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

Which of the following best fits the AS 12 definition of government grants?

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

  1. AFree technical advice from a government agency, to which no value can reasonably be assigned
  2. BAssistance in cash or kind for past or future compliance with certain conditionsCorrect
  3. CSales to a government hospital at the firm's usual price list
  4. DAny receipt from a government, whatever its nature

Explanation

The definition covers assistance 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. Not every receipt from government is a grant.

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