Question

In IFRS, if you work for a profit organization. If you recieve a sponsorship by the government for an event, does it satisfy the definition of income? Which IFRS standards apply to the sponsorship? How would the organization present the income for the sponsorship?

Answer 1

Answer :

IFRS includes the the IFRS developed by the IASB( intenational Accounting Boards) and International Accounting Standards adopted by the IASB. So It is IAS-20 which is applicable for accounting relating to goverment grant or assistance received by an organisation.

Generally Organisation received goverment's financial assistence under the goverment policy and Government provides assistence to develope industries in low develop area of country or wants to grow particular industry so that infrastructure and employment opportunity will be created with the help of enterpreneur's.

It is an cost free gift to organisation, however its use is predefined by the goverment. therefor somtimes it is given with certain conditions which should be comply by the organisation otherwise penalty or liablity to return the grant amount may arises. So before recognising into books entity must provide reasonable ensure to self that such conditions are possible to fulfill or already fulfilled.

IFRS explain difrent accounting treatment for goverment grant depending on purpose for which it given to the organisation.

On Event based grant means, Government provide grant to organisation so that the organisation meet out the expenses realating to such event. Accounting treatment of such grants are as fallow:

1. Grant will be recognised as Income over the period on systemetic basis for which the expenses relating to periods are incurred against them such grant is matched. So if event and realated expenditure are spread over the two accounting period then the grant amount will be splitt off and recognised as income in such two year.
2. Grants which are treated as income may be shown as seperatly in income statement or shown by deduction from realated expenses.
3. Standards prescribed that grant realating to expenses which already incurred in past year(reimbursment nature grant) or grant against which no future cost are required to be incurred then such Grant amount will immidaitly recognised as income of the year.

DISCLOUSER: Entity must disclosed in notes:

• accounting policy adopted for grants and its presentation in balance sheet.
• Nature and to ehich extent its recognised in financial satement as income.
• unfulfilled conditions attached to grant and contigencies may arises due to such unfulfilled conditions

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