As-12 doubt............................

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Can anyone explain me the treatment of monetary grants recd as per as-12?
Replies (22)

if monetory grant is received as capital contribution then it will be deducted from that asset.

and if it is received as general grant then it wil be credited to p&l a/c.

 

I dont think so yoy are correct sorry!! Some more replies please.
There is some bifurcation as depriciable asset n non depreciable asset. Pls xplain this treatment .

what is incorrect in it???

if it relates to

depreciable asset then it will b deffered and systematically credited in p&l a/c

and if it relates to non depreciable asset thencredited to capital reserve account.

If the asset is non depriciable n there is a obligation attchaed to it which requires expenditure to be incurred then treatment of grant is to be done on deffered basis....why is it so?

who said it will be deferred.

if asset is non depreciable then grant will be credited to capital reserve..

pls give me an example of ur query..

D.s rawat says it be deffered...... it will be deffered if obligation attached to it reqd expenditure to be incur n if there is no such obligation then it is credited to cap reserve.

okk so if any obligation attached to a grant then it will deffered.

for example.. govt grants re 50 lakh for d construction of a building then it will b credited in a seprate account till d completion of d building and after completion it will b adjusted from that reserve.

Grants related to non-depreciable assets are credited to capital reserve under this method, as there is usually no charge to income in respect of such assets. However, if a grant related to a non-depreciable asset requires the fulfilment of certain obligations, the grant is credited to income over the same period over which the cost of meeting such obligations is charged to income. The deferred income is suitably disclosed in the balance sheet pending its apportionment to profit and loss account.
according to me we have two treatment, first one is we should deduct grant in fixed assets cost and second garnt should credit into capital reserve. Proportion income should book over the useful life of asset and capital reserve will debit the same.
@ anupam ...once it is credited to capital reserve then you cant recognised proportion income.

If it is a depreciable asset you have two options

1. Reduce it from the cost of asset and provide depreciation on the reduced value for the remaining life of the asset.

2. Recognise grant seperately and write off every year in proportion to the total depreciation of the asset.

 

If it is non-depreciable,

1. Reduce from the asset

2. If some expenditure is involved then you can recognised grant seperately and write it off in proportion to expenses

Originally posted by : Yogesh Bhandari
Grants related to non-depreciable assets are credited to capital reserve under this method, as there is usually no charge to income in respect of such assets.
However, if a grant related to a non-depreciable asset requires the fulfilment of certain obligations, the
grant is credited to income over the same period over which the cost of meeting such obligations is
charged to income. The deferred income is suitably disclosed in the balance sheet pending its apportionment to profit and loss account.

Perfect answer!!!!


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