Impact of FRS102: Part 2- Government Grants

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In the latest in our series of blogs on the impact of FRS102 on Credit Unions, we look at the changes to accounting for government grants.

Under FRS102 a grant would only be recognised when there is reasonable reassurance that the Credit Union will comply with the grant conditions and that the grant will be received.

FRS102 allows two methods of accounting for government grants:

  • accruals method
  • performance method

Accruals Method

The accruals method is similar to current UK Accounting Practice.  Grants for expenditure are released to income as the costs are incurred. Grants for capital items are released to income in line with the depreciation on the related assets.

Performance Method

The performance method is a new approach for government grants which focuses on the performance related conditions within the grant. Once the Credit Union has met these conditions the grant would be released to income. This method is likely to cause more fluctuations in surpluses as it moves away from the matching concept.

Non-Government Grants

The treatment outlined above applies to government grants but what about non-government grants? FRS102 does have a section on the treatment of non-government grants but that specifically only applies to public benefit entities (and Credit Unions are excluded from this definition despite their obvious benefit for the public!). There is therefore a distinct lack of guidance on the accounting treatment for non-government grants in FRS102. It should be noted however that the definition of government grants is fairly wide and covers, “government, government agencies and similar bodies whether local, national or international”.