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

Zenith Textiles Ltd deals with several government bodies. Under the definition of government grants in Ind AS 20, which of the following would be EXCLUDED from government grants?

Ordinary sales to a government department at market prices are excluded from government grants. Ind AS 20 defines grants as resource transfers for past or future compliance with operating conditions, and excludes government transactions that cannot be distinguished from the entity's normal trading transactions.

  1. AA cash transfer from the State Government for past compliance with conditions relating to the company's operating activities
  2. BA cash transfer from the State Government for future compliance with conditions relating to the company's operating activities
  3. CSupply of fabric to a government department at ordinary market prices, which cannot be distinguished from Zenith's normal trading transactionsCorrect
  4. DA transfer of resources by the Government that carries conditions relating to the operating activities of the company

Explanation

Government grants are transfers of resources in return for past or future compliance with conditions relating to operating activities. The definition excludes assistance that cannot reasonably have a value placed on it and government transactions that cannot be distinguished from normal trading. Sales to a government department at market prices are normal trading, so they are excluded. The other options describe transfers tied to past or future compliance with operating conditions, which are grants.

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