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Why Grant Thornton
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Grant Thornton’s culture is one of our most valuable assets and has steered us in the right direction for more than 100 years.
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Beyond global scale, we embrace what makes each market unique, local understanding on a global scale.
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Join our network
In a world that wants more options for high quality services, we differentiate in the market to grow sustainably in today’s rapidly changing environment.
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Grant Thornton International Ltd acts as the coordinating entity for member firms in the network with a focus on areas such as strategy, risk, quality monitoring and brand.
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Workable solutions to maximise your value and deliver sustainable recovery.
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We can support you throughout the transaction process – helping achieve the best possible outcome at the point of the transaction and in the longer term.
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We provide a wide range of services to recovery and reorganisation professionals, companies and their stakeholders.
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At Grant Thornton, our IFRS advisers can help you navigate the complexity of financial reporting from IFRS 1 to IFRS 17 and IAS 1 to IAS 41.
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Our teams have in-depth knowledge of the relationship between domestic and international tax laws.
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Through our global organisation of member firms, we support both companies and individuals, providing insightful solutions to minimise the tax burden for both parties.
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Using our finely tuned local knowledge, teams from our global organisation of member firms help you understand and comply with often complex and time-consuming regulations.
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Transfer pricing
The laws surrounding transfer pricing are becoming ever more complex, as tax affairs of multinational companies are facing scrutiny from media, regulators and the public
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Africa tax desk
A differentiating solution adapted to the context of your investments in Africa.
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Banking Holding banking to account: the real diversity and inclusion pictureWe explore how the banking sector can continue to attract, retain and nurture women to build a more diverse and inclusive future.
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Sustainability From voluntary to mandatory ESG: How banks can future-proof their operationsAs we move from voluntary ESG initiatives to mandatory legislation, we explore what the banking sector needs to prioritise.
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IFRS IFRS 9 - Audit of Expected Credit LossesGPPC releases The Auditor’s response to the risks of material misstatement posed by estimates of expected credit losses under IFRS 9
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growthiQ Steering your company to long-term successHistory has something important to tell us about the difficulties of steering a business to long-term success – through seismic shifts in technology, consumer demands and product development. With that in mind it’s unsurprising that over half the world’s largest companies in the early 1900s had shut their doors by the late 1990s. Some, however, have endured.
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International Financial Reporting Standards Implementation of IFRS 17 ‘Insurance Contracts’The auditor’s response to the risks of material misstatement arising from estimates made in applying IFRS 17 ‘Insurance Contracts’
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IFRS Get ready for IFRS 17After twenty years of development the IASB has published IFRS 17 ‘Insurance Contracts’, find out more.
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Global business pulse - industry analysis Mid-market recovery spreads to more industriesThe index results for 13 key industries of the mid-market reveals a very uneven recovery from COVID-19
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Global business pulse - industry analysis A very uneven recovery across industriesThe index results for 13 key industries of the mid-market reveals a very uneven recovery from COVID-19
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Global business pulse - Sector analysis Clear patterns of damage from COVID-19 across the industriesThe index results for 12 key sectors of the mid-market reveal just how much or little the various parts of the economy were impacted by COVID-19.
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Not for profit Mission: possible – putting impact at the heart of charityGlobal charitable continues to decline and charity leaders are increasingly looking at their own unique impact journey.
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Access to finance Raise finance to invest in changePrepare your business to raise finance to invest in change.
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Private equity firms Private equity in the mid-market: reshaping strategies for 2021When the global COVID-19 pandemic stormed across the globe in early 2020, the private equity sector was hit hard but deals are coming back to the market.
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Mid-market businesses Getting ready for private equity investmentOur specialists explore how private equity firms are now working with their portfolios and how the mid-market can benefit from investment.
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Mid-market businesses Myth-busting private equityNervous about partnering with Private Equity? We explore some of the common myths we come across when speaking to mid-market businesses about PE investment.
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Public sector Helping build the government of tomorrow, todayLearn about the Grant Thornton US public sector team.
