AASB 120 - Accounting for Government Grants and Disclosure of Government Assistance - August 2015

What this legislation does:

This standard (AASB 120) sets the rules for how Australian businesses and organisations must account for money, assets, or other help they receive from government bodies. It covers two main things:

• Government grants – actual transfers of resources (cash, land, equipment) given on the condition that the recipient does something specific (like build a factory, hire staff, or conduct research)
• Government assistance – other forms of help that can't be easily valued (like free advice or guarantees)

Who it affects:

• For-profit companies preparing financial statements under Australian Accounting Standards (Tier 1)
• Not-for-profit organisations and public sector entities that receive government support
• Smaller entities using simplified reporting (Tier 2) – though they have reduced disclosure requirements

Key requirements:

• Don't count your chickens before they hatch: Grants can't be recognised in the books until there's "reasonable assurance" the entity will meet the conditions and actually receive the money
• Match the benefit to the cost: Grants must be recognised as income gradually, over the same periods when the entity incurs the expenses the grant is meant to cover