Government Relief Measures
As a response to the COVID-19 pandemic, governments around the world are implementing measures to help businesses and economies get through it. The Singapore government has announced various support schemes during the year in the form of income tax rebate and reliefs to protect local business and residents.
The Jobs Support Scheme (“JSS”) was first introduced in Singapore’s Budget 2020 (the “Unity Budget”) announcement and further enhanced in the Resilience Budget, Solidarity Budget, Fortitude Budget and Ministerial Statement that follows. The purpose of JSS, which is a form of cash flow support, is to provide wage support to employers to help them retain their local employees (Singapore Citizens and Permanent Residents) during this period of economic uncertainty.
Employers who have made CPF contributions for their local employees will qualify for the payouts under JSS. Eligible employers would receive a wage subsidy ranging from 10% to 75% (depending on business sector) on the gross monthly wages of each local employee (capped at $4,600) for the months of October 2019 to December 2019, and February 2020 to March 2021 (17 months).
Does JSS qualify for Government Grant?
In September 2020, ISCA issued the revised Financial Reporting Bulletin 6 (“FRB 6”) providing accounting guidance to employers on the JSS subsidies received from IRAS. In ISCA’s view, the JSS should be recognised as a grant income which will impact financial statements for the period ending March 2020 to August 2021.
Given that the JSS is a cash grant from the Singapore Government, it qualifies as a government grant because there is a transfer of resources from the Singapore Government to entities in return for meeting the stipulated conditions related to the operating activities of the entity and there is no service or goods provided back to the Singapore Government by the entities. Therefore, SFRS(I) 1-20 Accounting for Government Grants and Disclosures of Government Assistance should be applied in accounting for the JSS.
Other Income or Offset Against Salary Costs?
FRB 6 also addressed the presentation format for JSS grant income. According to SFRS(I) 1-20 paragraph 29, the grant income can be presented as either: (1) separately as grant income or under “other income”, or (2) offset against the salary costs.
ISCA’s viewpoint is that greater transparency will be achieved if the JSS grant income is presented as ‘grant income’ or under ‘other income’ in the financial statements, instead of a deduction against the salary costs. The disclosure should be consistently applied by the company.
What Should I do at the End of Financial Period?
According to SFRS(I) 1-20 paragraph 12, the grant is recognised in profit or loss on a systematic basis over the periods in which the entity recognises as expenses the related costs for which the grant is intended to compensate.
JSS payouts are intended to offset local employees’ wages (“the related costs”) and help protect their jobs. Under the JSS, the Government co-funds between 25% to 75% of the first $4,600 of gross monthly wages paid to each local employee in a 10-month period (October 2019 to December 2019, and February 2020 to August 2020) and 10% to 50% of the same in the subsequent 7-month period (September 2020 to March 2021).
While the JSS subsidies are calculated based on a percentage of employees’ monthly wages paid in certain months, employers have the flexibility to allocate the subsidies for their businesses as necessary to keep the business running and continue to retain their employees. Judgment is involved in determining the appropriate period. FRB6 shared that the 17 months period of economic uncertainty is likely to commence in April 2020 for most companies. As such, the recognition of the JSS grant income in the profit or loss should be on a systematic basis over the 17 months of economic uncertainty from April 2020 to August 2021. However, for some companies in the more affected sectors, the period of economic uncertainty may commence earlier.
While most companies are recognising JSS as and when received, adjustments need to be made by way of recognising grant receivables with a corresponding entry of deferred grant income to reflect the appropriate financial position in accordance with SFRS(I) 1-20 at the end of financial period.
Example for financial year ending 31 December 2020
An illustrative example has been included to aid in the understanding of the principles being applied.
