IAS 20 - Grants Accounting (SAP FI/GM)

[former_member466170]

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