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Educational Material on Ind AS 20 Accounting for Government Grants and Disclosure of Government Assistance

Educational Material on Ind AS 20 Accounting for Government Grants and Disclosure of Government Assistance

Ind AS 20 Accounting for Government Grants and Disclosure of Government Assistance : Ind AS 20 Accounting for Government Grants and Disclosure of Government Assistance outlines how to account for government grants and other assistance. Government grants are recognised in profit or loss on a systematic basis over the periods in which the entity recognises expenses for the related costs for which the grants are intended to compensate, which in the case of grants related to assets requires setting up the grant as deferred income or deducting it from the carrying amount of the asset. Ind AS 20 was issued in April 1983 and is applicable to annual periods beginning on or after 1 January 1984.

History of Ind AS 20

September 1981Exposure Draft E21 Accounting for Government Grants and Disclosure of Government Assistance
April 1983Ind AS 20 Accounting for Government Grants and Disclosure of Government Assistance
1 January 1984Effective date of Ind AS 20 (1983)
1994Ind AS 20 (1983) was reformatted
22 May 2008Ind AS 20 amended for Annual Improvements to IFRSs 2007 to bring it in line with Ind AS 39 in respect of loans with the below market-rate of interest
1 January 2009Effective date of May 2008 amendment to Ind AS 20

Educational Material on Ind AS 20 Accounting for Government Grants and Disclosure of Government Assistance

Ind AS 20 Accounting for Government Grants and Disclosure of Government Assistance : Government refers to government, government agencies and similar bodies whether local, national or international.

How to Account for Government Grants

Before we dig a bit more in details, let me stress that you should never ever credit the receipt of any grant directly in equity.

This capital approach is not permitted in IFRS.

Instead, IFRS prescribe so-called “income approach” – to recognise grants as income over the relevant periods to match them with the related expenditures or costs they should compensate.

Specific accounting treatment depends on the purpose of the grant received. An entity can receive a grant either for:

  • Acquisition of an asset, or
  • Reimbursement of costs.

Objective of Ind AS 20

The objective of Ind AS 20 is to prescribe the accounting for, and disclosure of, government grants and other forms of government assistance.

Scope of Ind AS 20

Ind AS 20 applies to all government grants and other forms of government assistance. [Ind AS 20.1] However, it does not cover government assistance that is provided in the form of benefits in determining taxable income. It does not cover government grants covered by Ind AS 41 Agriculture, either. [Ind AS 20.2] The benefit of a government loan at a below-market rate of interest is treated as a government grant. [Ind AS 20.10A]

Accounting for grants

A government grant is recognised only when there is reasonable assurance that (a) the entity will comply with any conditions attached to the grant and (b) the grant will be received. [Ind AS 20.7] The grant is recognised as income over the period necessary to match them with the related costs, for which they are intended to compensate, on a systematic basis. [Ind AS 20.12] Non-monetary grants, such as land or other resources, are usually accounted for at fair value, although recording both the asset and the grant at a nominal amount is also permitted. [Ind AS 20.23]

Disclosure of government grants

The following must be disclosed: [Ind AS 20.39]

  • accounting policy adopted for grants, including method of balance sheet presentation
  • nature and extent of grants recognised in the financial statements
  • unfulfilled conditions and contingencies attaching to recognised grants

Government assistance

Government grants do not include government assistance whose value cannot be reasonably measured, such as technical or marketing advice. [Ind AS 20.34] Disclosure of the benefits is required. [Ind AS 20.39(b)]

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Educational Material on Ind AS 20 Accounting for Government Grants and Disclosure of Government Assistance 

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Educational Material on Ind AS 20 Accounting for Government Grants and Disclosure of Government Assistance

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