This document discusses IndAS 20, which provides guidance on accounting for government grants and disclosure of government assistance. It begins with definitions of key terms like government, government assistance, and government grants. It then explains the two approaches to accounting for grants - the capital approach for asset-related grants and the income approach for other grants. It provides guidance on recognition, measurement, presentation, and disclosure of government grants under the income and capital approaches in the financial statements. Specific topics covered include accounting for non-monetary grants, forgivable loans, repayment of grants and presentation in statements of profit and loss, balance sheet and cash flows.

1. 2015
1
IndAS 20*: Accounting for Government Grants
(GG) and disclosure for government assistance
Presentation by : CA Varun Sethi
*Presentation includes comparison of Ind AS 20 with AS 12, as
also with ICDS** on GG
**ICDS stands for Income computation and disclosure standard and represent accounting
standards as issued by Indian revenue authorities for income computation for (income)
corporate and non-corporate taxation purposes.

2. 20152
IndAS 20
Accounting for Government Grants
CA Varun
Sethi
09899766487
Presentation by : CA Varun Sethi Private and Confidential
Accounting for Revenue*
Revenue from
NON-exchange transactions (NET)
(e.g.Taxes, Donations,government grants)
Revenue from
exchange transactions (ET)
ET are transactions in which one entity
receives assets or services, or has
liabilities extinguished, and directly
gives approximately equal value
(primarily in the form of cash, goods,
services,or use of assets) to another
entity in exchange.
NET are transactions in which
• one entity either receives value from
another entity without directly giving
approx.equal value in exchange,or
• gives value to another entity without
directly receiving approx. equal value
in exchange.
*IPSAS based definition

3. 20153
IndAS 20
Accounting for Government Grants
CA Varun
Sethi
09899766487
Presentation by : CA Varun Sethi Private and Confidential
Accounting for
Revenue
Revenue from NON-
exchange transactions (e.g.
Government grants)
Revenue from NON-
exchange transactions
(e.g. financial reporting by governments
of taxes & transfers)
Revenue from exchange
transactions
IAS 18/ IAS 11/
IFRS15/ Ind AS 115
Revenue from contracts with
customers
AS 12/ Ind AS 20
Accounting for
Government Grants
No corresponding IFRS/Ind
AS.
ASLB by ASLBB is expected

4. 20154 Presentation by : CA Varun Sethi Private and Confidential
IFRS
(IAS 20)
IGAAP
(Ind AS)
IGAAP
(AS)
US GAAP
(ASC)
• AS 12 deals with
Accounting for
Government Grants
• AS does NOT
provide industry-
specific guidance for
not-for-profit
entities.
• IndAS 20 deals with
Accounting for
Government Grants
and Disclosure of
Government
Assistance.
• IndAS does NOT
provide industry-
specific guidance for
not-for-profit entities.
• IAS 20 deals with
Accounting for
Government Grants
and Disclosure of
Government
Assistance
• IFRS does NOT
provide industry-
specific guidance for
not-for-profit entities,
• There is NO
corresponding
standard in US GAAP.
• FAS 116
(Contributions)
/117/ASC 958 - Apply
to not-for-profit
entities.
Global accounting frameworks:
Accounting for Government Grants
CA Varun
Sethi
09899766487

5. 20155 Presentation by : CA Varun Sethi Private and Confidential
Financial reporting framework
for exchange & non exchange transactions by reporting entity
CA Varun
Sethi
09899766487
• Revenue from
exchange transactions
• Revenue from NON-
exchange transactions
including Government
grants.
• Revenue from
exchange transactions
• Revenue from NON-
exchange transactions
including Government
grants.
• Revenue from
exchange transactions
• Revenue from NON-
exchange transactions
(voluntary non-reciprocal
transfer).
Government sector
Private sector
(For profit)
Business,Industrial,commercial
enterprises
Non-Government
Organizations/
Non-Profit Organizations
ASLB 9
IndAS 115/IAS 18/ IAS 11
Ind AS 20/ AS 12
IndAS 115/IAS 18/ IAS 11
Ind AS 20/ AS 12
ASLB by ICAI AS/ IndAS by ICAI/MCA AS/IndAS by ICAI
Accounting and Financial Reporting Framework

