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MPR Sanjay Kumar

3145 Points Posted on 16 May 2022

1. received a government grant at 40% towards the acquisition of machinery worth rupees 25 crores

2. received a capital subsidy of rupees 150 lacs from government for setting up a plant costing rupees 300 lacs in notified backward region

3. received 50 lacs from government for setting up a project for supply of arsenic free water in notified area

4.received 5 lakhs from the local authority for providing Corona vaccine free of charge to its employees and their families

5.it has a received a performance award of Rs 500 lacs from government with a condition of major renovation in the power plant within 3 years Suraj limited in curd 90% of amount towards capital expenditure and balance for revenue expenditure

could you please treat the above in books of Suraj limited as per Accounting standard 12 government grants

how to disclose

Replies (6)

prasad Nilugal

GST Practitioner & Accounts

15093 Points Posted on 16 May 2022

As per AS 12 you can disclose Government grants in two way

1) You can capitalise
2) you can show as Income / revenue

So , when any Government grants are not refunded to Government can be capitalise , grants for non- depreciable asset should be shown as a Capital reserve in the balance sheet.
In case of income approch Government grants related to revenue credited to profit and losss account as other income
Refund of Government grants due to non fulfill ment of certain conditions , that also you have to disclose .

MPR Sanjay Kumar

3145 Points Posted on 16 May 2022

So can I purchase a machinery government grant to capitalize? first case

yasaswi gomes

My grammar is 💯 good I

7301 Points Posted on 16 May 2022

Yes, you can use the balance sheet method method 1. you have to recognise the asset at cost less grant amount and depreciate it. Method 2 is also there. Then from above, if it is a loan subsidy, the treatment is different.

MPR Sanjay Kumar

3145 Points Posted on 16 May 2022

Dear sir typically why the certain government grants are refunded what are the categories

prasad Nilugal

GST Practitioner & Accounts

15093 Points Posted on 16 May 2022

Not fulfilling certain conditions led down by the GOVT .
Also you have to check, weather AS 12 applicable to your company or not , because Non Companies are divided into 4 level to whom accounting Standards are applicable , so if your company is in level one then all the accounting standards are applicable to that company , otherwise in level 2 to 4 certain exemption has been given .