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Global business pulse - industry analysis Mid-market recovery spreads to more industriesThe index results for 13 key industries of the mid-market reveals a very uneven recovery from COVID-19
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Global business pulse - industry analysis A very uneven recovery across industriesThe index results for 13 key industries of the mid-market reveals a very uneven recovery from COVID-19
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Global business pulse - Sector analysis Clear patterns of damage from COVID-19 across the industriesThe index results for 12 key sectors of the mid-market reveal just how much or little the various parts of the economy were impacted by COVID-19.
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Industries European Real Estate PodcastJessica Patel, Tax Partner at Grant Thornton UK speaks with tax partners and directors across the network to share their insights on the real estate market and some of the challenges.
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Industries European Real Estate PodcastJessica Patel, Tax Partner at Grant Thornton UK speaks with tax partners and directors across the network to share their insights on the real estate market and some of the challenges.
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Global business pulse - industry analysis Mid-market recovery spreads to more industriesThe index results for 13 key industries of the mid-market reveals a very uneven recovery from COVID-19
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Global business pulse - industry analysis A very uneven recovery across industriesThe index results for 13 key industries of the mid-market reveals a very uneven recovery from COVID-19
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Global business pulse - industry analysis Mid-market recovery spreads to more industriesThe index results for 13 key industries of the mid-market reveals a very uneven recovery from COVID-19
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Global business pulse - industry analysis A very uneven recovery across industriesThe index results for 13 key industries of the mid-market reveals a very uneven recovery from COVID-19
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Retail How retail is positioning for successCOVID-19 provided some hard lessons for the retail industry. It is time to turn those into sustainable and well executed growth strategies in 2021.
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Telecoms Can tech and telecom leverage economic headwindsAs most businesses brace for an economic downturn, tech and telecom could see new prospects. But, to turn the headwinds to your advantage, you need to find your unique opportunities and risks.
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Technology Mid-market tech companies lead the way on diversity and inclusionWe explore how the mid-market tech sector can continue to build and nurture a culture that’s increasingly more diverse and inclusive for women.
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Tax Resetting global tax rules after the pandemicBusinesses are seeing rising challenges, and finance heads are dealing with a range of new measures. To say the next 12 months are critical for businesses is an understatement.
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TECHNOLOGY International tax reform: the potential impact on the technology industryIn this article, we’ve summarised key elements of the global tax reform proposals, their potential impact on technology industry and advice from our digital tax specialists on what technology companies can do to prepare.
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Telecoms Can tech and telecom leverage economic headwindsAs most businesses brace for an economic downturn, tech and telecom could see new prospects. But, to turn the headwinds to your advantage, you need to find your unique opportunities and risks.
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TMT TMT industry: Fully charged or on standby?Our research revealed five key trends that resonated with Technology, Media and Telecoms (TMT) industry leaders around the world. We asked a panel of our experts from UK, US, India Ireland and Germany, to give us their reaction to the findings.
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Cybersecurity One size fits nothingTechnology companies must adopt a new approach to digital risk: those that successfully develop a reputation for digital trust by demonstrating an unwavering commitment to cyber security and data privacy will be able to carve out a competitive advantage.
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Technology, media & telecommunications Why it’s time for a 5G reality checkFigures suggest the mobile sector is maturing. While data usage continues to soar, mobile revenues are expected to flatten out over the next few years.
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International business Mid-market businesses lifted by rising tide of optimismOptimism among global mid-market business leaders rose to 67% in the first half of this year and they are markedly more optimistic about their prospects with global optimism having increased by 8%.
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Global business pulse - industry analysis Mid-market recovery spreads to more industriesThe index results for 13 key industries of the mid-market reveals a very uneven recovery from COVID-19
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Hotels COVID-19: Checking in with the hotel industry one year onCOVID-19 provided some hard lessons for the hotel sector. It is time to turn those into sustainable and well executed growth strategies.
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Global business pulse - industry analysis A very uneven recovery across industriesThe index results for 13 key industries of the mid-market reveals a very uneven recovery from COVID-19
- By topic
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Women in Business 2024
2024 marks the 20th year of monitoring and measuring the proportion of women occupying senior management roles around the world.
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COP28: Mid-market firms should seize the opportunity from adaption and innovation
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Scanning the horizon: Mid-market sets sights on global trade growth
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Mid-market sees business optimism reach record high
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Women in tech: A pathway to gender balance in top tech roles
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Women in leadership: a pathway to better performance
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Women in Business 2024
2024 marks the 20th year of monitoring and measuring the proportion of women occupying senior management roles around the world.
