Question bank — IAS 20 — Accounting for Government Grants and Disclosure of Government Assistance
79 questions in FR/EN/ES, scored by the real scoring engine.
Purpose and scope of the standard1 question
Scope exclusions1 question
The defined terms2 questions
- A public authority pays EUR 80,000 to an entity on condition that it acquires and operates a production machine. How does IAS 20 describe this grant?Single choiceL1
- A regional agency hands over EUR 300,000 to Orvane. The contract states that the agency will waive repayment if the entity keeps 40 jobs on the site for three years, and that any amount not waived will be repaid with interest. Which qualification from the definitions of IAS 20 fits this payment?Single choiceL3
Forms of government assistance1 question
Reasonable assurance2 questions
- Four statements are put forward about the recognition of a government grant. Which one is wrong?Single choiceL2
- A region has granted Dalmire a grant of EUR 400,000 to modernise a plant, on condition that 60 jobs are maintained for four years. At the reporting date, a reorganisation plan under discussion could bring headcount down to 55 positions; management has not yet made its decision. In three to five sentences, justify the treatment you would adopt at the reporting date.JudgmentL3
Receipt is not evidence1 question
The form of settlement1 question
Forgivable government loans2 questions
- A government loan will be waived if the entity keeps operating on the site for five years. Under what condition does IAS 20 treat it as a grant?Single choiceL2
- Brevane owes a public agency a loan of …, which is waived if it keeps operating for five years. At 31 December, there is reasonable assurance that this condition will be met. Case convention: the waiver offsets staff costs already recognised, so the grant is taken to profit or loss for the year. Record the entry.Journal entryL3
Benefit of a below-market loan4 questions
- A government loan is granted at an interest rate below the market rate. How does IAS 20 treat the benefit this gives to the borrower?Single choiceL2
- A public body grants Valmeyer an interest-free loan of …, repayable in one instalment in … years. Case assumption: the market rate for a comparable loan is …% a year. Calculate the initial value of the loan by discounting the final repayment, then the benefit of the loan. Round to the euro.CalculationL3
- Garnier receives a government loan of … at a below-market rate. Measured under IFRS 9 at initial recognition, the loan is worth …. Case convention: the benefit is treated as a grant and presented as deferred income, linked to the costs that the loan finances. Record the initial entry.Journal entryL3
- Maurelle obtains EUR 2,000,000 from a public fund at a rate set by law that is well below what a bank would grant it. The finance director proposes to record the loan at 2,000,000 and to identify no benefit, on the grounds that the rate is statutory and not negotiated. In four to six sentences, justify the treatment you would adopt at initial recognition.JudgmentL4
Principle of the income approach2 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.True / falseL1
- 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?Single choiceL3
Systematic basis3 questions
- Rochat receives … to fund a training programme whose total expected costs are …. During the year it recognises … 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.CalculationL2
- Cormane received … to acquire a machine and recorded the grant as deferred income. The machine has a useful life of … years and the costs compensated are the depreciation charges, which are even (case convention: straight-line release). Record the release entry for the year.Journal entryL3
- 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?Single choiceL4
Matching to the costs compensated3 questions
- Four statements concern the matching of an income grant with the costs it compensates. Which one is wrong?Single choiceL2
- Tessier receives … to compensate staff costs expected to total …. It recognises … of these costs in year 1 and … in year 2. Case convention: the grant is matched in proportion to the compensated costs recognised. Calculate the grant matched to each year.CalculationL3
- Bellanger is awarded … to compensate staff costs expected to total …. During the year it recognises … of these costs. Case conventions: the grant is matched in proportion to the compensated costs recognised, and it is paid at the end of the programme (a receivable at this stage). Record the entry for the year.Journal entryL3
No direct credit to equity2 questions
- An entity receives from a ministry a grant that compensates training costs incurred over several years. Which treatment is consistent with IAS 20?Single choiceL2
