Disclosures required for government grants

24th June 2020

Government grants are much more common recently, due to the various aid offered during the Coronavirus pandemic. Beforehand, only a small proportion of companies would have received a grant from the government, but it is now expected that most companies will have some sort of grant included in their 2020 accounts.

 

What wording is required to disclose the grants received from the government is dependent on the size of a company. Typically larger companies will have to make more disclosure than smaller companies.

 

The size of a company depends on the annual turnover, the gross assets and the number of employees – 2 of the 3 must be met. To be classed as a small entity, the annual turnover must be no more than £10.2m, gross assets must not exceed £5.1m and there must be less than 50 employees.

 

To be classed as a micro-entity, these limits are decreased to £632k annual turnover, £316k gross assets and less than 10 employees.

 

Disclosures required

FRS 102 – Medium and large companies

For medium and large companies, the accounting policy must be disclosed (have they been accounted for under the accrual or performance model), along with the nature and the amount of the grants. Additionally, if any of the conditions of the grant are unfulfilled, these must be disclosed. This must be provided on a grant by grant basis.

 

FRS 102 Section 1A – Small companies

For small companies, the accounting policy must be disclosed, but there is no specific requirement to disclose details of the government grants received. However, if this grant is material, then the disclosures above apply. It is important that the accounts show a ‘true and fair view’, so if it is considered that the grants are material and have significance in the financial statements then the company may decide to disclose more details.

 

FRS 105 – Micro companies

For micro companies, there are no disclosure requirements for government grants. The exceptions to this is anything that would be classed as a financial commitment, guarantee  or contingency. Micro company accounts are assumed to show a true and fair view so no further details are required.

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