interest income on subsidy

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murali (Querist)
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08 December 2010 Situation is

Government has provided subsidy for acquiring the depreciable fixed asset. The subsidy amount i have deposited in bank until acquiring the asset. I have earned/received interest on the amount deposited.

My question what is the accounting treatment for interest earned on subsidy which is deposited in bank ?? whether it is deducted from respective fixed asset or accounted as interest income ?

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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08 December 2010 Subsidy is generally given only when fixed asset has been purchased.

In my opinion, as we are capitalising any item related with the fixed assets till it is put to use, likewise you may take the interest as (negative) expenditure and deduct from the cost of respective fixed asset.

CA HIREN JOGI

CA HIREN JOGI (Expert)
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10 December 2010 Yes, Shri Bafnaji is correct. The interest earned on this is to be deducted from the Cost of Capitalising the asset.

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