Financial Reporting · Ind AS 41 Agriculture

Ind AS 41: Government Grants Related to Biological Assets

Updated 5 October 2026 · Fact-checked

Under Ind AS 41, a government grant on a biological asset measured at fair value less costs to sell goes to profit or loss. An unconditional grant is recognised when it becomes receivable. A conditional grant is recognised only when its conditions are met. Until then, any amount received is a liability.

Understand Government Grants Related to Biological Assets

A biological asset is a living animal or plant, such as a dairy herd or a timber plantation. Ind AS 41 measures it at fair value less costs to sell, both at initial recognition and at each reporting date. The change in that value goes to profit or loss. Governments often give grants to farmers and agri-businesses. This topic tells you when such a grant becomes income.

The key point is that Ind AS 20 does not apply to grants on biological assets measured at fair value less costs to sell. Ind AS 41 has its own rules. Ind AS 20 spreads grants over the asset's life. Ind AS 41 does not do that. The asset is already carried at fair value, so the grant is simply income at the right moment.

There are two cases. In the first, the grant is unconditional. You recognise it in profit or loss when, and only when, it becomes receivable. Receipt of cash is not the test. In the second, the grant is conditional. This includes a grant that requires the entity not to engage in a specified agricultural activity. You recognise it in profit or loss when, and only when, the conditions attaching to it are met.

If cash arrives before the conditions are met, you cannot take it to income. You show it as a liability, such as a grant received in advance, until the conditions are satisfied. You do not deduct the grant from the carrying amount of the asset. You also do not set it up as deferred income and release it over the asset's life.

There are exceptions. If a biological asset is measured at cost less accumulated depreciation and impairment, Ind AS 20 applies to the grant. This happens when fair value is not reliably measurable at initial recognition. Bearer plants, such as tea bushes or rubber trees, are accounted for under Ind AS 16. Grants on them also fall under Ind AS 20.

Key rules to remember

Unconditional grant: Recognise in profit or loss when the grant becomes receivable; Applies to biological assets at fair value less costs to sell. The trigger is the right to receive, not cash receipt.
Conditional grant: Recognise in profit or loss when the conditions attaching to the grant are met; Includes grants that require the entity not to engage in specified agricultural activity. Before this, show any amount received as a liability.
Scope boundary: Fair value less costs to sell model → Ind AS 41; cost model or bearer plants → Ind AS 20; Bearer plants fall under Ind AS 16, so their grants follow Ind AS 20.
Presentation: Grant income = profit or loss item; not deducted from the asset and not deferred; The asset stays at fair value less costs to sell.
Disclosure: Disclose the grants recognised in the period, unfulfilled conditions and other contingencies, and significant expected decreases in grant levels; Disclosure is a common written-answer point.

How to solve Government Grants Related to Biological Assets questions

Use this order for any question on grants related to biological assets.

1Identify the asset. Confirm it is a biological asset (livestock or growing plants) and not a bearer plant, which falls under Ind AS 16.
2Check the measurement basis. If it is fair value less costs to sell, apply Ind AS 41. If it is cost less depreciation, apply Ind AS 20.
3Read the grant terms. Decide whether it is unconditional or conditional. Look for words such as 'provided that', 'subject to' or 'must retain'.
4For an unconditional grant, find the date it becomes receivable, such as an approval or sanction date. Recognise income on that date.
5For a conditional grant, find the date the conditions are met. Recognise income only on that date.
6Deal with cash received early. Credit a liability until the conditions are met.
7Work out which reporting period the income falls in, and pass the journal entries.
8Add the disclosure of unfulfilled conditions and contingencies if the question asks for notes.

Quickest way: Receivable or conditions met: one-line test

When to use it: Use when time is short, especially for MCQs on when to recognise a grant.

Ask if the grant has any condition. If no, income arises on the date it becomes receivable, whatever the cash date.
If yes, income arises on the date the last condition is met.
Cash received before that date goes to a liability, not to income.
Check the asset basis: fair value model means Ind AS 41, and cost model or bearer plant means Ind AS 20.

Common mistakes in Government Grants Related to Biological Assets

Recognising the grant only when cash is received.
Students link income with cash inflow.
Fix: For an unconditional grant, the trigger is the date it becomes receivable. Recognise a receivable if cash has not come in.
Spreading the grant over the useful life of the asset.
Students carry over the Ind AS 20 deferred income approach.
Fix: Ind AS 41 gives no such deferral for fair value assets. Take the whole grant to profit or loss at the trigger date.
Deducting the grant from the carrying amount of the biological asset.
Students confuse it with the Ind AS 20 option for asset grants.
Fix: The asset stays at fair value less costs to sell. The grant is a separate profit or loss item.
Taking an advance conditional grant to income on receipt.
Students see the cash and book it straight to income.
Fix: Credit a liability until the conditions are met. Then transfer it to profit or loss.
Applying Ind AS 41 to grants on bearer plants.
Students think every plant is a biological asset under Ind AS 41.
Fix: Bearer plants are under Ind AS 16, and Ind AS 20 governs their grants. Only the produce growing on them is under Ind AS 41.
Treating a grant that bars an agricultural activity as unconditional.
Students miss that not doing something is also a condition.
Fix: Such a grant is conditional. Recognise it when the entity meets the condition.

