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

Vishwa Textiles Ltd received a cash subsidy from a State Government for modernising its spinning unit. The subsidy is payable in return for compliance with conditions relating to the operating activities of the company. Which description best matches how Ind AS 20 defines government grants?

Under Ind AS 20, government grants are assistance by government through transfers of resources 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 normal trading transactions with government, are excluded.

  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, including free technical advice and transactions at normal market prices, that cannot be valued
  3. COnly cash receipts from government that need not be repaid under any circumstance
  4. DTransfers of resources from government that are unconditional and relate to no operating activity

Explanation

Ind AS 20 defines government grants as assistance by government in the form of transfers of resources in return for past or future compliance with certain conditions relating to operating activities. Option B is wrong because the definition excludes assistance that cannot reasonably have a value placed on it and transactions that cannot be distinguished from normal trading transactions.

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