Financial Reporting · Ind AS 20 Accounting for Government Grants and Disclosure of Government Assistance

Repayment of Grants and Government Assistance Disclosures under Ind AS 20

Updated 5 October 2026

Under Ind AS 20, a government grant that becomes repayable is treated as a change in accounting estimate under Ind AS 8. Repayment of an income grant or an asset grant is applied first against the unamortised deferred income, with any excess in profit or loss. Asset grants are shown only as deferred income. Disclose policy, amounts, unfulfilled conditions and other assistance.

Understand Repayment of Grants and Government Assistance Disclosures

A grant is recognised only when there is reasonable assurance that you will comply with its conditions and that the grant will be received. Later, you may fail a condition, and the government may ask for the money back. The grant then becomes a liability, and you must account for the repayment.

IND AS 20 treats repayment as a change in accounting estimate. So you apply Ind AS 8 prospectively and recognise the effect in the current period's profit or loss, through the set-off described below. You do not restate earlier periods. You do not treat it as a prior period error, unless the original recognition was itself an error.

The treatment depends on how the grant was originally presented. If the grant was related to income, apply the repayment first against any unamortised deferred income balance. Any excess goes to profit or loss immediately. If you had deducted the grant from the expense, the repayment is simply a charge to profit or loss.

If the grant was related to an asset, Ind AS 20 allows only one presentation: deferred income. The option in IAS 20 to deduct the grant from the asset's carrying amount is not available under Ind AS 20. On repayment, reduce the deferred income balance by the amount repayable. Any excess over the unamortised deferred income goes to profit or loss immediately. The asset's cost, carrying amount and depreciation are not changed by the repayment.

There is also government assistance that is not a government grant under the standard. Some forms of assistance cannot reasonably be valued, so they are excluded from the definition of a grant. Examples are free technical or marketing advice and guarantees. The benefit of a government loan at a below-market rate of interest is different: it is treated as a government grant and measured under Ind AS 109 (Ind AS 20, para 10A). Other assistance, like a general infrastructure benefit (roads, water in a development area) or a trading advantage, has no specific relation to operating activities. It is not a grant to be measured. Where such assistance is significant, you still disclose its nature, extent and duration, so the financial statements are not misleading. Disclosure is the main requirement here.

Key rules to remember

Repayment of income grant: Repayment applied first against unamortised deferred credit; excess → profit or loss immediately; If the grant was netted against expense, the whole repayment goes to profit or loss.
Repayment of asset grant (deferred income): Repayment applied against unamortised deferred income; excess → profit or loss immediately; Deferred income balance = grant received − income already released. Ind AS 20 allows no other presentation for asset grants, and the asset's carrying amount is not adjusted.
Accounting basis: Repayment = change in accounting estimate (Ind AS 8), applied prospectively; effect recognised in current period profit or loss via the set-off above; prior periods not restated; Not a prior period error unless the original treatment was wrong.
Required disclosures: Policy and presentation method; nature and extent of grants and other assistance recognised; unfulfilled conditions and other contingencies; Also disclose direct benefits from other assistance that are not grants, where significant.

How to solve Repayment of Grants and Government Assistance Disclosures questions

Use this order for any question on grant repayment or assistance disclosure.

1Identify the original grant: amount, type (asset or income) and presentation method used.
2Confirm the trigger: the grant has become repayable because a condition was breached. Call it a change in estimate under Ind AS 8, applied prospectively, with the effect recognised in current period profit or loss and no restatement of prior periods.
3Compute the unamortised deferred income at the repayment date (grant less income released to date).
4For an income grant or an asset grant: apply repayment against the unamortised deferred income first and take the excess to profit or loss.
5For an asset grant, remember Ind AS 20 allows only the deferred income presentation. Reduce the deferred income by the repayment. Do not change the asset's carrying amount or depreciation. Spread any remaining deferred income over the remaining life.
6Pass the journal entries, keeping the repayment liability or cash credit clear.
7For assistance without a specific operating relation, do not measure it as a grant. Decide what to disclose.
8Close with the disclosure points: policy, amounts, unfulfilled conditions and other assistance.

Quickest way: Repayment in three lines

When to use it: Use this when the question gives the grant, the presentation method and the repayment date, and asks only for the entry or effect on profit.

Write the unamortised balance: grant minus amount released.
Repayment first sets off this balance. Anything above it goes to profit or loss.
An asset grant also sits in deferred income, so the same set-off applies. Do not touch the asset's cost or depreciation. State that this is a change in estimate, applied prospectively.

Common mistakes in Repayment of Grants and Government Assistance Disclosures

Restating prior years' financial statements for the repayment.
Students link any correction with a prior period error.
Fix: Write that repayment is a change in estimate under Ind AS 8, recognised in the current period, with no restatement of prior periods.
Taking the entire repayment to profit or loss for a deferred income grant.
The set-off against unamortised deferred income is forgotten.
Fix: Always compute the unamortised balance first and charge only the excess.
Deducting an asset grant from the asset's carrying amount, or adding the repayment back to the asset's cost.
Students carry over the IAS 20 alternative, which is not available under Ind AS 20.
Fix: Treat every asset grant as deferred income. On repayment, reduce the deferred income and leave the asset's carrying amount and depreciation unchanged.
Measuring general infrastructure benefits as a government grant.
Any government benefit is assumed to be a grant.
Fix: Remember that benefits with no specific relation to operating activities are not grants. Disclose them if significant.
Skipping disclosures in a theory answer.
Students focus on the numbers.
Fix: List all the disclosure heads: policy, nature and extent, unfulfilled conditions and other contingencies.