- During a training session, a participant states that there are two broad approaches to accounting for a government grant. Which description of these approaches, and of the one adopted by IAS 20, is correct?Single choiceL1
Depreciable assets3 questions
- Dumont has received … to acquire a depreciable machine. It presents the grant as deferred income. The machine's useful life is … years and depreciation is straight-line (case convention). Calculate the annual release of the grant, then the deferred income remaining at the end of year 1.CalculationL2Variant
- Ledoux has acquired equipment costing …, partly financed by a grant of … presented as deferred income. Useful life: … years, straight-line depreciation with no residual value (case conventions). Record the two year-end entries for the first year: the depreciation charge, then the release of the grant.Journal entryL3
- A grant of … finances the purchase of a packaging line by Mercier, which presents it as deferred income. The line has a useful life of … years, depreciated on a straight-line basis (case convention), and has been in use for … years. Calculate the annual release of the grant and the deferred income still to be released.CalculationL3Variant
Costs already incurred3 questions
- A grant awarded to compensate expenses already incurred must be spread over future periods.True / falseL1
- 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?Single choiceL2
- Last year, Hérault expensed EUR 85,000 of restoration costs after an incident. On 15 March, the government notifies it of a grant of … compensating these costs, receivable on notification (the conditions are met). Record the entry for the current year.Journal entryL3
Specific costs2 questions
- Pascal receives … to compensate certification costs specifically named in the agreement, expected to total …. During the year it recognises … of these costs, as well as … of other expenses not covered by the agreement. Case convention: allocation in proportion to the named costs. Calculate the grant recognised in profit or loss for the year.CalculationL2
- Rivière receives EUR 200,000 from a public programme "for the site's environmental certification costs". It has incurred EUR 120,000 of certification body fees, EUR 40,000 of general organisational consulting and EUR 30,000 of its own staff time; the agreement lists the certification body fees but is silent on consulting and staff. In three to five sentences, justify how you would identify the costs compensated before matching the grant.JudgmentL3
Fair value or nominal amount3 questions
- A municipality transfers a plot of land to an entity free of charge, which is a non-monetary grant. At what amount does IAS 20 allow the land and the grant to be recognised?Single choiceL2
- A public body transfers to Lacombe an item of equipment whose fair value, a case input, is …, for a price of …. Case convention: the entity recognises the equipment at fair value and the difference from the price paid is the non-monetary grant. Calculate the amount of the grant.CalculationL3
- A municipality transfers an industrial building to Ardant free of charge; its fair value, a case input, is …. Case conventions: the non-monetary grant is recognised at fair value and presented as deferred income. Record the entry on receipt.Journal entryL3
The presentation choice3 questions
- IAS 20 allows a grant related to assets to be presented in the statement of financial position either as deferred income or as a deduction from the asset's carrying amount.True / falseL1
- Cadet acquires equipment costing … and receives a grant of …. Useful life: … years, straight-line depreciation with no residual value (case conventions). Calculate the net charge in profit or loss for the year if the grant is presented as deferred income (depreciation on gross cost less release), then the depreciation charge if it is deducted from the carrying amount, and the difference in profit or loss between the two methods.CalculationL3
- Giraud acquires a plant for EUR 800,000, depreciable over 10 years (straight-line, no residual value), and receives a grant of EUR 200,000. It hesitates between deferred income and deduction from the carrying amount. Which statement correctly describes the effect of the deferred income method, compared with deduction, on the first year?Single choiceL4
Statement of cash flows2 questions
- An entity buys equipment and receives an asset grant to finance it. How do the purchase and the grant appear in the statement of cash flows?Single choiceL2
- Perrin presents its asset grants as deferred income. At the start of the year, deferred income is …. It receives … of new grants for equipment bought during the year, and releases … to profit or loss. Calculate closing deferred income and the amount of grant receipt to be presented as a flow separate from the purchase of the equipment.CalculationL3
