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

Sunrise Textiles Ltd. receives a cash transfer from the State Government on condition that it complies with specified conditions relating to its operating activities, either in the past or in the future. Which of the following best fits the description of a 'government grant' under Ind AS 20?

A government grant is assistance by government through transfer of resources to an entity in return for past or future compliance with conditions relating to its operating activities. It excludes assistance that cannot reasonably be valued and dealings with government that are indistinguishable from normal trading transactions.

  1. AAssistance 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 activitiesCorrect
  2. BAny benefit from government that cannot reasonably have a value placed upon it, such as free technical advice
  3. CA sale of goods to a government department on normal trading terms and prices
  4. DA tax rate reduction applicable to all entities in the economy without any conditions

Explanation

Ind AS 20 defines government grants as assistance in the form of transfers of resources in return for past or future compliance with conditions relating to operating activities. Forms of assistance that cannot reasonably be valued, and transactions that cannot be distinguished from normal trading transactions, are excluded. Hence the sale on normal trading terms and the non-valuable advice are wrong.

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