requirements for their content and overriding concepts such as going concern, the accrual basis of accounting and the current/non-current distinction. The standard requires a complete set of financial statements to comprise a statement of financial position, a statement of profit or loss and other comprehensive income, a statement of changes in equity and a statement of cash flows.
First assignment of marketing research
Business case: The fashion channel
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CA Varun Sethi Ind AS 20 - Accounting for Government GrantsVarun Sethi
Presentation by CA Varun Sethi: Indian Financial Reporting:
IndAS 20*: Accounting for Government Grants (GG) and disclosure for government assistance
Presentation includes comparison of Ind AS 20 issued by ICAI, (converged with IAS 20 issued by IASB), with AS 12, with IAS 20, and with ICDS (Income computation and accounting standards) on Government Grants
Sectors Impacted:
1. Corporates who enjoy Export related interest rate subvention on bank loans (Eg. Sugar/ Rice industries)
2. Non profit sector,
3. Companies enjoying government investment subsidies (Central investment subsidy scheme etc)
CA Varun Sethi Ind AS 20 - Accounting for Government GrantsVarun Sethi
Presentation by CA Varun Sethi: Indian Financial Reporting:
IndAS 20*: Accounting for Government Grants (GG) and disclosure for government assistance
Presentation includes comparison of Ind AS 20 issued by ICAI, (converged with IAS 20 issued by IASB), with AS 12, with IAS 20, and with ICDS (Income computation and accounting standards) on Government Grants
Sectors Impacted:
1. Corporates who enjoy Export related interest rate subvention on bank loans (Eg. Sugar/ Rice industries)
2. Non profit sector,
3. Companies enjoying government investment subsidies (Central investment subsidy scheme etc)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)tangelae6x
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
As of February 1, 2020 and February 2, 2019, there were no revolving credit loans outstanding under the credit agreements, and there were no borrowings under the
agreements during 2019 and 2018. In addition, there were no standby letters of credit outstanding at February 1, 2020 and February 2, 2019. Revolving loans under the credit
agreement bear interest based on various published rates.
The Company's credit agreement, which is an obligation of a 100%-owned subsidiary of Macy’s, Inc. (“Parent”), is not secured. However, Parent has fully and
unconditionally guaranteed this obligation. The credit agreement requires the Company to maintain a specified interest coverage ratio for the latest four quarters of no less
than 3.25 and a specified leverage ratio as of and for the latest four quarters of no more than 3.75. The Company’s interest coverage ratio for 2019 was 12.68 and its leverage
ratio at February 1, 2020 was 1.78, in each case as calculated in accordance with the credit agreement. The interest coverage ratio is defined as EBITDA divided by net interest
expense and the leverage ratio is defined as debt divided by EBITDA. For purposes of these calculations EBITDA is calculated as net income plus interest expense, taxes,
depreciation, amortization, non-cash impairment of goodwill, intangibles and real estate, settlement charges, non-recurring cash charges not to exceed in the aggregate $200
million and extraordinary losses less interest income and non-recurring or extraordinary gains. Net interest is adjusted to exclude the premium on early retirement of debt.
A breach of a restrictive covenant in the Company’s credit agreement or the inability of the Company to maintain the financial ratios described above could result in an
event of default under the credit agreement. In addition, an event of default would occur under the credit agreement if any indebtedness of the Company in excess of an
aggregate principal amount of $150 million becomes due prior to its stated maturity or the holders of such indebtedness become able to cause it to become due prior to its
stated maturity. Upon the occurrence of an event of default, the lenders could, subject to the terms and conditions of the credit agreement, elect to declare the outstanding
principal, together with accrued interest, to be immediately due and payable. Moreover, most of the Company’s senior notes and debentures contain cross-default provisions
based on the non-payment at maturity, or other default after an applicable grace period, of any other debt, the unpaid principal amount of which is not less than $100 million
that could be triggered by an event of default under the credit agreement. In such an event, the Company’s senior notes and debentures that contain cross-default provisions
would also be subject to acceleration.
Commercial Paper
The Company is a party to a $1,500 million unsecured commercial paper program. The Com ...
