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AS - 12 : Accounting for Government Grants

Accounting Standard - 12 (Accounting For Government Grants) (PARA 13-23)

International Accounting Standard - 20

RELATABLE ACCOUNTING STANDARDS

AS - 04 (Contingencies and Events occurring after Balance Sheet Date)
A contingency related to a government grant, arising after the grant has been recognized
should be treated in accordance with AS-4. (PARA 19)

AS - 05 (Net Profit or Loss for the period, Prior Period Items and Changes in
Accounting Policy)
Revenue Grant should be recognized and disclosed in the profit and loss statement of the
period in which they are receivable, as an extraordinary item. (PARA 18) And likewise
Government grant that becomes refundable. (PARA 20)

DEFINITIONS
Government refers to Government, Government agencies and similar bodies whether local, national
or international.

Government Grants are assistance by government in cash or kind to an enterprise for past or future
compliance with certain conditions. They exclude those forms for government assistance which cannot
reasonably have a value placed upon them and transactions with government which cannot be
distinguished from the normal trading transactions of the enterprise.

Government Assistance, other then government grants, i.e., Tax holidays in backward areas, Tax
exemptions in notified areas.

GOVERNMENT PARTICIPATION
Grants in the nature of Promoter's Contribution should be credited to Capital Reserve which can be
neither distributed as dividend nor considered as deferred income.
(PARA 16)
Where such a contribution becomes refundable, in part or in full, to the government on non
fulfillment of some specific conditions, the relevant amount recoverable by the government is
reduced from the Capital Reserve.
(PARA 22)

RECOGNITION OF GOVERNMENT GRANTS (PARA 13)

The Govt. Grants should be recognized when there is reasonable assurance that;
- The enterprise will comply with the conditions attached to them, and
- The grants will be received.
NOTE: Only receipt of a grant is not conclusive evidence that the conditions attached to the
grant have been or will be fulfilled.

ACCOUNTING TREATMENT FOR GOVERNMENT GRANTS

(1) NON MONETARY GOVERNMENT GRANTS: (PARA 17)
Grants in form of Land, Plant and Machinery, etc.
(1)(a) Grants are given at Concessional Rates:
Such assets are accounted for at their acquisition cost.
JOURNAL ENTRY
RECOGNITION OF GOVERNMENT GRANTS
Fixed Asset Account DR XXX XXX
To Bank Account
DEPRECIATION
Depreciation shall be provided on the book value.
REFUND OF GOVERNMENT GRANTS
XXX XXX
(1)(b) Grants are given at Free of Cost:
Such assets are recognised at their nominal value.
JOURNAL ENTRY
RECOGNITION OF GOVERNMENT GRANTS
Fixed Asset Account DR XXX XXX
To Profit and Loss Account
REFUND OF GOVERNMENT GRANTS
Profit and Loss Account DR XXX XXX
To Fixed Assets Account

(2) MONETARY GOVERNMENT GRANTS:

(2)(a) Grants Related to Specific Fixed Assets (PARA 14)
(i) Depreciable Fixed Assets
METHOD - 1
Grant is shown as deduction from the gross value of the assets concerned in arriving at its book
value
· Grant is less then cost of asset
JOURNAL ENTRY
RECOGNITION OF GOVERNMENT GRANTS
Fixed Asset Account DR XXX XXX
To Bank Account
(Total cost of fixed asset)

Bank Account DR XXX XXX

To Fixed Asset Account
 (The amount of grant received is to be
reduced from the value of fixed asset)
DEPRECIATION
Depreciation shall be provided on the reduced book value.
Trade
REFUND OF GOVERNMENT GRANTS Globally
Fixed Asset Account DR XXX XXX
To Bank Account Without
(Grant refunded)
Concern
DEPRECIATION
fundapps.co
Depreciation shall be provided on the revised book value, prospectively over the
residual useful life of the asset.
Shareholding
· Where the grant equals the whole, or virtually the whole of the cost of asset
Disclosure
JOURNAL ENTRY
RECOGNITION OF GOVERNMENT GRANTS Automated
Fixed Asset Account DR XXX XXX Shareholding
To Bank Account Disclosure: 13F
(Total cost of fixed asset) Reporting, Short
Selling (EU, HK,
Bank Account DR XXX XXX Japan,
To Fixed Asset Account
Singapore)
(The amount of grant received is to be
reduced from the value of fixed asset)-
(The book value will reduce to NIL)

