Skip to content

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

Vihaan Components Ltd supplies electrical panels to a State electricity board under a tender, at prices that match those it charges private customers. In the same year it also receives (i) a cash subsidy from the State government for setting up a unit in a notified backward district, subject to conditions on operations, and (ii) a transfer of land from the State government for a plant, subject to a condition to employ local workers. Which of the following does NOT represent a government grant under Ind AS 20?

The sales to the electricity board at normal prices are not a government grant. Ind AS 20 excludes transactions with government that cannot be distinguished from normal trading transactions. The subsidy and the conditional land transfer are transfers of resources linked to operating conditions, so they qualify as grants.

  1. AThe sales revenue from the electricity board under the tender at normal pricesCorrect
  2. BThe cash subsidy for setting up the unit in the backward district
  3. CThe transfer of land subject to the local employment condition
  4. DThe cash subsidy, if it is received only after the unit starts operating

Explanation

Ind AS 20 defines government grants as transfers of resources in return for past or future compliance with conditions relating to operating activities. The definition excludes transactions with government that cannot be distinguished from the entity's normal trading transactions. Sales to the board at normal prices are ordinary revenue. The subsidy and the land both carry operating conditions, so both are grants, and the timing of receipt does not change that.

Did you get it right without looking?

One question tells you little. A timed set on Ind AS 20 Accounting for Government Grants and Disclosure of Government Assistance shows your real accuracy, how long you take and where you lose marks.

Practise Ind AS 20 Accounting for Government Grants and Disclosure of Government AssistanceFree diagnostic mock

More Ind AS 20 Accounting for Government Grants and Disclosure of Government Assistance questions