In accordance with the "Basic Standards for Enterprise Accounting," the Ministry of Finance issued the revised Accounting Standards for Business Enterprises No. 16 — Government Grants on 2017, 5, 10, which took effect on 2017, 6, 12.
1. Overview of Guidelines
Government grants are monetary or non-monetary assets received from the government on a non-reciprocal basis.
Characteristics of Government Grants
- • Government economic resourcesFor enterprise grants received from third parties, if there is conclusive evidence that the government is the actual source of funding and the third party acts only as an intermediary for collection and disbursement, such grants are also considered government-sourced economic resources.
- • Complimentary: Enterprises receive economic resources from the government without providing goods, services, or other consideration in return.
Government Subsidy Classification
- • Government grants related to assetsGovernment grants received by enterprises for constructing or otherwise acquiring long-term assets
- • Government grants related to incomeGovernment grants other than those related to assets
II. Recognition and Measurement
Government grants are recognized only when the following conditions are met:
- • The enterprise can meet the conditions attached to government grants
- • Companies can receive government subsidies
Government grants related to assets
Should be deducted from the carrying amount of the relevant asset or recognized as deferred income. If recognized as deferred income, it shall be allocated to profit or loss over the useful life of the related asset using a rational and systematic method.
Government grants related to income
For amounts compensating related costs, expenses, or losses in future periods, recognize as deferred revenue and include in current profit or loss or offset against related costs in the period when those costs, expenses, or losses are recognized. For amounts compensating related costs, expenses, or losses already incurred, directly include in current profit or loss or offset against related costs.
3. Presentation
Income Statement Presentation
Enterprises shall separately present the "Other Income" line item above "Operating Profit" in the income statement. Government grants recognized as other income shall be reported under this line item.
Related to daily activities
Recognize as other income or offset against relevant costs and expenses based on the substance of the economic transaction.
Unrelated to daily activities
Should be included in non-operating income and expenses.
4. Subsidized Interest on Policy-Based Loans
The fiscal authority will disburse interest subsidy funds to the lending bank.
Enterprises may choose to either: recognize the loan at the amount actually received and calculate borrowing costs based on the principal and the preferential policy rate; or recognize the loan at its fair value and calculate borrowing costs using the effective interest method.
The government will directly disburse interest subsidy funds to enterprises.
Enterprises shall offset corresponding interest subsidies against relevant borrowing costs.
Regulatory Document Attachment
Accounting Standards for Business Enterprises No. 16 — Government Grants (PDF)