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Women in business: Regional picture
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Pathways to Parity: Leading the way
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Transition Plan Taskforce publishes its final disclosure framework
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Top five constraints to international business in the mid-market
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Brand and international marketing – breaking global barriers
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Building resilience in international business
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IFRS Alerts
IFRS Alerts covering the latest changes published by the International Accounting Standards Board (IASB).
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Example Financial Statements
General guidance for preparers of financial statements that supports the commitment to high quality, consistent application of IFRS.
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Insights into IFRS 2
Insights into IFRS 2 summarises the key areas of the Standard, highlighting aspects that are more difficult to interpret and revisiting the most relevant features that could impact your business.
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IFRS 3
Mergers and acquisitions are becoming more common as entities aim to achieve their growth objectives. IFRS 3 ‘Business Combinations’ contains the requirements for these transactions.
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IFRS 8
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IFRS 16
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IAS 36
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IFRS 17
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Pillar 2
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Global expatriate tax guide
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International indirect tax guide
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Global transfer pricing guide
Helping you easily find everything you need to know about the rules and regulations regarding transfer pricing and Country by Country reporting for every country you do business with.
As a response to the COVID-19 global pandemic, governments around the world are implementing measures to help businesses and economies get through it. The nature of government grants can take on various forms such as below market rate loans, short-time working subsidies, relief funds, income-based tax credits to name just a few.
While many forms of government assistance should be accounted for by applying IAS 20 ‘Accounting for Government Grants and Disclosure of Government Assistance’ because they meet the following definition, others should be addressed by other standards such as IAS 12 ‘Income Taxes’.
Definition of a government grant
Government grants are assistance by government in the form of transfers of resources to an entity in return for past or future compliance with certain conditions relating to the operating activities of the entity. They exclude those forms of government assistance which cannot reasonably have a value placed upon them and transactions with government which cannot be distinguished from the normal trading transactions of the entity (IAS 20.3).
Entities will therefore need to assess the economic substance of any government assistance they are receiving to determine what is the appropriate accounting treatment. Indicators to consider include:
- the amount of tax incentive is independent of taxable profit or tax liability
- the expenditure must be made on a particular activity or asset and other substantive conditions may be attached to the tax incentive relating to the operating activity of the entity.
In this article we discuss in more depth four key questions to consider prior to determining the appropriate accounting treatment:
- Is the government assistance in the scope of IAS 20 or another standard?
- What is the correct recognition and measurement?
- Is it recognised in the correct period?
- How should the assistance received from governments be presented in the financial statements?
Read COVID-19 accounting considerations for CFOs: Government grants
What is the correct recognition and measurement?
Entities that have not previously received a government grant may need to develop an accounting policy in relation to the assistance received and how it has been reflected in the entity’s financial statements. In some instances, significant judgements from those charged with governance may be required to determine which accounting standard best reflects the economic substance of the assistance that has been received by the reporting entity.
Where government grants are received, typically the grant is recognised at the date at which it is reasonably assured that a the entity will comply with the conditions attached; and b the grants will be received. (IAS 20.7)
In many situations, the reporting entity will not need to wait for formal confirmation from the government agency providing the grant before recognising the economic assistance provided.
The way in which a grant is received does not impact the accounting of the grant, (for example, if it is received in cash or by reducing a liability to the government). In addition, the way it is accounted for should be consistent with how the expenses or the costs for which the grant are intended to compensate are recognised. Therefore, it is essential to determine the nature and the main objective of the COVID-19 assistance that has been provided by the government rather that its legal form.
Generally, the fair value of the consideration is directly observable – for instance, cash received. For other forms of subsidies, the determination of the fair value of the benefit granted may need to be computed using observable inputs. For finance provided at below-market rates, the fair value of the government grant is determined by reference to the relative fair value of the debt when fair valued in the absence of the government grant.
Measurement of government grants depends on the nature of the grant and the entity’s accounting policy. For example, grants relating to assets or grants relating to income. Refer below for presentation options.
Is it recognised in the correct period?
