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

Bharat Engineering Ltd. is evaluating three items it has dealt with during the year: (I) a free consultancy service from a government agency whose value cannot reasonably be estimated, (II) a cash subsidy of Rs 40 lakh given for complying with pollution-control conditions in its operations, and (III) sale of machine parts to a government department at normal market prices and terms. Which of these fall within the definition of 'government grants' under Ind AS 20?

Only the Rs 40 lakh cash subsidy is a government grant. It is a transfer of resources for compliance with operating conditions. The free advice cannot reasonably be valued, and the sale at normal market terms is indistinguishable from ordinary trading, so both are excluded from the definition.

  1. AOnly IICorrect
  2. BI and II
  3. CII and III
  4. DI, II and III

Explanation

Government grants exclude assistance that cannot reasonably have a value placed upon it (item I) and transactions with government that cannot be distinguished from normal trading transactions (item III). Only the cash subsidy tied to operating conditions (item II) is a transfer of resources for compliance with conditions. Option 'II and III' wrongly treats normal trade as a grant.

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