Accounting for Government Grants : Standard-Setting and Accounting Choice

Stadler, Christian and Nobes, Christopher W. (2018) Accounting for Government Grants : Standard-Setting and Accounting Choice. Journal of Accounting and Public Policy, 37 (2). pp. 113-129. ISSN 0278-4254

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This paper provides evidence on several matters relating to accounting for government grants under International Financial Reporting Standards (IFRS). Focusing on grants related to assets, we trace the development of International Accounting Standard (IAS) 20, outline some of the problems of current accounting practice, and suggest why these have not been addressed by the standard-setter. Then, by hand-collecting data relating to 559 firms from 15 countries, we empirically analyze several issues. We show that asset grants are economically important for some firms and that the frequency of grants is significantly different across the countries. For the non-financial firms in our sample, we identify the grant-related accounting policy choice: a firm can either show the grant as deferred income or net it against the asset. The options are roughly equally popular overall but the firm’s country of domicile is strongly associated with the choice. Further, as a key element of disclosure quality for this topic, we investigate whether or not the balance sheet-related numbers relating to grants are disclosed, finding that many firms do not disclose them. Disclosure quality is better for firms which use the ‘deferred income’ option, and it is also better in countries where a higher proportion of firms has received government grants. International differences and poor disclosure are detrimental to international comparisons, so we conclude that the policy choice should be removed from the accounting standard.

Item Type:
Journal Article
Journal or Publication Title:
Journal of Accounting and Public Policy
Additional Information:
This is the author’s version of a work that was accepted for publication in Journal of Accounting and Public Policy. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Accounting and Public Policy, 37, 2, 2018 DOI: 10.1016/j.jaccpubpol.2018.02.004
Uncontrolled Keywords:
?? government grantsias 20accounting choiceinternational differencesaccountingsociology and political science ??
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Deposited On:
25 Jan 2018 13:10
Last Modified:
08 Jun 2024 00:21