Costs already incurred

Learning objectives

• Determine the period in which to recognise a grant that compensates expenses or losses already incurred or that has no future related costs.L1, L2, L3

Normative references

• IAS 20 §20A grant that becomes receivable as compensation for expenses or losses already incurred, or for the purpose of giving immediate financial support with no future related costs, is recognised in profit or loss of the period in which it becomes receivable.
• IAS 20 §21A grant awarded to give immediate financial support, rather than as an incentive to undertake specific expenditure, may warrant recognition in profit or loss of the period in which the entity qualifies to receive it, with disclosure to ensure that its effect is clearly understood.
• IAS 20 §22A grant that compensates expenses or losses of a previous period is recognised in profit or loss of the period in which it becomes receivable, with disclosure to ensure that its effect is clearly understood.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

3 questions

• A grant awarded to compensate expenses already incurred must be spread over future periods.L1
• Following a flood in December of year 1, Verdier recognised EUR 90,000 of restoration costs as expenses of year 1. In March of year 2, a public authority notifies it of EUR 60,000 of aid for these costs; the conditions are met and the aid is receivable on notification. In which period is the aid recognised in profit or loss?L2
• Last year, Hérault expensed EUR 85,000 of restoration costs after an incident. On 15 March, the government notifies it of a grant of {grant_amount} compensating these costs, receivable on notification (the conditions are met). Record the entry for the current year.L3