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

Scope and Definitions under Ind AS 20 (CA Final Financial Reporting)

Updated 5 October 2026 · Fact-checked

Ind AS 20 applies to accounting for government grants and disclosure of other government assistance. A government grant is assistance in the form of a transfer of resources to an entity in return for past or future compliance with conditions relating to its operations. You first check the definitions, then the exclusions, then apply recognition rules.

Understand Scope and Definitions under Ind AS 20

Governments help businesses in many ways. They give cash, transfer land, waive duties, give cheap loans or provide free advice. Ind AS 20 tells you how to account for these and what to disclose.

Start with three terms. Government means government, government agencies and similar bodies, whether local, national or international. So a state agency or an international body can be a source of a grant. Government assistance is action by government designed to give an economic benefit to a specific entity or a range of entities that qualify under certain criteria. 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.

The key link is this: all grants are government assistance, but not all government assistance is a grant. Grants exclude forms of assistance that cannot reasonably have a value placed on them. They also exclude transactions with government that cannot be distinguished from the normal trading transactions of the entity. Free technical advice and a government loan guarantee are examples of assistance that is not a grant. Assistance that is not a grant is dealt with by disclosure, not by recognition of a value.

A government loan at a below-market rate of interest is different. The benefit of the below-market rate is treated as a government grant (Ind AS 20 para 10A). The loan itself is recognised and measured under Ind AS 109, so its initial carrying amount is its fair value. The grant is the difference between the proceeds received and that initial carrying amount. After you measure the loan under Ind AS 109, the benefit is accounted for under Ind AS 20. So a cheap government loan gives rise to a grant, but a guarantee of a loan does not.

Now the exclusions. Ind AS 20 does not deal with: (a) the special problems of accounting for government grants in financial statements reflecting the effects of changing prices, or in supplementary information of a similar kind; (b) government assistance given in the form of benefits that are available in determining taxable profit or tax loss, or are determined or limited on the basis of income tax liability, such as income tax holidays, investment tax credits, accelerated depreciation allowances and reduced income tax rates (these fall under Ind AS 12); (c) government participation in the ownership of the entity; and (d) government grants covered by Ind AS 41 Agriculture.

On Ind AS versus IAS 20: the Indian standard is largely aligned with IAS 20 but does not offer certain IAS 20 options. Two differences you should know are these.

Non-monetary grants: Ind AS 20 removes the IAS 20 option of measuring a non-monetary grant at a nominal amount. Such grants must be recorded at fair value.
Grants related to assets: Ind AS 20 requires these to be presented in the balance sheet as deferred income. The IAS 20 option of deducting the grant from the asset's carrying amount is not available.

The below-market government loan treatment in para 10A is substantively the same as in IAS 20. Only the cross-reference differs: the Ind AS text refers to Ind AS 109, where IAS 20 refers to IFRS 9. Do not present it as a substantive difference.

Do not treat the list of differences as closed. Check the latest ICAI text for any other difference. Also, the references in the Ind AS text to other standards follow the Ind AS numbering, for example Ind AS 12, Ind AS 41 and Ind AS 109.

Key rules to remember

Government grant (definition): Government grant = transfer of resources to an entity in return for past or future compliance with conditions relating to operating activities; Learn the three parts: transfer of resources, conditions, operating activities. The benefit of a below-market government loan is also a grant.
Assistance vs grant: Government grants ⊂ Government assistance; Every grant is assistance. Assistance with no reasonably measurable value (such as free advice or a loan guarantee), or indistinguishable from normal trading, is not a grant.
Below-market government loan: Grant = Proceeds received − Fair value of the loan (initial carrying amount under Ind AS 109); Applies to a government loan at a below-market rate of interest (para 10A). The loan is measured under Ind AS 109 and the grant is the difference between the proceeds and that initial carrying amount.
Scope exclusions: Excluded: changing-prices effects; tax-based benefits (Ind AS 12); government ownership participation; grants under Ind AS 41; Four exclusions. Tax holidays, investment tax credits and reduced tax rates go to Ind AS 12.
Ind AS vs IAS 20 (non-monetary grants): Non-monetary grant → measured at fair value (nominal amount option not available in Ind AS 20); Key difference from IAS 20.
Ind AS vs IAS 20 (asset-related grants): Grant related to an asset → presented as deferred income (deduction from asset's carrying amount not available); Key difference from IAS 20.

