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Issuing grants and financial guarantees a public sector perspective

Henning Diederichs examples the issues highlighted by the pandemic in accounting for grants and financial guarantees by government.

Mandatory lockdowns of ‘non-essential’ businesses and the effects of the pandemicIssuing grants and financial guarantees on both supply and demand have been mitigated by a wide range of measures to help businesses through these unprecedented times. The UK and many other governments around the world have used grants and financial loan guarantees as part of their response to the COVID-19 crisis. While grants and financial guarantees are not new accounting topics, the scale and timing of such transactions as a result of the pandemic have brought into sharp focus some specific financial reporting issues for the public sector. 

UK government entities apply International Financial Reporting Standards (IFRS), with some adaptations for the public sector, and have a year end of 31 March. When, in March 2020, large amounts of grants were being promised as part of relief packages, there were discussions about whether they should be recognised as a provision in government accounts as at 31 March 2020.