ASBE No. 16
Active
Government Grants
Government Grants is part of the Chinese Accounting Standards for Business Enterprises (ASBE).
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Conceptual Framework Linkage
Monetary or non-monetary assistance received free of charge
ASBE No. 16 governs the RECOGNITION and MEASUREMENT of GOVERNMENT GRANTS – MONETARY or NON-MONETARY assets RECEIVED from the GOVERNMENT FREE of charge – EXCLUDING state INVESTMENT and OTHER capital contributions TREATED as owners' EQUITY. The Standard is BROADLY converged with IAS 20 internationally, WITH one NOTABLE presentation-related DIVERGENCE (Section 5).
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Scope and Definition
Assistance received without an equivalent exchange
A GOVERNMENT GRANT is MONETARY or NON-MONETARY ASSISTANCE received from the GOVERNMENT FREE of charge – EXCLUDING government ACTIONS taken in its CAPACITY as an OWNER (e.g. CAPITAL contributions treated as an EQUITY investment, WHICH are OUTSIDE this Standard's SCOPE).
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Two Categories – Asset-Related and Income-Related Grants
Classified by the nature of the underlying condition
CategoryDescription
Grants related to assetsREQUIRE the PURCHASE, CONSTRUCTION, or OTHERWISE formation of a LONG-TERM asset
Grants related to incomeALL other GRANTS, NOT tied to the FORMATION of a LONG-term asset
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Grants Related to Assets – Deferred Income Treatment
Amortised systematically over the asset's useful life
A GRANT related to an ASSET is RECOGNISED as DEFERRED INCOME (a LIABILITY), AMORTISED to PROFIT or LOSS on a SYSTEMATIC and RATIONAL basis OVER the useful LIFE of the RELATED asset – MATCHING the GRANT'S recognition to the PERIOD over WHICH the underlying ASSET generates ECONOMIC benefits.
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THE KEY DIVERGENCE – No Asset-Deduction Presentation Alternative
Only one presentation method is permitted
IAS 20 PERMITS an ENTITY to PRESENT an ASSET-related grant EITHER as DEFERRED income, OR ALTERNATIVELY by DEDUCTING the GRANT from the ASSET'S carrying AMOUNT (REDUCING the DEPRECIATION charge over the ASSET'S life INSTEAD of RECOGNISING separate GRANT income). ASBE No. 16 permits ONLY the DEFERRED INCOME presentation – the ASSET-deduction ALTERNATIVE is NOT available. WHILE BOTH methods PRODUCE the SAME net PROFIT impact over TIME, this is a GENUINELY notable PRESENTATION-level divergence, SIMPLIFYING and STANDARDISING Chinese PRACTICE relative to the CHOICE IAS 20 permits internationally.
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Grants Related to Income
Matched to the period of related costs, or recognised immediately
A GRANT related to INCOME intended to COMPENSATE for FUTURE related COSTS or LOSSES is RECOGNISED in PROFIT or LOSS OVER the period the RELATED costs are RECOGNISED. A GRANT received as COMPENSATION for EXPENSES or LOSSES ALREADY incurred is RECOGNISED IMMEDIATELY in PROFIT or LOSS for the PERIOD it becomes RECEIVABLE.
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Recognition Criteria
Reasonable assurance of compliance and receipt
A GOVERNMENT grant is RECOGNISED ONLY where THERE is REASONABLE ASSURANCE that the ENTERPRISE will COMPLY with any CONDITIONS attached to the GRANT, and that the GRANT will ACTUALLY be RECEIVED.
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Worked Example – a Grant Related to an Asset
Deferred income, amortised over the asset's life
Example: A government subsidy for a new production line
A company receives an RMB 12,000,000 government grant to purchase new manufacturing equipment with an estimated 10-year useful life.
The company recognises the RMB 12,000,000 as DEFERRED INCOME, AMORTISING it to profit or LOSS over the 10-year useful LIFE: RMB 12,000,000 ÷ 10 = RMB 1,200,000 per year – RECOGNISED as a SEPARATE line of GRANT income, RATHER than REDUCING the equipment's OWN carrying amount (an OPTION unavailable under ASBE No. 16).
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Worked Example – a Grant Compensating for Costs Already Incurred
Immediate recognition in profit or loss
Example: A retrospective disaster-relief subsidy
A company receives an RMB 3,000,000 government subsidy compensating it for flood-related losses already incurred in the prior period.
The company recognises the FULL RMB 3,000,000 IMMEDIATELY in PROFIT or LOSS in the CURRENT period – since it COMPENSATES for COSTS/losses ALREADY incurred, RATHER than FUTURE costs to be MATCHED over TIME.
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Disclosure Requirements
What ASBE No. 16 requires
Nature and amounts of government grants recognised, by categoryUnfulfilled conditions and other contingencies attached to recognised grants
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Critical Judgments & Estimates
Where judgement matters most
SIGNIFICANT JUDGEMENTS
Whether "reasonable assurance" of compliance and receipt existsClassifying a grant as asset-related or income-related
SIGNIFICANT ESTIMATES
Amortisation period for asset-related grants, linked to the related asset's useful life
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Relationship to IAS 20
Comparison – ASBE 16 vs IAS 20
FeatureASBE 16IAS 20
Asset-related grant presentationDeferred income ONLYDeferred income OR asset-deduction, as a policy choice
Income-related grant timingMatched to related costs, or immediateMatched to related costs, or immediate – converged
A NARROW but genuine PRESENTATION divergence – the UNDERLYING recognition and MEASUREMENT principles are OTHERWISE thoroughly CONVERGED with IAS 20.
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Statement Mapping
Where every government grant event lands
EventStatement(s) affectedNotes
Asset-related grantBS ISDeferred income, amortised over the asset's useful life
Income-related grantISMatched to related costs, or recognised immediately
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Related Standards
Cross-reference map
StandardConnection
ASBE No. 4Fixed Assets – supplies the useful life basis for amortising asset-related grants
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Quick-Reference Glossary
Deferred income (grants)
A liability recognised for an asset-related government grant, amortised systematically to profit or loss over the related asset's useful life.
Grant related to income
A government grant not tied to the formation of a long-term asset, recognised in profit or loss matched to the related costs or immediately if compensating for costs already incurred.
Financial statement key (Chinese GAAP / ASBE terminology)
BS Balance Sheet (资产负债表)
IS Income Statement (利润表)
SCOE Statement of Changes in Owners' Equity (所有者权益变动表)
CFS Cash Flow Statement (现金流量表)
History & Development
2006-02
ASBE No. 16 Government Grants issued
Operative for periods beginning on or after 1 February 2007