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

Vishwa Infra Ltd, a Pune-based contractor, wins a road-resurfacing tender floated by a State public works department. It is paid Rs 4 crore, which is the same rate it charges private customers for similar work, and no compliance conditions apply beyond the contract specifications. The accountant proposes to treat Rs 4 crore as a government grant. Under Ind AS 20, how should this be viewed?

The Rs 4 crore is not a government grant. Ind AS 20 excludes transactions with government that cannot be distinguished from the entity's normal trading transactions. The contract is priced at ordinary commercial rates, so it is revenue from a customer, not assistance, and the government payer does not change that.

  1. AIt is a government grant because the payer is a government body
  2. BIt is a government grant to the extent the work is for public benefit
  3. CIt is not a government grant, because transactions with government that cannot be distinguished from the entity's normal trading transactions are excludedCorrect
  4. DIt is a grant related to income, to be shown as deferred income and released over the contract period

Explanation

Ind AS 20 defines government grants as transfers of resources in return for compliance with conditions relating to operating activities. The definition excludes transactions with government that cannot be distinguished from normal trading transactions. Payment at normal commercial rates under a tender is ordinary revenue, so the identity of the payer does not make it a grant.

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