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

Ind AS 20 defines government grants as 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 its operating activities. Which of the following arrangements of Medha Textiles Ltd with a State Government falls outside the definition of a government grant?

The uniform supply under a tender at normal commercial prices is not a government grant. Ind AS 20 excludes transactions with government that cannot be distinguished from normal trading transactions. The subsidy, free land and compensation for past losses are transfers of resources linked to conditions or past operations, so they qualify as grants.

  1. AA cash subsidy received for installing effluent treatment equipment, on condition that the equipment is maintained for five years
  2. BA free transfer of a plot of land with a condition that a factory is set up on it within three years
  3. CRevenue from supplying uniforms to a State Government department under a tender, at prices the company charges other bulk customersCorrect
  4. DCash received as compensation for operating losses of a past year, with no future conditions attached

Explanation

The definition excludes transactions with government that cannot be distinguished from the entity's normal trading transactions. Supplying uniforms at normal commercial prices is ordinary revenue. The subsidy, the land transfer and the compensation for past losses are transfers of resources in return for compliance with conditions or for past operating activities, so they are grants.

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