Grants used to live in the realms of the charity and culture sectors, but with the devastating impact of Covid 19 we have seen government grants being issued to many groups of people this year.
A common question we get is – how to record it?
All grants come with their own terms and its important that you understand the term of the grant which you have received.
Depending on the terms of the specific grant there are different ways to account for what you have received. However, the most common is as income. Usually you will receive some form of funds and that will be spent in the delivery of some product, service or function.
To keep the grant separate from your normal trading revenue it is usually posted to ‘other income’.
This is so that its easy to identify by you and others looking at the accounts
If the grant is attached to an asset rather than funds then it can be recorded in either of the following ways:
- As deferred income or
- By deducting the grant from the assets carrying amount.
There are also some required disclosures you must make:
- Accounting policy adopted for grants, including method of balance sheet presentation
- Nature and extent of grants recognised in the financial statements
- Unfulfilled conditions and contingencies attaching to recognised grants
This is slightly confusing for many people so you may want to ask your accountant to help you make sure the grant is posted correctly and disclosed in line with reporting requirements.
If in doubt… you can always ask us.
