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CMA Intermediate · Financial Accounting · Accounting for Government Grants (AS 12)

Under AS 12, which of the following best describes 'government grants'?

Government grants are assistance by government, in cash or kind, given to an enterprise for past or future compliance with certain conditions. Assistance that cannot reasonably be valued, and dealings indistinguishable from normal trading, are excluded from the definition.

  1. AAssistance by government in cash or kind to an enterprise for past or future compliance with certain conditionsCorrect
  2. BAny transaction with a government body, including normal sales of goods to a government department
  3. CForms of government assistance to which no reasonable value can be assigned, such as free technical advice
  4. DOnly cash payments made by the central government to an enterprise

Explanation

AS 12 defines government grants as assistance by government in cash or kind for past or future compliance with certain conditions. Assistance that cannot reasonably be valued and transactions indistinguishable from normal trading are excluded, so options 2 and 3 are wrong. Option 4 is too narrow because kind is included.

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