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Indian Accounting Standard (Ind AS) 20
Accounting for Government Grants and Disclosure of
(This Indian Accounting Standard includes paragraphs set in bold type and plain
type, which have equal authority. Paragraphs in bold type indicate the main
1 This Standard shall be applied in accounting for, and in the disclosure of,
government grants and in the disclosure of other forms of government
2 This Standard does not deal with:
(a) the special problems arising in accounting for government grants in
financial statements reflecting the effects of changing prices or in
supplementary information of a similar nature.
(b) government assistance that is provided for an entity in the form of
benefits that are available in determining taxable profit or tax loss, or are
determined or limited on the basis of income tax liability. Examples of
such benefits are income tax holidays, investment tax credits, accelerated
(c) government participation in the ownership of the entity.
(d) government grants covered by Ind AS 41, Agriculture.
3 The following terms are used in this Standard with the meanings
Government refers to government, government agencies and similar
bodies whether local, national or international.
Government assistance is action by government designed to provide an
economic benefit specific to an entity or range of entities qualifying under
certain criteria. Government assistance for the purpose of this Standard
does not include benefits provided only indirectly through action affecting
general trading conditions, such as the provision of infrastructure in
development areas or the imposition of trading constraints on
Government grants are assistance by government in the form of transfers
of resources to an entity in return for past or future compliance with
certain conditions relating to the operating activities of the entity. They
exclude those forms of government assistance which cannot reasonably
have a value placed upon them and transactions with government which
cannot be distinguished from the normal trading transactions of the
Grants related to assets are government grants whose primary condition is
that an entity qualifying for them should purchase, construct or otherwise
acquire long-term assets. Subsidiary 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.
Grants related to income are government grants other than those related
Forgivable loans are loans which the lender undertakes to waive
repayment of under certain prescribed conditions.
Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants
at the measurement date. (See Ind AS 113, Fair Value Measurement)
4 Government assistance takes many forms varying both in the nature of the
assistance given and in the conditions which are usually attached to it.
The purpose of the assistance may be to encourage an entity to embark on a
course of action which it would not normally have taken if the assistance was
5 The receipt of government assistance by an entity may be significant for the
preparation of the financial statements for two reasons. Firstly, if resources
have been transferred, an appropriate method of accounting for the transfer
must be found. Secondly, it is desirable to give an indication of the extent to
which the entity has benefited from such assistance during the reporting
period. This facilitates comparison of an entity’s financial statements with
those of prior periods and with those of other entities.
6 Government grants are sometimes called by other names such as subsidies,
subventions, or premiums.
7 Government grants, including non-monetary grants at fair value, shall
not be recognised until there is reasonable assurance that:
(a) the entity will comply with the conditions attaching to them; and
1 See Appendix A Government Assistance—No Specific Relation to Operating Activities
(b) the grants will be received.
8 A government grant is not recognised until there is reasonable assurance that
the entity will comply with the conditions attaching to it, and that the grant
will be received. Receipt of a grant does not of itself provide conclusive
evidence that the conditions attaching to the grant have been or will be
9 The manner in which a grant is received does not affect the accounting method
to be adopted in regard to the grant. Thus a grant is accounted for in the same
manner whether it is received in cash or as a reduction of a liability to the
10 A forgivable loan from government is treated as a government grant when
there is reasonable assurance that the entity will meet the terms for forgiveness
of the loan.
10A The benefit of a government loan at a below-market rate of interest is treated
as a government grant. The loan shall be recognised and measured in
accordance with Ind AS 109, Financial Instruments. The benefit of the below-
market rate of interest shall be measured as the difference between the initial
carrying value of the loan determined in accordance with Ind AS 109, and the
proceeds received. The benefit is accounted for in accordance with this
Standard. The entity shall consider the conditions and obligations that have
been, or must be, met when identifying the costs for which the benefit of the
loan is intended to compensate.
11 Once a government grant is recognised, any related contingent liability or
contingent asset is treated in accordance with Ind AS 37, Provisions,
Contingent Liabilities and Contingent Assets.
12 Government grants shall be recognised in profit or loss on a systematic
basis over the periods in which the entity recognises as expenses the
related costs for which the grants are intended to compensate.
13 There are two broad approaches to the accounting for government grants: the
capital approach, under which a grant is recognised outside profit or loss, and
the income approach, under which a grant is recognised in profit or loss over
one or more periods.
14 Those in support of the capital approach argue as follows:
(a) government grants are a financing device and should be dealt with as
such in the balance sheet rather than be recognised in profit or loss to
offset the items of expense that they finance. Because no repayment is
expected, such grants should be recognised outside profit or loss.
(b) it is inappropriate to recognise government grants in profit or loss,
because they are not earned but represent an incentive provided by
government without related costs.
