Systematic basis

Learning objectives

• Calculate the portion of a grant recognised in profit or loss for a period on a systematic basis matched to the related costs.L1, L2, L3
• Justify and defend in a professional file (L4) the treatment adopted for the "Recognition on a systematic basis" concept, distinguishing the IFRS requirement, the case data, the teaching assumption and judgement.L4

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.
• IAS 20 §16The income approach requires grants to be recognised in profit or loss on a systematic basis over the periods in which the related costs they compensate are recognised; recognition on a receipts basis does not comply with accrual accounting and is acceptable only when no basis for allocation exists. For the accrual assumption, the current text refers to IAS 1; with IFRS 18 (a future requirement, 1 January 2027), the reference is to IAS 8.

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

3 questions

• Rochat receives {grant_amount} to fund a training programme whose total expected costs are {total_costs}. During the year it recognises {period_costs} of these costs. Case convention: the systematic basis adopted is the proportion of compensated costs recognised. Calculate the grant recognised in profit or loss for the year.L2
• Cormane received {grant_amount} to acquire a machine and recorded the grant as deferred income. The machine has a useful life of {useful_life} years and the costs compensated are the depreciation charges, which are even (case convention: straight-line release). Record the release entry for the year.L3
• Lavandier receives EUR 300,000 to cover launch costs that will be recognised as 50% in the first year, 30% in the second and 20% in the third (case fact). Which allocation to profit or loss is consistent with recognition on a systematic basis over the periods of the costs compensated?L4