What is the financial statement effect of an income-based grant once conditions are met?

When an income-based grant's conditions are met, it is recognized as revenue immediately. This approach aligns with the revenue recognition principle, which states that revenue should be recognized when it is earned and realizable. In the case of an income-based grant, the completion of specific conditions indicates that the organization has indeed earned the grant.

Once the criteria set by the grantor are satisfied, the organization can then reflect the grant amount on its financial statements, enhancing revenue. This recognition is essential as it reflects the true financial performance of the organization during the period when the grant's conditions were fulfilled. Consequently, it can aid stakeholders in assessing profitability and financial health accurately.

Other choices involve misrepresentations of how grants should be treated in the financial statements. For instance, offsets against liabilities or deductions from taxes do not accurately describe the accounting treatment for grants with met conditions, as these do not recognize the grant as earned revenue, thereby missing the financial impact on income reporting.