Deferred grant treatment

The deferred income on the project will not have been treated as income in the year that it was received and instead included as a liability until the expenditure on the project had been spent and therefore match the income and expenditure in the same year.

If the expenditure has now been spent and the deferred income is now receivable the income should now be included within grants in the statement of financial statements, presumably as a restricted fund if the money was specifically for this project. The expenditure would also be included as restricted bringing the restricted fund to zero.

I hope this helps.

Lisa

I agree with you Malcolm, income would only be deferred if it had conditions that if the money was not spent it would be refundable.

The orignal query did not state whether the income had conditions or not.  As it was deferred I have assumed that it had been accounted for correctly and therefore must have had conditions on its use.

Lisa

If it "can be spent on other things" [on what ever the board decide], it sounds like it ought not to be deferred - it should be part of [unrestricted] reserves.

If preparing accounts for ye 20X2, with an opening deferred income creditor in ye 20X1, I would release it to income in ye 20X2.

Maybe it really ought to have been credited to income in 20X1, so income would have been understated in that year.

If this difference is material, then there might be some kind of prior year adjustment, but it could equally well be a up dated judgment about the nature of the grant which means it can now be spent on what the board want.

My view would be that unless there is a restriction on the grant that it must be spent in a later period, it should be accounted for through the SOFA. A restriction on what the grant may be spent on does not mean the grant should be deferred. However, if there was doubt as to whether the funds could be kept by the charity, then this would probably break the income recognition rules in the SORP and cause it to be deferred.

If the income was deferred in the brought forward figures for the current year, then it should certainly be released now to the SOFA. Based on the limited details above, I agree then it is possible it should not have been deferred last year. I also agree it would have to be pretty material before it would be worth bothering to do a prior year adjustment.

As an aside, if this charity is a preschool, does it even have sufficient income (<£250k and not an incorporated charity) to require accruals accounts? If it qualifies for receipts and payments accounts, that might be a simpler way to proceed going forward.