2
Name:
Instructor:
Course:
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Institution Affiliation:
Governmental funds are used to report the accounting records of the government. The government uses the statement of financial position and the operating statements to report to the tax payers. This is because most of the government finances are received from the taxes paid by the taxpayers and the government thus owes a responsibility to the taxpayers of accountability.
The financial statements are comprised of the balance sheet and statement of operations which include all the revenues, expenditure and changes in the fund balances. Prepaid items and inventories are reported as assets during their purchase. The expenditures are deferred in their recognition till the period in which the assets are consumed or used.
The government fund generally focuses on the primary sources, uses and balances of current financial resources in a budget. The government fund includes the following:
· General fund
· Special revenue funds
· Capital projects funds
· Debt service funds
· Permanent funds
Proprietary funds involve the different sectors that a government is divided into for instance state governments. The proprietary funds account are presented by the statement of net position, the cash flows and also the statement of operating expenditures, incomes or revenues and changes in the net position. Individual proprietary funds should be recorded in separate columns. Proprietary funds include enterprise funds and internal service funds. The function of these enterprises is to provide goods and services to the general public at a fee. Internal service funds account for goods and services provided by one department to another department of the governmental unit on a cost-reimbursement basis.
Fiduciary funds are used to account for the assets held in trust by the government for the benefit of the different government departments or entities or individuals. For instance the employees receiving their retirement benefits is an example of the fiduciary fund held by the government. The fiduciary fund includes:
· Agency funds
the agency fund involve the receipt, temporary investment and remittance of the fiduciary resources to their specifics, be they individuals, private governments, or other governments. The statement of net position requires that assets be equal to the liabilities. The statement of the changes in assets and liabilities reports the beginning balances, additions, deductions and ending balances.
· Pension and other employee benefit trust funds
the division is required to hold and report the resources which are held in trust for the beneficiaries of pension plans, contribution plans, postemployment benefit plans, or other employee benefit plans. The requirements of the accounting of the different pension fund are stipulated in the GAAP and require maintaining of separate distinct accounts for the different entities.
· External investment trust funds
it requires the reporting of ...
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued).docxvannagoforth
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
As of February 1, 2020 and February 2, 2019, there were no revolving credit loans outstanding under the credit agreements, and there were no borrowings under the
agreements during 2019 and 2018. In addition, there were no standby letters of credit outstanding at February 1, 2020 and February 2, 2019. Revolving loans under the credit
agreement bear interest based on various published rates.
The Company's credit agreement, which is an obligation of a 100%-owned subsidiary of Macy’s, Inc. (“Parent”), is not secured. However, Parent has fully and
unconditionally guaranteed this obligation. The credit agreement requires the Company to maintain a specified interest coverage ratio for the latest four quarters of no less
than 3.25 and a specified leverage ratio as of and for the latest four quarters of no more than 3.75. The Company’s interest coverage ratio for 2019 was 12.68 and its leverage
ratio at February 1, 2020 was 1.78, in each case as calculated in accordance with the credit agreement. The interest coverage ratio is defined as EBITDA divided by net interest
expense and the leverage ratio is defined as debt divided by EBITDA. For purposes of these calculations EBITDA is calculated as net income plus interest expense, taxes,
depreciation, amortization, non-cash impairment of goodwill, intangibles and real estate, settlement charges, non-recurring cash charges not to exceed in the aggregate $200
million and extraordinary losses less interest income and non-recurring or extraordinary gains. Net interest is adjusted to exclude the premium on early retirement of debt.
A breach of a restrictive covenant in the Company’s credit agreement or the inability of the Company to maintain the financial ratios described above could result in an
event of default under the credit agreement. In addition, an event of default would occur under the credit agreement if any indebtedness of the Company in excess of an
aggregate principal amount of $150 million becomes due prior to its stated maturity or the holders of such indebtedness become able to cause it to become due prior to its
stated maturity. Upon the occurrence of an event of default, the lenders could, subject to the terms and conditions of the credit agreement, elect to declare the outstanding
principal, together with accrued interest, to be immediately due and payable. Moreover, most of the Company’s senior notes and debentures contain cross-default provisions
based on the non-payment at maturity, or other default after an applicable grace period, of any other debt, the unpaid principal amount of which is not less than $100 million
that could be triggered by an event of default under the credit agreement. In such an event, the Company’s senior notes and debentures that contain cross-default provisions
would also be subject to acceleration.
