Grant Income

Grants are usually not recognised as income as soon as the cash arrives. Instead, under accounting standards such as IFRS, grant income is matched with the costs the grant is intended to cover.

Grants related to income, such as a grant towards training costs or wages, are recognised over the period in which those costs are incurred. Grants related to assets, such as a grant towards buying equipment, are recognised over the asset's useful life, either as income or by reducing depreciation.

For example, a company receives a grant of 60,000 to cover the wages of three apprentices for one year. It recognises grant income of 5,000 a month as the wages are paid, rather than 60,000 when the money arrives.

Grant income is especially important for charities, universities and research organisations, which often depend heavily on grants. These organisations may follow their own accounting rules, distinguishing restricted grants, which must be spent on specific purposes, from unrestricted ones.