Account For Government Assistance Practice Test

A for-profit construction company receives a $1,200,000 federal grant in 20X5 to purchase specialized safety equipment, with the condition that the equipment must be used exclusively on federally funded projects for four years; otherwise, the grant must be repaid. The company accounts for the grant by analogy to IAS 20 and concludes it is probable the condition will be met. What disclosures are required for the government assistance received in the company’s U.S. GAAP financial statements?

A for-profit renewable energy developer earns transferable state income tax credits in 20X5 for placing qualifying solar assets into service. The credits are contingent upon maintaining the assets in service for five years; if the assets are disposed of earlier, a portion of the credits must be repaid to the state (recapture). The entity intends to sell the credits to a third party in early 20X6 and applies U.S. GAAP. What is the appropriate accounting treatment for the assistance received?