Accounting of govt.grants

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Querist : Anonymous

Querist : Anonymous (Querist)

14 May 2011 Sir,
Please advice me about accounting treatment of govt.grants and relavent Accounting Standard.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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14 May 2011 There are two approaches.
1. capital approach under which grant is considered as part of share holders funds.
2. income approach in which grant is taken as income over one or more periods.

Conditions to be full filled are more particularly described in Accounting standard-12.

However for income tax purpose grant should be reduced from the cost of the asset if it is capital asset based grant vide explanation 10 to section 43(1) of the Income tax Act,1961.

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