At present, it is still possible to draw down contributions and subsidies from the state in connection with the Covid-19 pandemic.
We would therefore like to summarise the reporting of these compensations from an accounting point of view. The correct reporting of these compensation bonuses affects the financial statements being prepared for 2020 and 2021.
One of the most common state subsidies is the Antivirus program, whose main goal is to retain jobs and reduce the impact of the crisis on employment. This program was extended until the end of May 2021, with the Antivirus A part of the program covering employees with ordered quarantine or isolation extended until the end of June 2021.
In connection with the booking of this contribution, it is necessary to distinguish schemes A, B, plus from scheme C. Schemes A, B, plus consist of state compensation for wage costs as a percentage of eligible expenditure. The accounting entity must first incur and book these wage costs; part of those costs may then be reimbursed to it as a government subsidy. Here it is necessary to take into consideration both the accruals principle and the precautionary principle. Under the accruals principle, an accounting entity should report subsidy income in the same period in which the costs to which the subsidy relates were incurred, and thus the time and material connection of the costs to the revenues is preserved. The precautionary principle requires the reporting of revenue when the provision of a subsidy is not in doubt. Interpretation of the National Accounting Council I-14 deals in greater detail with the moment of recognition of the right to receive a subsidy. It is clear that in many cases there can be a clash between these two principles and it is necessary to make a good evaluation of all the circumstances and facts. Especially at the turn of 2020 and 2021, when in 2021 subsidies were being requested which related to costs for 2020. In most cases involving the Antivirus program, the entity has the conditions for the provision of the subsidy under its own control, so that in such a case, the right to the subsidy can be recognized as soon as 2020. At the moment of an unquestionable right to a subsidy, the entity books 378-Other receivables/346-Subsidies from the state budget. The settlement of the subsidy is then performed as 346-Subsidies from the state budget/648-Other operating income. At the time of the receipt of funds, the receivable is settled on account 378.
In contrast, an Antivirus C contribution, under which part of social insurance was waived in 2020, is accounted for only as for a discount. There are two ways to book this discount. The first option is to book the total prescription of the liability due to the payment of social insurance 524-Personnel expenses/ 336-Settlement with institutions and, upon fulfillment of the conditions, reduce this obligation using the applied discount by a reverse entry in 336/524. The second option is not to book the discount at all and to capture only the liability due to the payment of social insurance as a reduced amount 524-Personnel costs/336-Clearing with institutions.
In the case of COVID Rent, this is an operational subsidy, which is booked in the same way as for Antivirus A, B, plus. Rental costs are charged in full to the account 518-Services/321-Liabilities, an unquestionable right to a subsidy to 378-Other receivables/346-Subsidies from the state budget and the settlement of the subsidy itself 346-Subsidies from the state budget/648-Other operating income. The same will apply to other compensatory titles such as Covid Gastro, Covid Culture, Covid Accommodation, Covid 2021, and Covid Uncovered Costs. At the turn of the year, the question again arises into which period the right to a subsidy should be correctly booked and subsequently included in the tax base. Here the situation is substantially more complicated than in the case of Antivirus. The moment when a claim is not in doubt is usually the day of approval of the application. For the COVID Rent subsidy to be provided for the fourth quarter of 2020, other conditions had to be met, such as payment of 50% of the rent and an existing rental relationship. Only by meeting these conditions can the subsidy be considered to not be in doubt and thus be recognized as income. It must be emphasized that the accounting entity must evaluate each subsidy application and its reporting individually. If there are significant uncertainties at the time of preparation of the financial statements, the subsidy will not be reported in 2020 and will only be described in the notes to the financial statements.
All significant state aid and compensation should then be duly commented on in the notes to the financial statements, where the entity should provide information primarily on the value of the subsidy and its purpose, the costs to which the subsidy relates, any uncertainties associated with the submitted applications and, where applicable, any subsequent events.