As 12

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CA DEEPAK RAMAN (Querist)

03 February 2013 Sir
I have an query regarding AS 12. The question is---- A limited purchased plant costing 250 lakhs on 1st Jan 2008.The co. charges WDV depreciation on the asset. The asset has an estimated life of 15 years with a scrap value of 25 lakhs. The co. received govt. grant to the extent of 50% of assets cost. As per T&C of the grant 50% of the company's product are to be supplied to the govt. agencies for the 1st 5 years at a price 20% below the market price. Average market price of the product from 2008-12 are 300,320,340,360,380 respectively. Production capacity was 1 lakh unit per annum. Capacity utilization during the 1st 5 years are 50%,60%.60%,70% & 80%. How do you allocate govt. grants if the co. decides to treat the grant as defered income?

CA Kishore Tallam

CA Kishore Tallam (Expert)

08 February 2013 If u have decided to treat as deferred income, then the govt grant shall be transferred in the same proportion in which depreciation is charged to statement of profit and loss and not in any other ratio.

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