Question

A government grant that becomes repayable shall be accounted for as?

1) Change in accounting estimate
2) Change in accounting policy
3) Both change in accounting estimate and change in accounting policy
4) Neither change in accounting estimate nor change in accounting policy

Answer 1

A government grant that becomes repayable is accounted for as neither change in accounting estimate nor change in accounting policy; it is recognized as a financial liability.

Step-by-step explanation:

When a government grant becomes repayable, it is accounted for as neither change in accounting estimate nor change in accounting policy. A government grant is initially recognized as income and part of equity when there is reasonable assurance that the grant will be received and the grantee will comply with the conditions attached to it. When the grant becomes repayable, it changes the nature of the original transaction and now effectively becomes a financial liability on the balance sheet. This change is not a change in accounting estimate or policy but a recognition of an obligation that needs to be settled.