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Financial Reporting · Government grants

IAS 20 Repayment, Non-Monetary Grants and Disclosures

Updated 11 October 2026 · Fact-checked

Under IAS 20, repaying a government grant is a change in accounting estimate. You reduce the deferred income first, then expense any excess immediately. Non-monetary grants are recorded at fair value or a nominal amount. A below-market government loan benefit is a grant, measured as proceeds less the IFRS 9 fair value of the loan.

Understand Repayment, Non-Monetary Grants and Disclosures

IAS 20 covers more than the basic income and asset grant treatment. Three areas appear often in exams: repayment, non-monetary grants and below-market loans. You also need the disclosure list.

Repayment. A grant becomes repayable if conditions are breached. IAS 20 treats this as a change in accounting estimate under IAS 8. You do not restate prior years. You apply the effect in the current period.

If the grant relates to income, first set the repayment against any unamortised deferred income. Any excess is an immediate expense. If the grant relates to an asset, the repayment increases the carrying amount of the asset, or reduces the deferred income balance. Any extra depreciation that would have been charged to date is recognised immediately as an expense.

Non-monetary grants. The government may give land or other resources instead of cash. IAS 20 allows two policies. You can record the asset and grant at fair value, or at a nominal amount. Fair value is the usual exam answer unless the question says otherwise. Once you pick a policy, apply it consistently.

Below-market loans. A government loan at a rate below the market rate gives a benefit. Measure the loan at fair value under IFRS 9, which means discounting at a market rate. The benefit is the difference between the cash received and that fair value. Account for the benefit as a government grant under IAS 20. Then unwind the loan at the market rate as a finance cost.

Disclosures. You must disclose the accounting policy and the methods of presentation. You must also disclose the nature and extent of grants recognised and other forms of government assistance from which the entity has directly benefited. Unfulfilled conditions and other contingencies attached to recognised assistance must be disclosed too.

Key rules to remember

Repayment of an income grant
Repayment = reduction of deferred income (up to the unamortised balance) + excess to profit or loss immediately
Treated as a change in estimate, so no prior-period restatement.
Repayment of an asset grant
Extra cumulative depreciation caused by the repayment = expense immediately
The repayment increases the asset's carrying amount (or reduces deferred income). Depreciation that would have been charged to date is recognised at once.
Non-monetary grant
Asset and grant at fair value, or at a nominal amount
Choose one policy and apply it consistently.
Below-market government loan benefit
Benefit = proceeds received − fair value of loan (PV of payments at market rate)
Account for the benefit under IAS 20. Unwind the loan at the market rate.
Loan finance cost
Finance cost = opening carrying amount × market rate
Add the finance cost to the loan, and deduct any cash interest paid.

How to solve Repayment, Non-Monetary Grants and Disclosures questions

Use this approach for any question on repayment, non-monetary grants, loans or disclosures.

  1. 1Identify the type of assistance: cash grant, non-monetary grant or government loan.
  2. 2Decide whether the grant relates to income or to an asset, as this fixes where the credit sits.
  3. 3For a repayment, state that it is a change in estimate and apply it in the current year only.
  4. 4For a repayment, offset against unamortised deferred income first. Then expense the excess, plus any extra depreciation.
  5. 5For a non-monetary grant, record at fair value (or nominal amount if the question says so) and release over the asset's life.
  6. 6For a below-market loan, discount the cash flows at the market rate. The difference from proceeds is the grant.
  7. 7Unwind the loan at the market rate and release the grant over the period it compensates for.
  8. 8Finish with the disclosure points the question asks for.

Quickest way: Three-line check for IAS 20 extras

When to use it: Use this in Section A and Section B objective questions where time is tight.

  1. Repayment? Think change in estimate, deferred income first, excess to profit or loss.
  2. Non-monetary? Fair value (or nominal), then release over the useful life.
  3. Below-market loan? Proceeds minus PV at the market rate equals the grant. The loan is carried at PV.

Common mistakes in Repayment, Non-Monetary Grants and Disclosures

  • Restating prior years when a grant is repaid.

    Students confuse a repayment with an error correction.

    Fix: Remember IAS 20 treats repayment as a change in estimate. Apply it in the current period only.

