In one sentenceSupport a government body gives the business in cash or assets in return for meeting certain conditions; it is recognized as income over the periods in which the related costs are incurred.
Simply put
A grant is not income in full on the day it is received. International standard IAS 20 requires you to match it with the costs it was meant to cover: a grant to buy equipment is spread over the equipment's life, and a grant to support salaries is recognized with the salaries.
The grant is recognized only when there is reasonable assurance that the business will meet its conditions and will receive it.
Worked example
A factory received a grant of 300,000 SAR to buy equipment with a useful life of 10 years.
Grant recorded as deferred income on receipt300,000 SAR
Useful life of the equipment10 years
Grant income each year: 300,000 ÷ 1030,000 SAR
Don't confuse it with
Other incomeA grant is not recorded as income in one go like other income; it is spread over the periods of the related costs.