Valuation of inventory when govt grant availed

Vimal Raju (In Practice) (34 Points)

23 July 2015  

Dear All,

One of our clients, a Pvt ltd company has received Govt grant for the purpose of manufacturing medical equipments. The company used the total grant for the purchase of components for the purpose. As per AS 12, total amount spent by the company is credited to P&L under other income. As on 31.03.2015, the company has finished one equipment and three more are in semi finished condition. None of the equipments were sold.  My question is that while valuing inventory, whether we have to deduct grant from the purchase cost. Terms and conditions related to the grant are met by company.

Kindly advise.

Thanks in advance,

Vimal