Definitions of Terms

Fair value

The amount for which an asset could be exchanged between a knowledgeable, willing buyer and a knowledgeable, willing seller in an arm's-length transaction.

Forgivable loans

Those loans which the lender undertakes to waive repayment of under certain prescribed conditions.

Government

For the purposes of IAS 20, the term government refers not only to a government (of a country), as is generally understood, but also to government agencies and similar bodies whether local, national, or international.

Government assistance

Government assistance is action by government aimed at providing an economic benefit to an enterprise or group of enterprises qualifying under certain criteria. It includes a government grant and also includes other kinds of nonmonetary government assistance such as providing, at no cost, legal advice to an entrepreneur for setting up a business in a free trade zone. It excludes benefits provided indirectly through action affecting trading conditions in general; for example, laying roads that connect the industrial area in which an enterprise operates to the nearest city or imposing trade constraints on foreign companies in order to protect domestic entrepreneurs in general.

Government grants

A government grant is a form of a government assistance that involves the transfer of resources to an enterprise in return for past or future compliance (by the enterprise) of certain conditions relating to its operating activities. It excludes

• Those forms of government assistance that cannot reasonably be valued, and

• Transactions with governments that cannot be distinguished from the normal trading transactions of the enterprise.

Grants related to assets

Those government grants whose primary condition is that an enterprise qualifying for them should acquire (either purchase or construct) a long-term asset or assets are referred to as "grants related to assets." Subsidiary conditions may also be attached to such a grant. Examples of subsidiary conditions include specifying the type of long-term assets, location of long-term assets, or periods during which the long-term assets are to be acquired or held.

Grants related to income

Government grants, other than those related to assets, are grants related to income.