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

Kaveri Textiles Ltd receives a state subsidy for modernising its looms. Under Ind AS 20, which feature distinguishes a government grant from other forms of government assistance?

A government grant is a transfer of resources by government to an entity in return for past or future compliance with certain conditions relating to its operating activities. Assistance that cannot reasonably be valued, and dealings indistinguishable from normal trading transactions, are excluded from the definition of grants.

  1. AIt is a transfer of resources in return for past or future compliance with certain conditions relating to the entity's operating activitiesCorrect
  2. BIt is any benefit from government that cannot reasonably have a value placed upon it
  3. CIt is any transaction with government that cannot be distinguished from normal trading transactions
  4. DIt is free technical advice provided by a government agency to the entity

Explanation

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 operating activities. Forms of assistance that cannot reasonably be valued, and transactions indistinguishable from normal trading, are excluded from the definition. Options B and C describe exactly those exclusions, and option D is advice with no reasonable value.

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