Commercial Paper
The Company is a party to a $1,500 million unsecured commercial paper program. The Com ...
Solution Manual Advanced Financial Accounting by Baker 9th Edition Chapter 16Saskia Ahmad
Solution Manual, Advanced Accounting, Thomas E. King, Cynthia Jeffrey, Richard E. Baker, Valdean C. Lembke, Theodore Christensen, David Cottrell, Richard Baker, Advanced Financial Accounting, Advanced Financial Accounting by Baker Chapter 18, Advanced Financial Accounting by Baker Chapter 18 9th Edition, 9th Edition,
CARES Act Update - What you Need to Know Heading into 2021Citrin Cooperman
During this webinar we focused on the interplay between the different CARES Act provisions, in particular PPP loans, Provider Relief Funds, and Medicare Advanced Payments, and how they may impact 2020 year-end planning and 2021 forecasting.
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2
5. Accounting for Government
Grants and Disclosure of
Government Assistance
Related standards
IAS 20
Current GAAP comparisons
Looking ahead
End-of-chapter practice
5
6. Related Standards
IAS 41 Agriculture
IAS 37 Provisions, contingent liabilities and
contingent assets
6
7. IAS 20 - Overview
Objective and scope
Accounting for government grants
Government assistance
Disclosure
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8. IAS 20 – Objective and
Scope
Government grant: a form of government
assistance; a transfer from a government
to an entity that requires compliance with
certain conditions related to entity’s
operating activities.
Government assistance: government
action to generate an economic benefit for
entities that meet qualifying criteria.
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9. IAS 20 – Objective and Scope
Excludes benefits provided by adjusting
taxable profit or loss, or that are
determined on the basis of the income tax
liability - such as investment tax credits,
income tax holidays, accelerated tax
depreciation methods and reduced income
tax rates
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10. IAS 20 – Accounting for
Government Grants
Recognition and Measurement:
Recognize a government grant when
there is reasonable assurance that
1. The grant will be received, and
2. The entity will comply with the conditions
attached to the grant
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11. IAS 20 – Accounting for
Government Grants
Two general approaches:
1. Capital approach
2. Income approach * Apply this one *
* Grants from government are not equity
financing, they are non-shareholder-
related increases in net assets and
therefore items of income.
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12. IAS 20 – Accounting for
Government Grants
Income approach: recognize government
grants in profit or loss in the same periods
that the related expenses are recognized
If for acquisition of assets – on the same
basis as the depreciation on the assets
If related directly to incurring specific
expenditures – on the same basis as the
expenditures
12
13. IAS 20 – Accounting for
Government Grants
Presentation of grants related to assets:
Companies have a choice – recognize as
(a) deferred income or (b) as a reduction
in the carrying amount of the related asset
Example: Company A receives a $25 grant
toward the purchase of new equipment that
cost $100; equipment has a five year life
and is depreciated on a straight-line basis
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14. IAS 20 – Accounting for
Government Grants
Entry when grant received:
(a)
Dr. Cash 25
Cr. Deferred government grant 25
Or
(b)
Dr. Cash 25
Cr. Equipment 25
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15. IAS 20 – Accounting for
Government Grants
Entry as asset is used:
(a)
Dr. Depreciation expense 20
Cr. Accumulated depreciation 20
Dr. Deferred government grant 5
Cr. Depreciation expense/grant income 5
Or
(b)
Dr. Depreciation expense 15
Cr. Accumulated depreciation 15
Depreciation: ($100 - $25) ÷ 5 = 15
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16. IAS 20 – Accounting for
Government Grants
Presentation of grants related to income:
Example: Company B receives a
government grant equal to 10% of the
payroll costs incurred. Payroll costs
incurred are $100.