Worked examples

Example 1

Kamdhenu Dairy Ltd (March year-end, Ind AS company) buys a herd of dairy cattle, measured at fair value less costs to sell. On 10 March 20X2 a State government sanctions a grant of ₹12,00,000 for the herd. The grant has no conditions. The cash is received on 20 April 20X2. How should the grant be accounted for in the year ended 31 March 20X2?

Show the solution

The herd is a biological asset at fair value less costs to sell, so Ind AS 41 applies and Ind AS 20 does not.
The grant is unconditional, so it is recognised when it becomes receivable.
It became receivable on 10 March 20X2, when it was sanctioned. That date is within the year ended 31 March 20X2.
Entry on 10 March 20X2: Dr Grant receivable ₹12,00,000; Cr Government grant income (profit or loss) ₹12,00,000.
On 20 April 20X2: Dr Bank ₹12,00,000; Cr Grant receivable ₹12,00,000. This has no profit or loss effect.

Answer: Recognise ₹12,00,000 as income in profit or loss for the year ended 31 March 20X2, with a grant receivable at year-end. Do not defer it and do not wait for the cash.

Example 2

Greenfield Agro Ltd (March year-end) receives ₹30,00,000 in cash on 1 January 20X2 as a grant for a herd of cattle carried at fair value less costs to sell. The grant is conditional on the company keeping the herd in a notified region for 5 years. The conditions are met on 31 December 20X6. How is the grant accounted for?

Show the solution

The herd is measured at fair value less costs to sell, so Ind AS 41 governs the grant.
The grant carries a condition, so it is conditional.
Income is recognised only when the conditions are met, which is 31 December 20X6.
On 1 January 20X2: Dr Bank ₹30,00,000; Cr Liability (grant received in advance) ₹30,00,000. Nothing is taken to profit or loss.
The liability stays on the balance sheet in each period until 31 December 20X6. It is not released gradually.
On 31 December 20X6: Dr Liability ₹30,00,000; Cr Government grant income (profit or loss) ₹30,00,000.
In each intervening year, disclose the unfulfilled conditions attaching to the grant.

Answer: Treat the ₹30,00,000 as a liability from 1 January 20X2. Recognise it as income in profit or loss on 31 December 20X6, when the conditions are met, in the year ending 31 March 20X7. Until then, disclose the unfulfilled condition.

Exam tips

In MCQs, the trigger is the key. 'Receivable' points to unconditional and 'conditions met' points to conditional. Watch the dates and the reporting period.
In written answers, use provision-facts-conclusion form. State the Ind AS 41 rule, apply the dates and amounts, then give the entry and the period.
Always say why Ind AS 20 does not apply. Check whether the asset is at fair value less costs to sell or at cost, and whether it is a bearer plant.
Show journal entries for advance cash. Examiners reward the liability entry and the later transfer to profit or loss.
Add the disclosure points if marks allow: grants recognised, unfulfilled conditions and contingencies, and expected significant decreases in grants.

Practice questions from Ind AS 41 Agriculture

Government Grants Related to Biological Assets in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Government Grants Related to Biological Assets: frequently asked questions

Does Ind AS 20 apply to grants on biological assets?

Not when the biological asset is measured at fair value less costs to sell. Ind AS 41 has its own rules for those grants. If the asset is measured at cost less depreciation and impairment, Ind AS 20 applies.

What is the difference between an unconditional and a conditional grant in Ind AS 41?

An unconditional grant has no conditions attached and is recognised in profit or loss when it becomes receivable. A conditional grant has conditions, including a requirement not to engage in a specified agricultural activity. It is recognised only when those conditions are met.

Where is the government grant shown in the financial statements?

It is shown in profit or loss once the recognition trigger is met. It is not deducted from the asset's carrying amount and is not spread as deferred income. If cash comes in before the trigger, it sits as a liability.

What happens to grants on bearer plants?

Bearer plants are accounted for under Ind AS 16 as property, plant and equipment. Grants related to them follow Ind AS 20, not Ind AS 41. The agricultural produce growing on them remains under Ind AS 41.