Grant accounting

According to AS-12,Grant amount Rs.20,000 can be capitalised and Rs.80,000 can be shown as an item of Exceptional Income in the Profit and Loss Account.Depreciation can be applied normally as per AS-6 read with AS-10.Grant should be written off and adjusted in proportion with Depreciation.

When a grant relates to a fixed asset, SSAP 4 recognises that there are two potential balance sheet treatments available to entities:

(a) to treat the amount of the grant as deferred income which is credited to the profit and loss account by instalments over the expected useful economic life of the related asset on a basis consistent with the depreciation policy

(b) to deduct the amount of the grant from the purchase price or production cost of the related asset, with a consequent reduction in the annual charge for depreciation.......

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