Government grants are assistance by government in the form of transfers of resources to an entity in return for past or future compliance with certain conditions relating to the operating activities of the entity. They exclude those forms of government assistance which cannot reasonably have a value placed upon them and transactions with government which cannot be distinguished from the normal trading transactions of the entity. Government assistance is action by government designed to provide an economic benefit specific to an entity or range of entities qualifying under certain criteria. Government assistance for the purpose of this Standard does not include benefits provided only indirectly through action affecting general trading conditions, such as the provision of infrastructure in development areas or the imposition of trading constraints on competitors. In this Standard, government assistance does not include the provision o f infrastructure by improvement to the general transport and communication network and the supply of improved facilities such as irrigation or water reticulation which is available on an ongoing indeterminate basis for the benefit of an entire local community. Government grants, including non-monetary grants at fair value, shall not be recognised until there is reasonable assurance that:
the entity will comply with the conditions attaching to them; andthe grants will be
A government grant may take the form of a transfer of a non-monetary asset, such as land or other resources, for the use of the entity. In these circumstances, the fair value of the non-monetary asset is assessed and both grant and asset are accounted for at that fair value. Government grants shall be 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 grants are intended to compensate. A government grant that becomes receivable as compensatio n for expenses or losses already incurred or for the purpose of giving immediate financial support to the entity with no future related costs shall be recognised in profit or loss of the period in which it becomes receivable. Grants related to assets are government grants whose primary condition is that an entity qualifying for them should purchase, construct or otherwise acquire long-term assets. Subsidiary conditions may also be attached restricting the type or location of the assets or the periods during which they are to be acquired or held. Government grants related to assets, including non-monetary grants at fair value, shall be presented in the balance sheet by setting up the grant as deferred income. Grants related to income are government grants other than those related to assets. Grants related to income are presented as part of profit or loss, either separately or under a general heading such as ‘Other income’; alternatively, they are deducted in reporting the related expenses. A government grant that becomes repayable shall be accounted for as a change in accounting estimate (Ind AS 8 Accounting Policies, Changes in Accounting Estimates and Errors). Repayment of a grant related to income shall be applied first against any unamortised deferred credi t recognised in respect of the grant. To the extent that the repayment exceeds any such deferred credit, or when no deferred credit exists, the repayment shall be recognised immediately in profit or loss. Repayment of a grant related to an asset shall be recognised by reducing the deferred income balance by the amount repayable.
The following matters shall be disclosed:
the accounting policy adopted for government grants, including the methods of presentation adopted in the financial statements;the nature and extent of government grants recognised in the financial statements and an indication of other forms of government assistance from which the entity has directly benefited; andunfulfilled conditions and other contingencies attaching to government assistance that has been
Appendix A of Ind AS 20 address the issue that whether government assistance is a government grant within the scope of Ind AS 20 and, therefore, should be accounted for in accordance within the Standard. The Appendix prescribes that government assistance to entities meets the definition of government grants in Ind AS 20, even if there are no conditions specifically relating to the operating activities of the entity other than the requirement to operate in certain regions or industry sectors. The Appendix provides that such grants shall not be credited directly to shareholders’ interests.
Difference Between AS 12 and Ind AS 20
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Credited to Capital Reserve or be treated as deferred income or Deducted from the cost of the asset to arrive at its carrying value.
Deduct from the cost of the asset or Credit to Capital Reserve (part of Shareholder’s Funds). However, if the procurement of grant have certain future obligations to be fulfilled, then such grant shall be treated as deferred income and credited to P&L Account, over the periods, which bear the cost of meeting obligation.
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