When are grants relating to income released to profit or loss?

Grants relating to income are recognized in profit or loss over periods in which the costs of meeting the grant conditions are incurred. This approach is consistent with the matching principle of accounting, which aims to align expenses with the revenues they help to generate.

When a grant is received, it typically has specific conditions attached that must be fulfilled to recognize the income. These conditions often involve incurring expenses related to the purpose of the grant, such as qualifying costs or achieving certain outcomes. By releasing the grant income as these expenses are incurred, the financial statements provide a clearer representation of the financial performance and position of the entity during each reporting period.

This method ensures that the income from the grant supports the expenses it was intended to cover, offering stakeholders a better understanding of the entity's financial results. It emphasizes the relationship between the grant received and the specific activities or projects funded by it, presenting a more accurate reflection of the timing and extent of the income recognized in the profit or loss.