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AS 12 GOVERNMENT GRANTS

S.Reddy (CA by Qualification) (42 Points)

14 October 2021

when government grant need to be accounted in the books which is related to investment,at the time when we receive or after filing the application for the grant. grant will be issued after 3 years.

please suggest

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2 Replies

yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 14 October 2021

Only when the grant is received, we have to account for it. Accruals based Recognition is not possible here because there is no commercial transaction here.

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yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 14 October 2021

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. This is your criteria under capital approach. There are two methods, reduce the gross asset value and calculate deferred taxes, depreciation etc.

Now I found out, that if your firm will fulfill all necessary obligations to obtain a grant, it can be recognised today. Sorry for being hasty.

https://www.mca.gov.in/Ministry/notification/pdf/AS_12.pdf

Choose the two methods applicable, and I know it as direct and indirect methods,