Principle of the income approach

Learning objectives

• Explain the principle of the income approach: the grant is not recognised directly in equity but in profit or loss over the periods in which the related costs it compensates are recognised.L1, L2, L3

Normative references

• IAS 20 §12Income approach: the grant is recognised in profit or loss on a systematic basis over the periods in which the entity recognises as expenses the related costs for which the grant is intended to compensate.

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

2 questions

• Under the income approach adopted by IAS 20, a grant is taken to profit or loss over the periods in which the entity recognises the costs that the grant is intended to compensate.L1
• Pélissier receives EUR 120,000 from a region to fund a three-year research programme whose costs are incurred in equal amounts each year (case convention). Which treatment is consistent with the income approach?L3