For Financial Period Ending 31 December 2020
| Month |
Oct-19 |
Nov-19 |
Dec-19 |
Feb-20 |
Mar-20 |
Apr-20 |
May-20 |
Jun-20 |
| Salary cost incurred ($) (capped at$4,600) |
4,600 |
4,600 |
4,600 |
4,600 |
4,600 |
4,600 |
4,600 |
4,600 |
| JSS wage support |
25% |
25% |
25% |
25% |
25% |
75% |
75% |
25% |
| Computed JSS grant ($) [JSS wage support % x $4600] |
1,150 |
1,150 |
1,150 |
1,150 |
1,150 |
3,450 |
3,450 |
1,150 |
| JSS grant income recognised in P/L ($) |
- |
- |
- |
- |
- |
3,450 |
3,450 |
1,150 |
| Grant receivable B/S ($) |
- |
- |
- |
864 |
5,750 |
3,450 |
3,450 |
4,600 |
| Deferred grant income B/S ($) |
- |
- |
- |
864 |
5,750 |
5,750 |
5,750 |
5,750 |
| Payout ($) |
- |
- |
- |
- |
- |
-5,750 |
-3,450 |
- |
Continued
| Month |
Jul-20 |
Aug-20 |
Sep-20 |
Oct-20 |
Nov-20 |
Dec-20 |
Total |
| Salary cost incurred ($) (capped at$4,600) |
4,600 |
4,600 |
4,600 |
4,600 |
4,600 |
4,600 |
|
| JSS wage support |
25% |
25% |
10% |
10% |
10% |
10% |
|
| Computed JSS grant ($) [JSS wage support % x $4600] |
1,150 |
1,150 |
460 |
460 |
460 |
460 |
17,940 ^ |
| JSS grant income recognised in P/L ($) |
1,150 |
1,150 |
1,150 |
1,150 |
1,150 |
1,150 |
14,950 * |
| Grant receivable B/S ($) |
2,300 |
3,450 |
3,910 |
920 |
1,380 |
1,840 |
|
| Deferred grant income B/S ($) |
5,750 |
5,750 |
5,060 |
4,370 |
3,680 |
2,990 |
|
| Payout ($) |
-3,450 |
- |
- |
-3,450 |
- |
- |
16,100 @ |
Entity A, with financial year ending 31 December 2020, was significantly impacted by the pandemic and closed its store from April 2020 onwards following the circuit-breaker measures. Entity A has one local employee who is paid a gross monthly salary of $4,600 and eligible for JSS. Entity A belongs to Tier 3 business and resumed business on 2 June 2020.
According to SFRS(I) 1-20 paragraph 12, the grant is recognised in profit or loss on a systematic basis over the periods in which an entity recognises as expenses the related costs for which the grant is intended to compensate. The stated purpose of JSS s to provide 17 months of wage support to entities to retain their local employees during economic uncertainty till August 2021. Entity A determined that the 17 months of economic uncertainty commenced in April 2020 when it closed the store.
Entity A determines that the co-funding from Singapore Government is in line with the percentage of actual salary costs incurred as follows:
- From April 2020 and May 2020, JSS grant income representing 75% of the actual salary costs is to be recognised in profit and loss as the Singapore Government is co-funding 75% of the wages of local employees in respective months due to circuit breaker measure.
- From June 2020 to January 2021, JSS grant income representing 25% of the actual salary costs is to be recognised in profit and loss as the Singapore Government is co-funding 25% of the wages of local employees.
- From February 2021 to August 2021, JSS grant income representing 10% of the actual salary costs is to be recognised in profit and loss as the Singapore Government is co-funding 10% of the wages of local employees.
As at 31 December 2020, Entity A is eligible to JSS grant of $17,940 (^) and will recognise JSS grant income totalling $14,950 (*) during April 2020 to December 2020. The total JSS received will be $16,100 (@). As such, Entity A shall recognise grant receivables and deferred grant income of $1,840 and $2,990 respectively as at 31 December 2020.
This article was contributed by Bernard Juay, Director and Head of Business Advisory at Complete Corporate Services. If you need further assistance or other advisory or specific accounting related issues, please reach out to our Business Advisory professionals at CCS or click here for a further discussion.