IAS 20.12 applies: ‘Government grants shall be recognised in profit or loss on a systematic basis over the periods in which the entity recognises as expenses the related costs for which the grants are intended to compensate.’
The income is recognised within profit or loss as the conditions are complied with – for example, for subsidised wages, this could be the period of service for wages. Care should be taken to align the assistance received with requirements of the government agency providing the economic assistance (ie cash received for wage subsidies should not be used against any other costs unless specifically permitted to do so). If the government grant comes in the form of subsidised construction costs, then financial support received may relate to the period of construction.
When accounting for loans issued by financial institutions to construction companies, with a credit guarantee for that loan being provided by the government, preparers of financial statements need to assess whether, without the guarantee, the loan might never have been granted due to the financial difficulties encountered by the entity or the level of uncertainties around its capacity to rapidly recover from the present situation. If this circumstance exists, one could argue the subsidy should be spread over the term of the loan as an interest adjustment.
Alternatively, others may take the view that since the loan is aimed at compensating a shortfall of cash due to a significant decrease in the level of revenue, the subsidy is aimed at compensating another type of cost or expense and therefore it could justifiably be recognised in profit or loss immediately. Before making a final determination, a careful assessment and evaluation of all facts and circumstances should take place.
How should government assistance be presented in the financial statements?
The presentation of government grants is dependent on whether it is a grant related to income or a grant related to assets. Whilst government grants are more common in the form of income, there is potential that entities could receive grants related to the purchase, acquisition or construction of assets.
Grants related to income
Grants related to income are required to be presented as a part of profit or loss, either separately or under a general heading such as ‘Other income’. Alternatively, they are deducted in reporting the related expense (IAS 20.29).
Note that grants are not revenue and should not be presented as such, even though they may have resulted as a direct fall in revenues
Therefore there is a policy decision available to entities as to how the grant is presented on the face of the profit or loss.
Our preference is that the grants be presented separately on the profit or loss and not netted against the related expense if it has predictive value. Presenting the expenses without offsetting this way reflects the uniqueness of the COVID-19 pandemic and its impact on its financial performance during the reporting period.
Disclosure of the effect of the grant on any item of income or expense which is required to be separately disclosed is usually appropriate.
Grants related to assets
For grants related to assets, IAS 20.12 (as noted above), and the paragraphs following, allow for such a grant to either: a reduce the carrying value of the asset being acquired; or b be recognised as deferred income and systematically amortised over a period matching the useful life of the acquired asset.
While this may not be as common as grants related to income, we have seen additional funding allocations from some governments going towards the purchase of ventilators and other respiratory support equipment for hospitals dealing with the consequences of COVID-19.
The first provides simpler accounting, while the second clearly demonstrates the relative benefit received and historical cost of the acquired asset. Either presentation is appropriate, but approach b) is generally preferred.
The profit or loss impact is presented in a manner consistent with grants related to income.
Government grants example
RetailCo was significantly adversely impacted by decreases in foot-traffic and closed its stores on 15 March 2020. Economic and regulatory circumstances changed on 30 June 2020 such that RetailCo wished to reopen its stores, however the significant period of time with no cash inflow resulted in insufficient working capital to meet its lease obligations.
RetailCo received a two-year interest free loan from the government of CU1,000 secured over the assets of RetailCo with repayment due in full at the end of the loan term. RetailCo has determined that in an arms-length transaction, a counterparty would demand an interest rate of 10% per annum as simple interest, payable in arrears. The fair value of the debt is thus determined as the net present value of the debt:
NPV of cash flows:
___________________ Fair value of grant: |
CU1,000/1.102 CU826.45 _____________________ CU173.55 |
The fair value of the grant is recognised either as income upon receipt of the grant or over the term of the loan, whichever is appropriate.
How Grant Thornton can help
Preparers of financial statements will need to be agile and responsive as the situation unfolds. Having access to experts, insights and accurate information as quickly as possible is critical – but your resources may be stretched at this time. We can support you as you navigate through accounting for the impacts of COVID-19 on your business.
Now more than ever the need for businesses, their auditors and any other accounting advisors to work closely together is essential. If you would like to discuss any of the points raised, please speak to your usual Grant Thornton contact or your local member firm.