Accounting for COVID-19 government assistance in the UK (under FRS 102)

By Katherine Rose, Citroen Wells Chartered Accountants

In the United Kingdom, the Coronavirus Job Retention Scheme (CJRS) and the Statutory Sick Pay Rebate Scheme (SSP) resulted in cash payments from the government to compensate employers for part of the wage costs of employees placed on furlough or sick leave, respectively, due to Covid-19.

These are government grants and can be recognised using either the performance model or the accrual model. This choice does not make a difference to the accounting treatment of the grant, however, the accounting policy used should be disclosed in the firm’s financial statements. Regardless of which model is applied, the grant income will be shown within “other income” and there will be either a debtor or a deferred income balance recognised, depending upon when the cash was received from HMRC. It is not appropriate to net the grant income off against wage costs.

During the Covid-19 pandemic, local authorities provided grants to small businesses and those in the retail, hospitality, and leisure industries. These grants have no future performancerelated conditions. As with the CJRS/ SSP there is a choice of using the performance or accrual model, both with the same accounting outcome. The grant is recognised as income in the period during which it becomes receivable (when the scheme eligibility criteria were first published, or if there is uncertainty around eligibility, when confirmation of entitlement was received from the local authority). This will be shown within “other income”, with a corresponding debtor until the cash is received from the local authority.

Government guaranteed loans were given to eligible businesses where the government paid fees and interest for the first twelve months of the loan. These financing transactions are measured initially at the present value (PV) of future payments discounted at a market rate of interest for a similar debt instrument. As the government covers the first twelve months of interest, this results in an overall non-market rate of interest on the loan. The PV of the interest being paid for by the government is generally viewed as representing a government grant and will therefore be presented as such in profit or loss.

FRS 102 – The Financial Reporting
Standard applicable in the
UK and Republic of Ireland
CJRS – Coronavirus Job
Retention Scheme
SSP – Statutory Sick Pay
Rebate Scheme
HMRC – HM Revenue & Customs
PV – Present Value

Katherine Rose

Katherine Rose

GGI member firm
Citroen Wells Chartered Accountants
Auditing & Accounting, Tax, Advisory, Corporate Finance, Fiduciary & Estate Planning
London, UK
T: +44 20 7304 2000
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Citroen Wells' partners include specialists with years of practical knowledge assisting their international clients, including the financial problems facing property investors, dealers, and developers. They offer a range of high-quality accounting, tax, financial, and business services.

Katherine Rose is responsible for quality control, compliance, and technical matters at Citroen Wells. She also manages a portfolio of audit clients, with 15 years’ experience working with businesses across many industries, focussing on international groups and consolidations under UK GAAP and IFRS.

Published: Auditing, Reporting & Compliance Newsletter, No. 06, Autumn 2021 l Photo: Alexey Fedorenko -




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