Deferred income3 questions
- Under the deferred income method, a grant related to a depreciable asset is taken to profit or loss in full in the year it is received.True / falseL1
- Vasseur receives … from a region to finance a production line that it is about to acquire; the acquisition condition is reasonably assured. Case convention: the grant related to an asset is presented as deferred income. Record the entry on receipt.Journal entryL3
- Chevalier receives a grant of EUR 600,000 for a machine costing EUR 2,400,000, put into service on 1 October of year 1. Useful life: 8 years, straight-line depreciation pro rata temporis (case conventions); the grant is presented as deferred income. Which situation applies at 31 December of year 1?Single choiceL4
Deduction from the carrying amount3 questions
- An entity deducts an equipment grant from the asset's carrying amount. How does the grant then affect profit or loss?Single choiceL1
- Hamelin acquires equipment costing … and deducts the grant received of … from its carrying amount. Residual value: …; useful life: … years, straight-line depreciation (case conventions). Calculate the cost net of the grant, then the annual depreciation charge.CalculationL2
- Aubry has acquired a press for EUR 1,000,000. It then receives … of equipment grant, which its accounting policy deducts from the asset's carrying amount. Record the entry on receipt.Journal entryL3
Non-depreciable assets1 question
Presentation of income grants3 questions
- A grant related to income may be presented in profit or loss either as a separate line or under a heading such as "other income", or as a deduction from the related expense.True / falseL1
- Navarre has recognised EUR 120,000 of training costs. It receives … under a grant that compensates these costs, and its policy is to present income grants as a deduction from the related expense. Case convention: the grant relates entirely to the current year. Record the entry.Journal entryL2
- Roussel is awarded … to compensate subcontracting expenses expected to total …. During the year it recognises … of these expenses. Case conventions: allocation in proportion to the expenses, and presentation of the grant as a deduction from the related expense. Calculate the grant matched to the year, then the net expense presented.CalculationL3
Further presentation points1 question
A change in estimate3 questions
- When a government grant already recognised becomes repayable, the repayment is accounted for as a change in accounting estimate.True / falseL2
- Bastide had received EUR 120,000 for a 4-year machine, recorded as deferred income and released for one year. At the reporting date, the grant becomes repayable for …. The deferred income not yet released is …. Calculate the expense to recognise immediately.CalculationL3
- Meunier had received EUR 200,000 for a 5-year machine, presented as deferred income and released over 2 years. At the reporting date, the granting body demands repayment of …; the deferred income not yet released is …. The reversal is treated as a change in estimate. Record the entry.Journal entryL4
Repayment of an asset grant4 questions
- An asset grant, deducted from the asset's carrying amount, becomes repayable. Among these four statements about its treatment, which one is wrong?Single choiceL3
- Lemaire acquired an asset costing … and deducted a grant of … from its carrying amount. The asset has a useful life of … years, depreciated on a straight-line basis with no residual value (case conventions), and … years have elapsed when the grant becomes repayable in full. Calculate the cumulative additional depreciation to recognise immediately and the carrying amount after the catch-up.CalculationL3
- Bouvier acquired an asset costing … and deducted a grant of … from its carrying amount. Useful life: … years, straight-line depreciation with no residual value (case conventions). After … years, the grant becomes repayable in full, which is treated as a change in estimate. Record the entry.Journal entryL4
- Guérin acquired an asset for EUR 900,000, depreciated over 5 years (straight-line, no residual value), and deducted a grant of EUR 180,000 from its carrying amount. After 2 years, the grant becomes repayable in full. Which treatment is consistent with a change in estimate?Single choiceL4
Repayment of an income grant3 questions
- When an income grant becomes repayable, the amount repayable is expensed immediately without first being set against the unreleased deferred income.True / falseL2
- Pinel had received EUR 90,000 for a three-year training programme, recorded as deferred income and released over two years. The programme is called into question: the grant becomes repayable for …, while the deferred income not yet released is …. Calculate the expense to recognise immediately.CalculationL3Variant