How to solve Scope and Definitions under Ind AS 20 questions

For any scope or definition question, run the same test in the same order. Write the provision, apply it to the facts, then state the conclusion.

1Read the case and list each benefit received from government or a government body.
2Check the source: is it government, a government agency or a similar body, local, national or international?
3Decide if it is government assistance, meaning an action giving an economic benefit to a specific entity or a class of qualifying entities.
4Decide if it is a grant: a transfer of resources in return for compliance with conditions relating to operating activities. Remember that a below-market government loan is a grant.
5Test for exclusions: tax-based benefit (Ind AS 12), government ownership participation, agriculture grant (Ind AS 41), changing prices.
6Check whether the benefit has a reasonably measurable value and is distinguishable from normal trading transactions. If not, it is assistance only.
7State the treatment: apply Ind AS 20 recognition for grants, disclose the nature and extent of other assistance, or refer to the other Ind AS.
8Write one line of conclusion tied to the facts.

Quickest way: Four-gate filter

When to use it: Use it for MCQs and short-note questions with limited time.

Gate 1: Is the giver government or a similar body? If no, stop.
Gate 2: Is it a tax-based benefit, government ownership participation or an Ind AS 41 grant? If yes, Ind AS 20 does not apply.
Gate 3: Is there a measurable transfer of resources with conditions (including a below-market government loan)? If yes, it is a grant.
Gate 4: If it has no measurable value (free advice, loan guarantee) or is normal trading, it is assistance only and needs disclosure.

Common mistakes in Scope and Definitions under Ind AS 20

Treating all government assistance as a government grant.
The two terms sound similar and students use them interchangeably.
Fix: Remember that grants are a subset. Free advice, guarantees and benefits that cannot be valued are assistance only.
Treating a below-market government loan as mere assistance, not a grant.
Students lump all loan-related help with guarantees.
Fix: A government loan at a below-market interest rate is a grant, measured as proceeds less the Ind AS 109 fair value of the loan. Only a guarantee is assistance without a value.
Applying Ind AS 20 to an income tax holiday or investment tax credit.
The benefit comes from government, so it looks like a grant.
Fix: Tax-based benefits are outside the scope and are handled under Ind AS 12.
Applying Ind AS 20 to a grant for a biological asset or agricultural activity.
Students forget the Ind AS 41 carve-out.
Fix: Grants covered by Ind AS 41 are excluded. Mention Ind AS 41 in the answer.
Treating government equity participation as a grant.
Money flows from government into the entity.
Fix: Government participation in ownership is excluded because the government acts as an owner, not as a grantor.
Saying Ind AS 20 allows a non-monetary grant at nominal value.
Students recall IAS 20 and mix it up with the Indian text.
Fix: Write that Ind AS 20 requires fair value for non-monetary grants, and the nominal amount option of IAS 20 is not available.
Showing an asset-related grant as a deduction from the asset's carrying amount.
Students recall this IAS 20 option.
Fix: Ind AS 20 requires an asset-related grant to be presented as deferred income. The deduction option is not available.
Treating a normal sale to a government department at market price as a grant.
The customer is government.
Fix: Transactions that cannot be distinguished from the normal trading of the entity are not grants. Apply the relevant standard such as Ind AS 115.

Worked examples

Example 1

Alpha Ltd, an Ind AS company, receives three items in the year: (i) a cash subsidy from a State Government for setting up a plant in a backward area, subject to conditions; (ii) a five-year income tax holiday under the tax law; (iii) free consultancy advice from a government research body. Identify which items fall under Ind AS 20 as grants.

