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The Interpretations Committee tentatively decided not to add the issue to its agenda

 26 November 2015


The Interpretations Committee received a request to clarify whether cash payments made by a government to help an entity finance a research and development project should be accounted for as a liability when received (on the basis that it is a forgivable loan as defined in IAS 20 Accounting for Government Grants and Disclosure of Government Assistance) or recognised in profit or loss when received (on the basis that it is a government grant as defined in IAS 20). The cash payment received from the government is repayable in cash only if the entity decides to exploit and commercialise the results of the research phase of the project. The terms of the repayment can result in the government receiving up to twice the amount of the original cash payment if the project is successful. If the entity decides not to proceed with the results from the research phase, the cash payment is not refundable and the entity must transfer to the government the rights to the research.

The Interpretations Committee noted that the entity had obtained financing for its research & development project and the appropriate accounting would depend on the specific terms and conditions of the cash payment received. The Interpretations Committee observed that the arrangement described in the submission was a financial liability within the scope of IFRS 9 Financial Instruments. Many members of the Interpretations Committee thought that the arrangement also met the definition of a forgivable loan as defined in IAS 20. The Interpretations Committee observed that judgement would be required in making this assessment and in determining when there is reasonable assurance that the entity will meet the terms for forgiveness of the loan.

The Interpretations Committee noted that there was sufficient guidance in the Standards to help determine the appropriate accounting for the cash payment received from a government. The Interpretations Committee observed that diversity in practice appeared to be limited based on the feedback it had received from its outreach activities.

In the light of existing IFRS requirements and the feedback received from its outreach activities, the Interpretations Committee determined that neither an Interpretation nor an amendment to a Standard was necessary and therefore [decided] not to add this issue to its agenda.


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