- A grant of EUR 150,000 financed research costs over five years for Quentin and was released to profit or loss each year. At the end of the third year, it becomes repayable for …; … of deferred income remains to be released. What expense must be recognised immediately?CalculationL3Variant
Impairment review3 questions
- An asset grant, deducted from the asset's carrying amount, becomes repayable, which raises the asset's carrying amount. Which of these statements are accurate? (More than one answer possible.)Multiple choiceL3
- Rolland acquired an asset costing … and deducted a grant of … from its carrying amount. Useful life: … years, straight-line depreciation with no residual value (case conventions). After … year, the grant becomes repayable in full. Calculate the catch-up depreciation, then the carrying amount to compare, in the impairment review, with what the asset can recover.CalculationL3
- Sauvage deducted a grant of EUR 300,000 from the carrying amount of a production line; the grant has now become repayable because it has cut back its activity at the site. The line's carrying amount is raised by EUR 300,000, and the line's expected cash flows have fallen with the reduced activity (case fact). The finance director considers that no impairment review is needed, the increase being "purely accounting". In four to six sentences, justify the position you would adopt.JudgmentL4
Other government assistance1 question
Accounting and presentation policy1 question
Nature and extent of assistance2 questions
- Which of these disclosures does IAS 20 expect about grants and other government assistance? (More than one answer possible.)Multiple choiceL2
- To prepare the disclosure on the extent of its asset grants presented as deferred income, Fabre has the year's data: opening deferred income …, grants recognised …, releases to profit or loss …, repayments set against deferred income …. Calculate closing deferred income and the amount of grants released to profit or loss for the year.CalculationL3
Unfulfilled conditions and contingencies1 question
Effective dates1 question
Boundary with IFRS 93 questions
- Four statements concern the boundary between IFRS 9 and IAS 20 for a below-market government loan. Which one is wrong?Single choiceL3
- Ferrand has obtained a government loan at a reduced rate, measured under IFRS 9 at … at initial recognition; the difference from the proceeds received has already been treated as a grant. Case convention: the loan is subsequently measured at amortised cost, at the effective interest rate of …% given by the case. It pays … at year-end. Calculate the interest expense and the closing financial liability.CalculationL3
- Ostrane receives EUR 1,000,000 from a public fund, repayable in five years, with annual interest of 1%. Case assumption: a comparable loan would carry a market rate of 5%. Measured under IFRS 9 at initial recognition, the loan is worth EUR 826,821. Which initial accounting is consistent with IFRS 9 and IAS 20?Single choiceL4
Capitalisation of borrowing costs (IAS 23)3 questions
- Chauvin is building a plant and has incurred … of expenditure to date. It has received … of grant for this asset, which it deducts from the asset's carrying amount. Under the IAS 23 rule (its own course), the capitalisation base for borrowing costs is the expenditure incurred net of the grant received for the asset. Calculate the expenditure used as the base.CalculationL3
- Four statements compare the two presentations of a grant related to an asset under construction. Which one is wrong?Single choiceL3
- Dupuy is building a plant for EUR 5,000,000 with a grant of EUR 1,000,000, which it presents as deferred income. The finance director states that, since the grant sits in liabilities, the asset stays at gross cost and the borrowing cost capitalisation base is therefore the gross expenditure. Case convention: the capitalisation base is the expenditure incurred net of the grant received for the asset, whatever the presentation adopted. In three to five sentences, discuss this statement.JudgmentL4
The cost of a fixed asset (IAS 16)2 questions
- Marchand records an item of property, plant and equipment at … and deducts the grant received of … from its cost. Residual value: …; useful life: … years, straight-line depreciation (case conventions). Calculate the cost net of the grant, then the annual depreciation charge.CalculationL2
- Perrot recorded an item of property, plant and equipment at … and deducted a grant of … from its cost. Useful life: … years, straight-line depreciation with no residual value (case conventions). Record the depreciation entry for the first year.Journal entryL3