Accounting of Govt Grant in aid-Assam Tea Estate

We have received Central Govt Grant in aid Rs.5 Cr towards setting up manufacturing plant in Assam. There are 3 options- either reduce asset value by grant amount or show Grant in accounts & Charges of over 5 years.

In case of 1 st option, Assets value is purposely reduced- not a true reflection. All follow 1 st. Kindly guide.

Regards

Replies (2)
Quick Summary
This discussion addresses the accounting treatment of a £5 crore Central Government grant received by an Assam tea estate for a new manufacturing plant. The core issue is whether to reduce the asset's value by the grant amount or recognise it as deferred income over five years. While the first method is common, the deferred income approach (Option 2) is recommended for better accuracy and compliance with AS 12, despite being less frequently used.

You may follow Option 2 (deferred income) even though “everyone follows the first method.”
✔ It is fully compliant with AS 12 and provides a more accurate picture of the fixed assets.
✔ Option 1 is simpler but understates asset values.

Many thanks.  How this will be dealt with in cost audit. 

Please guide.

 

Leave a Reply

Your are not logged in . Please login to post replies

Click here to Login / Register