Fixed Asset Account DR XXX XXX

OPEN
To Profit and Loss Account
(Fixed Asset should be shown in the
Balance Sheet at Nominal Value)
DEPRECIATION
Depreciation shall be provided on the nominal book value.
BLOG ARCHIVE
REFUND OF GOVERNMENT GRANTS
▼ 2008 (1)
Fixed Asset Account DR XXX XXX
▼ December (1)
To Bank Account
AS - 12 : Accounting for
(Grant refunded)
Government Grants
DEPRECIATION
Depreciation shall be provided on the revised book value, prospectively over the
residual useful life of the asset. FOLLOWERS
METHOD - 2 Mga sumusubaybay (0)
Grants are treated as deferred Income which is recognised in the profit and loss statement on
systematic and rational basis over the useful life of the asset. Sundin
JOURNAL ENTRY
RECOGNITION OF GOVERNMENT GRANTS
Fixed Asset Account DR XXX XXX
To Bank Account
(Purchase of Fixed Asset)

Bank Account DR XXX XXX

To Deferred Government Grant
Account
(The amount of grant received is to be
reduced from the value of fixed asset)
DEPRECIATION
Depreciation Account DR XXX XXX
To Fixed Asset Account
 (Depreciation on the book value - In
this case its total cost of acquisition)

Deferred Govt. Grant Account DR XXX XXX

To Profit and Loss Account
(The amount of grant has to be fully
allocated over the life of the asset in
proportion to the amount of
depreciation charged)
REFUND OF GOVERNMENT GRANTS
Deferred Govt. Grant Account DR XXX XXX
Profit and Loss Account DR XXX
To Bank Account
(Grant refunded)
DEPRECIATION
Depreciation shall be provided regularly as earlier.

(2) MONETARY GOVERNMENT GRANTS:

(2)(a) Grants Related to Specific Fixed Assets
(ii) Non Depreciable Fixed Assets
NO OBLIGATION ATTACHED
JOURNAL ENTRY
RECOGNITION OF GOVERNMENT GRANTS
Fixed Asset Account DR XXX XXX
To Bank Account
(Purchase of Fixed Asset)

Bank Account DR XXX XXX

To Fixed Asset Account/ Capital
Reserve Account
(The amount of grant received is to be
reduced from the value of fixed asset or
credited to the Capital Reserve)
REFUND OF GOVERNMENT GRANTS
Capital Reserve Account DR XXX XXX
To Bank Account
(Grant refunded)
OBLIGATION TO FULFILL CONDITIONS ATTACHED TO THE GRANT
JOURNAL ENTRY
RECOGNITION OF GOVERNMENT GRANTS
Fixed Asset Account DR XXX XXX
To Bank Account
(Purchase of Fixed Asset)

Bank Account DR XXX XXX

To Deferred Govt. Grant Account
(The amount of grant received is to be
reduced from the value of fixed asset or
credited to the Capital Reserve)
WRITING OFF OF DEFERRED GOVERNMENT GRANT ACCOUNT
Deferred Govt. Grant Account DR XXX XXX
To Profit and Loss Account
(Grants are credited to income over the
same period over which the cost of
 meeting such conditions is charged to
income)
REFUND OF GOVERNMENT GRANTS
Deferred Govt. Grant Account DR XXX XXX
Profit and Loss Account DR XXX
To Bank Account
(Grant refunded)

(2) MONETARY GOVERNMENT GRANTS:

(2)(b) Grant related to Revenue
(i) Received as compensation for Expenses or Losses already incurred OR for the purpose
of giving immediate financial support (PARA 18)
JOURNAL ENTRY
RECOGNITION OF GOVERNMENT GRANTS
Bank Account DR XXX XXX
To Profit and Loss Account
(Grant receivable shall be treated as
Extraordinary item as per AS-5)
REFUND OF GOVERNMENT GRANTS
Profit and Loss Account DR XXX XXX
To Bank Account
(Grant refund shall be treated as
Extraordinary item as per AS-5)
(ii) Government Grants relating to Revenue (PARA 15)
JOURNAL ENTRY
RECOGNITION OF GOVERNMENT GRANTS
Bank Account DR XXX XXX
To Profit and Loss Account
(Grant should either be shown
separately under 'Other Income' or
deducted in reporting the related
expense)

DISCLOSURE (PARA 23)

1. The accounting policy adopted for government grants, including the methods of
presentation in the financial statements.
2. The nature and extent of government grants recognized in the financial statements,
including grants of non-monetary assets given at a concessional rate of free of cost.

Labels: Accounting Standard, AS-12, AS12, Government Grants

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