balancee sheet presentation
This query is : Resolved
14 April 2010
the public sector undertaking has received government grant for capital expenditure which has to be treated as deffered revenue as per AS12. then where to show it in the balance sheet. whether it can be shown under the head 'reserves and surplus' or to show it separately after reserves and surplus and before secured loans as recommended in AS12 in which case is it acceptable as per schedule IV of the companies Act. kindly clarify.
14 April 2010
SHOW IT UNDER "RESERVE & SURPLUS".
14 April 2010
sirs,
i need further clarification regarding showing it under reserves&surplus
i need further clarification regarding showing it under reserves&surplus
14 April 2010
Two broad approaches may be followed for the accounting treatment
of government grants: the ‘capital approach’, under which a grant is treated
as part of shareholders’ funds, and the ‘income approach’, under which a
grant is taken to income over one or more periods.
Those in support of the ‘capital approach’ argue as follows:
(i) Many government grants are in the nature of promoters’
contribution, i.e., they are given with reference to the total
investment in an undertaking or by way of contribution towards
its total capital outlay and no repayment is ordinarily expected in
the case of such grants. These should, therefore, be credited
directly to shareholders’ funds.
(ii) It is inappropriate to recognise government grants in the profit
and loss statement, since they are not earned but represent an incentive provided by government without related costs.
I am in favour of this approach.
Government grants of the nature of promoters’ contribution should
be credited to capital reserve and treated as a part of shareholders’ funds.
Let other experts give their view.
of government grants: the ‘capital approach’, under which a grant is treated
as part of shareholders’ funds, and the ‘income approach’, under which a
grant is taken to income over one or more periods.
Those in support of the ‘capital approach’ argue as follows:
(i) Many government grants are in the nature of promoters’
contribution, i.e., they are given with reference to the total
investment in an undertaking or by way of contribution towards
its total capital outlay and no repayment is ordinarily expected in
the case of such grants. These should, therefore, be credited
directly to shareholders’ funds.
(ii) It is inappropriate to recognise government grants in the profit
and loss statement, since they are not earned but represent an incentive provided by government without related costs.
I am in favour of this approach.
Government grants of the nature of promoters’ contribution should
be credited to capital reserve and treated as a part of shareholders’ funds.
Let other experts give their view.
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