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Deducting subsidy in machinery value?

Jothi (Elastomeric Engineers-Admin Manager) (108 Points)

02 February 2012

Dear friends

We have got term loan from SIDBI and purchased machineries. For this term load we received subsidy from government. Kindly guide me whether we have to deduct the subsidy in machinery value.

Thanks

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4 Replies

Prashanth (Chartered Accountant) (2322 Points)
Replied 02 February 2012

Hi,

AS per Accounting Standard-12,You can deduct subsidy received from the govt from the original value of the machinery and provide depreciation on the balance amount of the machinery.

CMA Shilpa Shinde (COST ACCOUNTANT) (217 Points)
Replied 02 February 2012

Dear Jothi,

Your query is realted to AS- 12-Accounting for Government Grant.

Attached file.

Attached File : 392647 920982 as 12.pdf downloaded: 130 times

shivam gupta (Student) (142 Points)
Replied 02 February 2012

There are two methods in As 12

1) Net method

2) Gross method

in Net Method the subsidy Value will be deducted from the Purchase amount of Machinery & charge depriciation on the remaining cost to the life of the machinery

Example :-

Machinery cost 100000 & 10 years life

Subsidy received 80000

MAcinery value in Books 100000 - 80000 i.e 20000

& charge depriciation of Rs. 2000 in P/L A/c every year

& in notes to a/c the fact that the machinery purchased on subsidy should be disclosed

In Gross method

The purchase cost of Machinery should be recorded in books

& depriciation will be charged on such Machinery to its life

Subsidy received will be shown under liabilities & to be amortised to the life of the asset proportionately.

Take the Same example

Depriciation in P/l will be 10000