Technical Articles
IAS 20 – Grants Accounting (SAP FI/GM)
Introduction:
For the past few years I have been involved in Implementing SAP FICO, PSM-FM (Funds Management) and GM (Grant Management) in different organizations. Today I wanted to share my experience with respect to the Accounting for Grants including Expenditure on Grants and Grant Amortizations.
Overview of IAS 20:
IAS 20 Accounting for Grants and Disclosure outlines how to account for government grants and other assistance. Grants are recognized in profit or loss on a systematic basis over the periods in which the entity recognizes expenses for the related costs for which the grants are intended to compensate, which in the case of grants related to assets requires setting up the grant as deferred income or deducting it from the carrying amount of the asset.
Accounting Entries:
| In Case of Expenses on Grants | ||||||
| Intial Entry at the time when you received Cheque / Cash from the Grant | ||||||
| DR | CR | |||||
| BS | Bank / Cash | 100,000.00 | ||||
| BS | Deferred Grant | 100,000.00 | ||||
| Booking Grants Related Expenses | ||||||
| PnL | Grant Expenses | 20,000.00 | ||||
| BS | Vendor / Bank / Cash | 20,000.00 | ||||
| At Month End – Amortization of Grant | ||||||
| BS | Deferred Grant | 20,000.00 | ||||
| PnL | Grant Income | 20,000.00 | ||||
| In Case of Fixed Assets on Grants | ||||||
| Intial Entry at the time when you received Cheque / Cash from the Grant | ||||||
| DR | CR | |||||
| BS | Bank / Cash | 100,000.00 | ||||
| BS | Deferred Grant | 100,000.00 | ||||
| Booking Grants Related Fixed Assets | ||||||
| BS | Fixed Assets – Cost GL | 20,000.00 | ||||
| BS | Vendor / Bank / Cash | 20,000.00 | ||||
| At Month End – Amortization of Grant (Fixed Assets) | ||||||
| BS | Deferred Grant | 20,000.00 | ||||
| BS | Capital Asset Grant | 20,000.00 | ||||
| At Month End – Depreciation Run | ||||||
| PnL | Depreciation Expense | 416.67 | ||||
| BS | Accumulated Depreciation Expense | 416.67 | ||||
| At Month End – Amortization of Grant (Fixed Assets – Depreciation) | ||||||
| BS | Capital Asset Grant | 416.67 | ||||
| PnL | Grant Income | 416.67 | ||||
Document Splitting on Grants:
In order to achieve the Grants in the Financial Ledgers, we should implement Grant as a Document Splitting Characteristic with Zero Balancing.
In S4 HANA, when we activate Grants Management, the fields GEBER (Fund) and GRANT_NBR (Grant) are automatically available in the list of fields in document splitting characteristic.
After activating the characteristic the Grant No. will be appearing in FI documents.
Do review the following SAP Notes related to Document Splitting:
1085921 – Document split
891144 – General Ledger Accounting (new)/document splitting: Risks of subsequent changes
Thank you very much for reviewing my blog and I hope that I am able to explain the concept. I will take the time to write more on multiple scenarios on Grants Management very soon.
Best Regards,
Anss Shahid
Very explanatory document.
Nice Blog! Well Explained.
Informative Document:Thanks for sharing your Experience
Thank you Fahad, Sohaib and Shafiq!!
You inspire me to try new things.
Thanks Nabeel. Yes keep trying new things because everyday is a new day in SAP.
Cheers!