Worked examples

Example 1

On 1 April 2024, Meru Ltd received a ₹12,00,000 grant for a machine costing ₹60,00,000 (useful life 10 years, straight line, nil residual). The grant is shown as deferred income and released over the asset's life. On 1 April 2027, because a condition was breached, the full grant became repayable. Show the accounting on 1 April 2027.

Show the solution

Annual release = ₹12,00,000 ÷ 10 = ₹1,20,000.
Released for 3 years (to 31 March 2027) = ₹3,60,000.
Unamortised deferred income = ₹12,00,000 − ₹3,60,000 = ₹8,40,000.
Repayment is a change in estimate, applied prospectively and recognised in the current period (FY 2027-28) profit or loss. Prior years are not restated.
Apply the repayment ₹12,00,000 first against the deferred income of ₹8,40,000.
Excess = ₹12,00,000 − ₹8,40,000 = ₹3,60,000, charged to profit or loss immediately, i.e. in FY 2027-28, the year of repayment.
Entry: Deferred income Dr ₹8,40,000; Profit or loss Dr ₹3,60,000; To Grant repayable (or Bank) ₹12,00,000.

Answer: Deferred income of ₹8,40,000 is cleared and ₹3,60,000 is charged to profit or loss in FY 2027-28, the year of repayment. Earlier years are not restated.

Example 2

Kaveri Ltd bought equipment on 1 April 2025 for ₹50,00,000 (life 10 years, straight line, nil residual). It received a ₹10,00,000 government grant, shown as deferred income and released over the asset's life. On 31 March 2027, ₹4,00,000 of the grant became repayable because of a breach of condition. The other ₹6,00,000 of the grant stays with the company. Show the effect, ignoring tax.

Show the solution

Annual release = ₹10,00,000 ÷ 10 = ₹1,00,000. Release for 2 years = ₹2,00,000.
Unamortised deferred income at 31 March 2027 = ₹10,00,000 − ₹2,00,000 = ₹8,00,000.
Repayment is a change in estimate under Ind AS 8, applied prospectively. Prior years are not restated, so the ₹2,00,000 already released stays in profit or loss.
Only ₹4,00,000 of the grant is repayable. Ind AS 20 requires the repayment to be set off first against the unamortised deferred income. So set the whole ₹4,00,000 against the ₹8,00,000 balance. The repayment is less than the balance, so nothing goes to profit or loss. Do not split the deferred balance between the repaid and retained parts of the grant.
Deferred income after repayment = ₹8,00,000 − ₹4,00,000 = ₹4,00,000.
The asset is not adjusted. Carrying amount = ₹50,00,000 − (₹5,00,000 × 2) = ₹40,00,000. Depreciation stays at ₹5,00,000 a year.
Remaining deferred income of ₹4,00,000 is released over the remaining 8 years = ₹50,000 a year.
Entry: Deferred income Dr ₹4,00,000 To Grant repayable (or Bank) ₹4,00,000.

Answer: Deferred income of ₹8,00,000 is reduced by the ₹4,00,000 repayable to ₹4,00,000, and no amount is charged to profit or loss. The asset stays at ₹40,00,000 with depreciation of ₹5,00,000 a year, and ₹50,000 a year of deferred income is released over the remaining 8 years.

Exam tips

Write 'change in accounting estimate under Ind AS 8' in the first line of every repayment answer.
Show the unamortised deferred income calculation clearly. Marks usually come from that working.
For an asset grant, state that Ind AS 20 allows only the deferred income method. Show the deferred income reduced and the asset left unchanged.
In theory questions, list disclosures as short bullet points and mention other assistance with no specific operating relation.
Where a case gives a general benefit like road access, say it is not a measurable grant and that disclosure is needed if significant.

Practice questions from Ind AS 20 Accounting for Government Grants and Disclosure of Government Assistance

Repayment of Grants and Government Assistance Disclosures: frequently asked questions

Is repayment of a government grant a prior period error?

No. Ind AS 20 treats it as a change in accounting estimate under Ind AS 8. You apply it prospectively, recognise the effect in the current period, and do not restate prior periods. It is an error only if the original recognition was wrong.

How do I treat repayment of an income-related grant?

Apply it first against any unamortised deferred income. Any excess is recognised in profit or loss immediately. If the grant had been netted against expense, the whole repayment goes to profit or loss.

What is government assistance with no specific relation to operating activities?

These are benefits such as infrastructure improvements in development areas or general trading advantages. They cannot be measured as a grant. You disclose them where significant so that the statements are not misleading.

What must be disclosed under Ind AS 20?

Disclose the accounting policy and presentation method, and the nature and extent of grants recognised. Also disclose other forms of government assistance that directly benefit the entity, and any unfulfilled conditions and other contingencies linked to recognised assistance.