IAS 20 Government Grant/Assistance

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Asnake E
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Joined: 02 Oct 2019, 03:28

IAS 20 Government Grant/Assistance

Post by Asnake E »

Hi,

Following the COVID 19 pandemic, the government in our country is giving tax reliefs for businesses. Are the reliefs result in government grant or government assistance under IAS 20? How should the businesses account for them?

Note: the reliefs include the following
1. Forgiveness of all tax debt prior to 2014/2015,
2. A tax amnesty on interest and penalties for tax debt pertaining to 2015/2016-2018/2019, and the underlying tax due could be paid in instalments. Companies that paid their underlying tax due in lump sums would receive 10% discounts and those that were donating to the COVID-19 response fund would get 20% discount
3. Exemption from personal income tax withholding for 4 months for firms who keep paying employee salaries despite not being able to operate due to Covid-19.
4. an extension of monthly VAT returns and payment for the months of March, April, and May 2020 to June 2020, without any penalty or interest.
5. taxpayers that would be restricted from carrying forward losses under the loss carry-forward rules are allowed to carry forward losses incurred in the 2019/2020 tax year ending 7 July 2020 to the following year
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Marek Muc
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Re: IAS 20 Government Grant/Assistance

Post by Marek Muc »

well, you need to tackle them one by one ;) there are plenty of BIG 4 publications relating to covid, so I didn't add anything specific to the knowledge base

note that income tax is excluded from the scope of IAS 20, so you need to apply IAS 12 for 1,2 and 5

for 3 and 4, I think that a disclosure will suffice
Asnake E
Posts: 146
Joined: 02 Oct 2019, 03:28

Re: IAS 20 Government Grant/Assistance

Post by Asnake E »

Thank you for the reply.
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JRSB
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Re: IAS 20 Government Grant/Assistance

Post by JRSB »

Potential deferred tax asset implications to consider re #5
Student of IFRS.
Asnake E
Posts: 146
Joined: 02 Oct 2019, 03:28

Re: IAS 20 Government Grant/Assistance

Post by Asnake E »

Thank you.
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Marek Muc
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Re: IAS 20 Government Grant/Assistance

Post by Marek Muc »

PWC published a podcast on IAS 12 and covid-related reliefs, you may find it useful (I didn't listen to it though)

https://www.pwc.com/gx/en/services/audi ... taxes.html
Irfan Mustafa
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Re: IAS 20 Government Grant/Assistance

Post by Irfan Mustafa »

Lets tackle them one by one:
1. This would be dealt as a credit in tax expense as a prior year adjustment.
2. This would also be dealt as a credit in tax expense as a prior year adjustment.
3. Nothing needs to be done in company's book.
4. Nothing special needs to be done.
5. While assessing recognition of deferred tax asset on these carry forward losses, consider the new rules.
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Marek Muc
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Re: IAS 20 Government Grant/Assistance

Post by Marek Muc »

what do you mean by 'prior year adjustment' ?
Irfan Mustafa
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Re: IAS 20 Government Grant/Assistance

Post by Irfan Mustafa »

I meant component (b) of the following para

Para 80 of IAS 12: (incomplete)
Components of tax expense (income) may include:
(a) current tax expense (income);
(b) any adjustments recognised in the period for current tax of prior periods;
(c) the amount of deferred tax expense (income) relating to the origination and reversal of temporary differences;
(d) the amount of deferred tax expense (income) relating to changes in tax rates or the imposition of new taxes
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