15 Arguments in support of the income approach are as follows:
(a) because government grants are receipts from a source other than
shareholders, they should not be recognised directly in equity but
should be recognised in profit or loss in appropriate periods.
(b) government grants are rarely gratuitous. The entity earns them through
compliance with their conditions and meeting the envisaged
obligations. They should therefore be recognised in profit or loss over
the periods in which the entity recognises as expenses the related costs
for which the grant is intended to compensate.
(c) because income and other taxes are expenses, it is logical to deal also
with government grants, which are an extension of fiscal policies, in
profit or loss.
16 It is fundamental to the income approach that government grants should be
recognised in profit or loss on a systematic basis over the periods in which the
entity recognises as expenses the related costs for which the grant is intended
to compensate. Recognition of government grants in profit or loss on a
receipts basis is not in accordance with the accrual accounting assumption
(see Ind AS 1, Presentation of Financial Statements) and would be acceptable
only if no basis existed for allocating a grant to periods other than the one in
which it was received.
17 In most cases the periods over which an entity recognises the costs or
expenses related to a government grant are readily ascertainable. Thus grants
in recognition of specific expenses are recognised in profit or loss in the same
period as the relevant expenses. Similarly, grants related to depreciable assets
are usually recognised in profit or loss over the periods and in the proportions
in which depreciation expense on those assets is recognised.
18 Grants related to non-depreciable assets may also require the fulfilment of
certain obligations and would then be recognised in profit or loss over the
periods that bear the cost of meeting the obligations. As an example, a grant of
land may be conditional upon the erection of a building on the site and it may
be appropriate to recognise the grant in profit or loss over the life of the
19 Grants are sometimes received as part of a package of financial or fiscal aids
to which a number of conditions are attached. In such cases, care is needed in
identifying the conditions giving rise to costs and expenses which determine
the periods over which the grant will be earned. It may be appropriate to
allocate part of a grant on one basis and part on another.
20 A government grant that becomes receivable as compensation for
expenses or losses already incurred or for the purpose of giving
immediate financial support to the entity with no future related costs shall
be recognised in profit or loss of the period in which it becomes
21 In some circumstances, a government grant may be awarded for the purpose of
giving immediate financial support to an entity rather than as an incentive to
undertake specific expenditures. Such grants may be confined to a particular
entity and may not be available to a whole class of beneficiaries. These
circumstances may warrant recognising a grant in profit or loss of the period
in which the entity qualifies to receive it, with disclosure to ensure that its
effect is clearly understood.
22 A government grant may become receivable by an entity as compensation for
expenses or losses incurred in a previous period. Such a grant is recognised in
profit or loss of the period in which it becomes receivable, with disclosure to
ensure that its effect is clearly understood.
Non-monetary government grants
23 A government grant may take the form of a transfer of a non-monetary asset,
such as land or other resources, for the use of the entity. In these
circumstances, the fair value of the non-monetary asset is assessed and both
grant and asset are accounted for at that fair value.
Presentation of grants related to assets
24 Government grants related to assets, including non-monetary grants at
fair value, shall be presented in the balance sheet by setting up the grant
as deferred income.
25 [Refer Appendix 1].
26 The grant set up as deferred income is recognised in profit or loss on a
systematic basis over the useful life of the asset.
27 [Refer Appendix 1]
28 The purchase of assets and the receipt of related grants can cause major
movements in the cash flow of an entity. For this reason and in order to show
the gross investment in assets, such movements are disclosed as separate items
in the statement of cash flows.
Presentation of grants related to income
29 Grants related to income are presented as part of profit or loss, either
separately or under a general heading such as ‘Other income’; alternatively,
they are deducted in reporting the related expense.
29A [Refer Appendix 1]
30 Supporters of the first method claim that it is inappropriate to net income and
expense items and that separation of the grant from the expense facilitates
comparison with other expenses not affected by a grant. For the second
method it is argued that the expenses might well not have been incurred by the
entity if the grant had not been available and presentation of the expense
without offsetting the grant may therefore be misleading.
31 Both methods are regarded as acceptable for the presentation of grants related
to income. Disclosure of the grant may be necessary for a proper
understanding of the financial statements. Disclosure of the effect of the grants
on any item of income or expense which is required to be separately disclosed
is usually appropriate.
Repayment of government grants
32 A government grant that becomes repayable shall be accounted for as a
change in accounting estimate (see Ind AS 8 Accounting Policies, Changes
in Accounting Estimates and Errors). Repayment of a grant related to
income shall be applied first against any unamortised deferred credit
recognised in respect of the grant. To the extent that the repayment
exceeds any such deferred credit, or when no deferred credit exists, the
repayment shall be recognised immediately in profit or loss. Repayment
of a grant related to an asset shall be recognised by reducing the deferred
income balance by the amount repayable.