Entry when payroll costs incurred:
Dr. Grant receivable 10
Cr. Wages expense/grant income10
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17. IAS 20 – Accounting for
Government Grants
Repayment of grants:
If grant becomes repayable – treat as a
change in estimate
If related to an asset: cumulative amount
of additional depreciation that would have
been recognized to date is recognized in
P&L
If related to income: any necessary
adjustments are made to current year
profit or loss
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18. IAS 20 – Government Assistance
Grants exclude assistance that cannot
reasonably be valued, and transactions
between the government and the entity
that are in the normal course of business.
Other assistance (e.g., guarantee of loan,
significant sales) may be of interest to
financial statement readers if benefits are
significant and recurring
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19. IAS 20 Disclosure
Three types:
1. Accounting policy for grants and their
presentation
2. Nature and extent of grants recognized,
and information about other forms of
assistance that have been beneficial
3. Information about contingencies or
conditions not yet met related to
assistance recognized
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20. Looking Ahead
IAS 20 – part of short-term convergence
project with FASB. IAS 20 shortcomings:
1. Inconsistent with the conceptual
framework (deferred credits do not meet
the definition of a liability)
2. Option allowed now understates an
entity’s assets, reducing comparability of
the entity’s financial statements (i.e.,
option to deduct grant from asset acquired)
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21. Looking Ahead
Work on amending IAS 20 set aside
pending outcome of related standards,
such as IAS 37 Provisions, Contingent
Liabilities and Contingent Assets and
Conceptual Framework Project
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22. End-of-Chapter Practice
14-1 Iota Inc. receives a $100 government grant to be applied
against the construction of a new building. The building is
accounted for using the cost model, has an initial cost of $500,
a useful life of 25 years and $0 residual value.
Instructions
(a) Prepare entries to account for the acquisition of the building
and receipt of the government grant on Day 1, assuming Iota
presents the grant as deferred income, and then assuming it is
presented as a reduction of the asset’s cost.
(b) Prepare the entry to record depreciation expense at the end of
the first year of operations, as well as any other adjusting
entries required under each assumption in (a) above.
(c) In what respects will the statement of financial position and
income statement differ under the two accounting
presentations? Does it matter that they are different? Why?
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23. End-of Chapter Practice
14-2 Refer to 14-1 above. Assume that after four years of
operating in the new building, Iota Inc. decides to
transfer its operations to a larger municipality. The
original $100 grant is required to be repaid if Iota does
not remain in the building for a minimum of seven
years.
Instructions
(a) Prepare the entry(ies) to recognize the grant repayment
liability at the end of year 4, assuming Iota recognized
the grant originally as deferred income.
(b) Prepare the entry(ies) to recognize the grant repayment
liability at the end of year 4, assuming Iota recognized
the grant originally as a reduction of the asset’s cost.
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24. End-of Chapter Practice
14-3 Chi Corp. agreed to locate a new call center in an economically
disadvantaged area in return for specific government assistance. The
government provided $200 funding to a local college to bring the general
education level of a number of residents to an acceptable minimum, $25
toward the cost of a four-week call center employee training program
delivered by Chi Corp., and a $50 grant to offset the higher travel and
administrative costs to be incurred by Chi over a five-year period. This grant
is repayable at the rate of $10 per year for each year less than five years
that Chi does not operate in the area.
In addition, Chi Corp. is eligible for a 10% wage rebate at the end of each
year in which an average of 20 people or more are employed at the
operation. The company expects to have more than 23 employees on staff
at any time and to operate in this location for a minimum of eight years.
Assume the operation opens on July 2, 2009, at which time the $50 grant is
received. The employee training program takes place from July 5 to August
3 and Chi receives the $25 grant in early September. The payroll for the first
six months for the 27 full-time employees hired is $400.
Instructions
(a) Prepare all entries related to government assistance that need to be made
by Chi Corp. from July 1 to December 31, 2009, Chi’s fiscal year end.
Identify any situations where there are alternatives.
(b) Identify the government assistance disclosures that are required for Chi’s
December 31, 2009 financial statements.
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