Ind AS-20 : Accounting for Govt.

Grants and Disclosure

of Government Assistance
If Government Grant recognized earlier becomes refundable

BB
then amount of refund to be; accounted as change

A
Government Grants to be transferred/recognized to Profit or Loss in proportion of the
cost/revenue recognized w.r.t. item for which government grant is provided. RECOGNITION OF in estimate and;
GOVERNMENT a) First adjusted from balance of Government Grant in REFUND OF
GRANTS IN PROFIT ‘other equity’/liability. GOVERNMENT
Step I : Identify Government Grant is related to which item of Financial OR LOSS b) Excess refund if any (may be exceptional item) to be GRANT
Statement. transferred to Profit or Loss. However, refund of
government grant relating to asset recorded at net
Step II : Identify the cost/revenue associated with that item. values (as permitted in non-cash Cash grants), refund
to be added to cost of asset provided the asset is not
recorded beyond its carrying amount that would be recorded
in the books had no grants were received at all on such asset.
Step III : How to Recognize Government Grant in Profit or Loss
Interest free Generic A) In Balance Sheet:
For depreciable assets Expenses or Capital or Lower Purpose 1) Gross and not Net presentation
(PPE or Intangible Asset) Revenue Contribution interest (i.e. Government Grant not to be off-setted with as-
For non- sacrifice loans sociated asset, but shown separately under ‘Other
n In proportion of depreciable Equity’ pending appropriation to Profit or Loss). How-
depreciation on asset. assets (PPE Proportion of ever post amendment asset related grants including
n To be not offsetted from
or Intangible expense/ non-monetary grants may be presented on net basis.
cost of asset (Gross ap- Asset) revenue Proportion of However accounting for asset related monetary grants to
proach) however for
Associated Cost of be as per gross approach only.
non-monetary asset related
Proportion of Compliance or in
grants Net approach is also 2) Contingent Liability or Contingent Asset, as per
associated Proportion of
permitted. Ind AS 37 disclosure may be required.
n For assets with 'Residual
cost of Depreciation on Asset
compliance
Value' remember to (Contingent Liability: Government Grants recognized
allocate grants in ration of but if conditions not fulfilled it may become refundable)
depreciation charged to
depreciable amounts. (B) Statement of Profits or Loss:

C
1) Gross or Net approach both are permitted.
Additional Notes: PRESENTATION 2) Gross ApproachgRecognize Government Grant under
1) Government Grants received but not yet apportioned/transferred to Profit or loss to be shown as deferred
‘other income’
income.
2) Government Grants Recognized but not received will be shown as an Asset as government grants receivable 3) “Net ApproachgReduce Government Grant recognized
3) Government Grant if Related to Past transaction, such Government Grants to be immediately transferred to in Profit or loss from associated expense.
Profit or loss
Important (C) SOCIE: Disclose Government Grant Separately (Separate
form Retained Earnings)
Additional Disclosure under Ind AS 1 may be required if the nature/size/incidence of such
amount recognized in Profit or loss is substantial (Exceptional Items --- Schedule III, Division II) (D) Cash flow Statement: Ind AS 20, specifically
requires separate disclosure of government grant
received under respective cash flows on gross basis.

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 Ind AS-20 : Accounting for Govt. Grants and Disclosure
of Government Assistance
AUDIT MINDGRAPHS
Disclosure
DISCLOSURE

5
I) Government Grants recognized during the year V) Government Assistance (non-
monetary) to be disclosed to
II) Government Grants recognized in Profit or Loss during
provide users fair representation
the year
of material non-financial benefits FIRST TIME
III) Government Grants refunded/refundable during the year

received from government
IV) Accounting policy for the accounting of Government Grants Example: Licenses given, speedy clearing of files etc. I) Retrospective effect required except for
interest free loan or concessional rate
of interest Loans. Ind AS 109
(A) When Deemed Costs Approach of PPE
Ind AS 101 Provides that entity should
not retrospectively change the interest
Recognized at fair value, free loan received from government,
GOVERNMENT rest accounting is same. unless entity options for retrospective
7
ADOPTION
Followed : Asset to be recognized at its fair
market value on date of asset
acquisition and corresponding
government grant to be recognized

6
GRANTS However net approach is treatment for such loans (subject to depreciation adjustments)
RECEIVED permitted in such cases.
IN KIND II) Such interest free loans to be hence (B) Revaluation appRoach : Asset to be
Refer below forth accounted for under Ind AS 20; as revalued at fair market value on transition
per accounting principles given under date and gain to be allocated to
Ind AS 109
(i) Government Grants
III) First time adoption :
and
Practical difficulty When Government
Grants received in other Grants was received in cash/kind and
asset recognized at nominal value
(ii) Revaluation Reserve
IV) Capital Reserve : Retrospectively
than Cash Amendment under AS-12 change capital reserve as appearing on
transition date

Grants In Other Than Cash (Non-Monetary Grants)

Accounting for such grants to be like any other grant i.e. asset to
recorded at fair value with a corresponding credit to govt. grants
(Gross Approach)
4 However, Cos. (Ind AS Second Amendments) Rules, 2018 permits
such grants to be recognized at net values.
4 In such case presentation in BS of asset & GG may also be in Net
Values, for grants relating to asset whether received in cash or
non-monetaty in nature.
4 However, in Cash Flow Statement netting is not prefered rather
asset and grants related cash flows may shown in gross terms.
4 Refund of GG: Under net approach the grant refunded will be
added to cost of asset to the extent of depreciated value of
grant, balance to be Dr to PorL.

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