33 [Refer Appendix 1]
34 Excluded from the definition of government grants in paragraph 3 are certain
forms of government assistance which cannot reasonably have a value placed
upon them and transactions with government which cannot be distinguished
from the normal trading transactions of the entity.
35 Examples of assistance that cannot reasonably have a value placed upon them
are free technical or marketing advice and the provision of guarantees. An
example of assistance that cannot be distinguished from the normal trading
transactions of the entity is a government procurement policy that is
responsible for a portion of the entity’s sales. The existence of the benefit
might be unquestioned but any attempt to segregate the trading activities from
government assistance could well be arbitrary.
36 The significance of the benefit in the above examples may be such that
disclosure of the nature, extent and duration of the assistance is necessary in
order that the financial statements may not be misleading.
37 [Refer Appendix 1]
38 In this Standard, government assistance does not include the provision of
infrastructure by improvement to the general transport and communication
network and the supply of improved facilities such as irrigation or water
reticulation which is available on an ongoing indeterminate basis for the
benefit of an entire local community.
39 The following matters shall be disclosed:
(a) the accounting policy adopted for government grants, including
the methods of presentation adopted in the financial statements;
(b) the nature and extent of government grants recognised in the
financial statements and an indication of other forms of
government assistance from which the entity has directly
(c) unfulfilled conditions and other contingencies attaching to
government assistance that has been recognised.
Government Assistance—No Specific Relation to
This appendix is an integral part of the Ind AS.
1 In some countries government assistance to entities may be aimed at
encouragement or long-term support of business activities either in certain
regions or industry sectors. Conditions to receive such assistance may not be
specifically related to the operating activities of the entity. Examples of such
assistance are transfers of resources by governments to entities which:
(a) operate in a particular industry;
(b) continue operating in recently privatised industries; or
(c) start or continue to run their business in underdeveloped areas.
2 The issue is whether such government assistance is a ‘government grant’
within the scope of Ind AS 20 and, therefore, should be accounted for in
accordance with this Standard.
3 Government assistance to entities meets the definition of government grants in
Ind AS 20, even if there are no conditions specifically relating to the operating
activities of the entity other than the requirement to operate in certain regions
or industry sectors. Such grants shall therefore not be credited directly to
References to matters contained in other Indian Accounting
This appendix is an integral part of the Ind AS.
1 Appendix C, Levies, contained in Ind AS 37, Provisions, Contingent
Liabilities and Contingent Assets.
Note: This Appendix is not a part of the Indian Accounting Standard. The purpose of this
Appendix is only to bring out the major differences, if any, between Indian Accounting
Standard (Ind AS) 20 and the corresponding International Accounting Standard (IAS) 20,
Accounting for Government Grants and Disclosure of Government Assistance, and SIC 10
Government Assistance- No Specific Relation to Operating Activities, issued by the
International Accounting Standards Board.
Comparison with IAS 20, Accounting for Government Grants and
Disclosure of Government Assistance and SIC 10
1 IAS 20 gives an option to measure non-monetary government grants either at
their fair value or at nominal value. Ind AS 20 requires measurement of such
grants only at their fair value. Thus, the option to measure these grants at
nominal value is not available under Ind AS 20.
2 IAS 20 gives an option to present the grants related to assets, including non-
monetary grants at fair value in the balance sheet either by setting up the grant
as deferred income or by deducting the grant in arriving at the carrying
amount of the asset. Ind AS 20 requires presentation of such grants in balance
sheet only by setting up the grant as deferred income. Thus, the option to
present such grants by deduction of the grant in arriving at the carrying
amount of the asset is not available under Ind AS 20. As a consequence
thereof paragraph 32 has been modified and the following paragraphs of IAS
20 which are with reference to the options for presentation of grants related to
assets have been deleted in Ind AS 20. In order to maintain consistency with
paragraph numbers of IAS 20, the paragraph numbers are retained in Ind AS
(i) Paragraph 25
(ii) Paragraph 27
(iii) Paragraph 33
3 Requirements regarding presentation of grants related to income in the
separate income statement, where separate income statement is presented
under paragraph 29A of IAS 20 have been deleted. This change is
consequential to the removal of option regarding two statement approach in
Ind AS 1. Ind AS 1 requires that the components of profit or loss and
components of other comprehensive income shall be presented as a part of the
statement of profit and loss. However, paragraph number 29A has been
retained in Ind AS 20 to maintain consistency with paragraph numbers of IAS
4 Different terminology is used in this standard, eg, the term ‘balance sheet’ is
used instead of ‘Statement of financial position’ and ‘Statement of profit and
loss’ is used instead of ‘Statement of comprehensive income’.
5 Paragraph number 37 appear as ‘Deleted’ in IAS 20. In order to maintain
consistency with paragraph numbers of IAS 20, the paragraph number is
retained in Ind AS 20.