Capital Subsidy under govt schemes

Yes... Subsidy will be account(less) in the Asset's value.

Do u want to know how to treat capital subsidy receipts?

(Grants /subsidy)

Presentation of Grants/ subsidy Related to Specific Fixed Assets

Grants related to specific fixed assets are government grants whose primary condition is that an enterprise qualifying for them should purchase, construct or otherwise acquire such assets.

Other conditions may also be attached restricting the type or location of the assets or the periods during which they are to be acquired or held.

Two methods of presentation in financial statements of grants (or the appropriate portions of grants) related to specific fixed assets are regarded as acceptable alternatives.

Under one method, the grant is shown as a deduction from the gross value of the asset concerned in arriving at its book value.

The grant is thus recognised in the profit and loss statement over the useful life of a depreciable asset by way of a reduced depreciation charge.

Where the whole, or virtually the whole, of the cost of the asset, the asset is shown in the balance sheet at a nominal value.


Under the other method, grants related to depreciable assets are treated as deferred income which is recognised in the profit and loss statement on a systematic and rational basis over the useful life of the asset.

Such allocation to income is usually made over the periods and in the proportions in which depreciation on related assets is charged.


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 fulfillment 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.

For example, in the case of a company, it is shown after ‘Reserves and Surplus’ but before ‘Secured Loans’ with a suitable note.

Jignesh



I can send u the guidance note on grant.