SSAP 4 Accounting for Government Grants

SSAP 4 (Revised July 1990) (PDF)

SSAP 4 deals with the accounting treatment and disclosure of government grants and other forms of government assistance, including grants, equity finance, subsidised loans and advisory assistance. It is also indicative of best practice for accounting for grants and assistance from other sources.

Government grants are made in order to persuade or assist enterprises to pursue courses of action that are deemed to be socially or economically desirable. The range of grants available is very wide and changes regularly, reflecting changes in government policy. More significantly, different grants tend to be given on different terms as to the eligibility, manner of determination, manner of payment and conditions to be fulfilled.

The term 'government' is defined widely in SSAP 4. Thus, it includes not only the national government and all the various tiers of local and regional government of any country, but also government agencies. It also includes the European Commission and other EU bodies, together with other international bodies and agencies.

The general rule of SSAP 4 is that government grants should be recognised in the profit and loss account so as to match them with the expenditure towards which they are intended to contribute. To the extent, therefore, that grants are made as a contribution towards specific expenditure on fixed assets, they should be recognised over the useful economic lives of the related assets. In contrast, grants made to give immediate financial support or to reimburse costs already incurred should be recognised in the profit and loss account in the period in which they become receivable; those made to finance the general activities of an entity should be recognised in the profit and loss account in the period in which they are paid.

SSAP 4 is effective for accounting periods starting on or after 1 July 1990.