Show the solution

Item (i): The source is government. There is a transfer of resources against conditions linked to operations (setting up a plant). It meets the definition of a government grant.
Item (ii): The benefit is available in determining taxable profit or tax liability. Ind AS 20 excludes such benefits. Ind AS 12 applies.
Item (iii): The source is government and it is an economic benefit, so it is government assistance. Free advice cannot reasonably have a value placed on it, so it is not a grant. It is dealt with by disclosure of its nature and extent.
Conclusion: only item (i) is a grant. Item (iii) is assistance requiring disclosure. Item (ii) is outside the scope of Ind AS 20.

Answer: Only the cash subsidy is a government grant under Ind AS 20. The free advice is government assistance needing disclosure. The tax holiday is outside scope and falls under Ind AS 12.

Example 2

Beta Ltd is an Ind AS reporting entity. A Government gives it a plot of land free of cost, whose fair value is ₹80,00,000, to set up a factory. A student says that, as in IAS 20, Beta may record the land at a nominal ₹1. Also, Beta receives a grant from the Government to cultivate a plantation of tea bushes (biological assets). Advise on scope and treatment.

Show the solution

The land is a non-monetary transfer of resources from government with conditions linked to operations. It is a government grant.
Under IAS 20 an entity may choose to record a non-monetary grant at a nominal amount. Ind AS 20 does not allow this option.
Under Ind AS 20, the land and the grant are both measured at fair value, ₹80,00,000.
The fair-valued grant of ₹80,00,000 is presented in the balance sheet as deferred income. It is then recognised in profit or loss on a systematic basis over the periods in which Beta bears the cost of meeting the grant conditions.
The tea plantation grant relates to biological assets and agricultural activity. Grants covered by Ind AS 41 are excluded from Ind AS 20, so that grant is accounted for under Ind AS 41.
Conclusion: the student's view is not correct for Ind AS reporting.

Answer: Beta must measure the land grant at its fair value of ₹80,00,000, because the nominal-amount option in IAS 20 is not available under Ind AS 20. The grant is shown as deferred income and recognised in profit or loss on a systematic basis. The tea plantation grant is outside Ind AS 20 and is accounted for under Ind AS 41.

Exam tips

Learn the exact wording of the three definitions. Short-note questions on 'government', 'government assistance' and 'government grants' reward precise language.
Always list all four exclusions when asked about scope. Mention Ind AS 12 and Ind AS 41 by number.
For case MCQs, find the one fact that triggers an exclusion, such as a tax holiday or an agriculture grant.
For a difference question on Ind AS 20 and IAS 20, state the two differences: fair value for non-monetary grants, and deferred income presentation for asset-related grants. Then add any other points from the current ICAI text. If you mention the below-market government loan (para 10A), say that the treatment is the same as in IAS 20 and only the reference changes from IFRS 9 to Ind AS 109.
Write in provision-facts-conclusion form even for a two-mark answer.

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

Scope and Definitions under Ind AS 20: frequently asked questions

What is the difference between government grants and government assistance in Ind AS 20?

Government assistance is the wider term. It covers any action by government giving an economic benefit to specific entities. Government grants are the part of assistance that is a transfer of resources against conditions relating to operating activities.

What is excluded from the scope of Ind AS 20?

Ind AS 20 excludes the effects of changing prices on grant accounting, tax-based government assistance covered by Ind AS 12, government participation in the ownership of the entity, and grants covered by Ind AS 41. Tax holidays and investment tax credits are common examples of the tax-based exclusion.

How does Ind AS 20 differ from IAS 20?

Ind AS 20 does not allow a non-monetary grant to be recorded at a nominal amount, so it requires fair value. It also requires grants related to assets to be presented as deferred income, and does not allow deducting the grant from the asset's carrying amount. Revise any other points from the latest ICAI study material.

Is free technical advice from government a grant?

No. It is government assistance because it gives an economic benefit, but it cannot reasonably have a value placed on it. So it is not a grant. You disclose its nature and extent.

Is a government loan at a low interest rate a grant?

Yes. A government loan at a below-market rate of interest is treated as a government grant. The grant is the difference between the proceeds received and the fair value of the loan measured under Ind AS 109.