  • Expensing the whole repayment immediately even when deferred income remains.

    The repayment feels like a loss, so students charge it all to profit or loss.

    Fix: Debit the unamortised deferred income first. Only the excess goes to profit or loss.

  • Measuring a below-market loan at the cash received.

    Students forget IFRS 9 requires fair value on initial recognition.

    Fix: Discount the future payments at the market rate. The loan is the present value, and the rest of the proceeds is the grant.

  • Unwinding the government loan at the stated low rate.

    The loan document shows the low rate, so it looks like the right one.

    Fix: Use the market rate for the finance cost. Cash interest paid at the low rate is deducted from the carrying amount.

  • Treating the nominal-amount option as the only treatment for non-monetary grants.

    Students remember one option and forget the other.

    Fix: State both options. Use fair value unless the question directs otherwise.

Worked examples

Example 1

On 1 January 20X1 Delta received a grant of $120,000 towards a machine costing $600,000 with a 5-year life and no residual value. Delta records the grant as deferred income and releases it over the asset's life. On 1 January 20X3 a condition was breached and the whole grant became repayable. Show the entries on repayment.

Show the solution
  1. At 1 January 20X3, two years of release have occurred: $120,000 ÷ 5 = $24,000 per year, so $48,000 has been released.
  2. Unamortised deferred income = $120,000 − $48,000 = $72,000.
  3. Repayment of $120,000 is a change in estimate.
  4. Debit deferred income $72,000 (clears the balance).
  5. The excess is $120,000 − $72,000 = $48,000. Debit profit or loss $48,000.
  6. Credit cash $120,000.

Answer: Dr Deferred income $72,000, Dr Profit or loss $48,000, Cr Cash $120,000. The $48,000 equals the income already released, which is charged now. There is no restatement of prior years.

Example 2

On 1 January 20X1 Kiran received a government loan of $100,000, repayable in one payment on 31 December 20X2. The loan carries no interest. The market rate for a similar loan is 10%. Calculate the grant element and the finance cost for 20X1.

Show the solution
  1. Fair value of the loan = $100,000 ÷ 1.10² = $100,000 ÷ 1.21 = $82,645 (rounded).
  2. Grant = $100,000 − $82,645 = $17,355.
  3. Record the loan at $82,645, with the grant of $17,355 as deferred income (or credited to profit or loss if no future costs are being compensated).
  4. Finance cost for 20X1 = $82,645 × 10% = $8,264 (rounded).
  5. Loan at 31 December 20X1 = $82,645 + $8,264 = $90,909 (rounded).

Answer: The grant element is $17,355 and the 20X1 finance cost is $8,264. The loan stands at $90,909 at 31 December 20X1.

Exam tips

  • Write 'change in estimate' in any repayment answer. Markers look for the phrase and for no prior-year restatement.
  • In loan questions, set out the discounting line clearly. Method marks are awarded even if rounding differs.
  • Check whether the question gives you the market rate. If it does, the loan is almost certainly a below-market question.
  • For disclosure questions, list policy, nature and extent of grants, and unfulfilled conditions. Keep each point short.
  • In objective questions, read the options for 'nominal amount' and 'fair value'. Both can be valid, so check the wording of the question.

Practice questions from Government grants

Repayment, Non-Monetary Grants and Disclosures in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Repayment, Non-Monetary Grants and Disclosures: frequently asked questions

Is the repayment of a government grant a prior period adjustment?

No. IAS 20 treats it as a change in accounting estimate under IAS 8. You apply the effect in the current period and do not restate comparatives.

Can a non-monetary grant be recorded at nominal value?

Yes. IAS 20 allows either fair value or a nominal amount for the asset and the grant. You must apply your chosen policy consistently.

How is a government loan at a below-market rate treated?

Measure the loan at fair value using the market rate under IFRS 9. The difference between proceeds and fair value is a government grant. You then unwind the loan at the market rate.

What must be disclosed under IAS 20?

You disclose the accounting policy and presentation method, and the nature and extent of grants recognised. You also disclose other assistance benefiting the entity directly, and unfulfilled conditions or contingencies attached to recognised assistance.