6. 20156 Presentation by : CA Varun Sethi Private and Confidential
Scope and applicability
The Preface to the Statements of Ind AS/ AS, issued by the ICAI, states the following
Accounting Standards (Ind AS/ AS) apply in respect of
1. any enterprise (whether organized in corporate, cooperative or other forms) engaged in
commercial, industrial or business activities,
2. irrespective of whether
• it is profit oriented or
• it is established for charitable or religious purposes.
IndAS 20
Accounting for Government Grants: Scope
CA Varun
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09899766487
Applicability to Non profit sector:
• Accounting Standards will NOT, however, apply to enterprises only carrying on the
activities which are not of commercial, industrial or business nature.
• Accordingly, the Standards would APPLY even if a very small proportion of activities is
considered to be commercial, industrial or business in nature.
• The identification, recognition and measurement of elements of financial statements are
sector-neutral i.e. apply to for profit and non profit sectors.

7. 20157
IndAS 20
Accounting for Government Grants
CA Varun
Sethi
09899766487
Presentation by : CA Varun Sethi Private and Confidential
IndAS 20
3. Other Government
assistance – provision
of infrastructure
2. Government grants
(E.g. subsidies, subventions,
or premiums)
1. Government
assistance other than
2 & 3
ExcludedIncluded Included
Disclosure of 1 & 2
Accounting for 2
Scope
NOTE: AS 12 DOES NOT deal with
1. Govt. assistance other than in the form of GG.
2. Presentation of Grants of the nature of Promoters’ contribution SIMILAR TO
ICDS

8. 20158
IndAS 20
Accounting for Government Grants
CA Varun
Sethi
09899766487
Presentation by : CA Varun Sethi Private and Confidential
Scope
exclusions
Exclusions
1. Government assistance that cannot reasonably have a value placed
upon them.
Example Free technical or marketing advice and the provision of guarantees.
2. Government assistance that cannot be distinguished from the
normal trading transactions of the entity.
Example government procurement policy that is responsible for a portion of the entity’s sales.
3. 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
depreciation.
4. Government participation in the ownership of the entity.
Example: Government equity in Bhartuya Mahila Bank

9. 20159 Presentation by : CA Varun Sethi Private and Confidential
Government
Government
assistance
Government
grants
Government refers to
1. government,
2. government agencies and
3. similar bodies whether local, national or international
1
Government assistance is action by government designed to
provide an economic benefit specific to an entity or range of entities
qualifying under certain criteria.
2
3
Government grants are assistance by government in 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.
IndAS 20
Accounting for Government Grants
CA Varun
Sethi
09899766487
Definitions
Forgivable
loans4 Forgivable loans are loans which the lender undertakes to waive
repayment of under certain prescribed conditions.

10. 201510 Presentation by : CA Varun Sethi Private and Confidential
IndAS 20
Accounting for Government Grants
CA Varun
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09899766487
Accounting
approaches
Grants related to income
Grants related to assets incl. non
monetary assets
Government
Grants (GG)
Government grants whose primary condition
is that an entity qualifying for them should
purchase,construct or otherwise acquire
long-term assets.
Grants related to income are government
grants other than those related to assets.
The Income ApproachThe Capital Approach

11. 201511
IndAS 20
Accounting for Government Grants
CA Varun
Sethi
09899766487
Presentation by : CA Varun Sethi Private and Confidential
The Income approachThe Capital approach
Grant is recognized outside
profit or loss
Grant is recognized inside
profit or loss
Recognition of Government Grants
1. received in cash or
2. as a reduction of a liability to the government
The grants will be received.
Entity will comply with the conditions
attaching to them
Condition I: Condition II:
NOTE:
1. AS 12 DOES NOT deal with grants of the nature of Promoters’ contribution
SIMILAR TO ICDS.
2. Also ICDS does not permit ‘Capital approach’

12. 201512
IndAS 20
Accounting for Government Grants
CA Varun
Sethi
09899766487
Presentation by : CA Varun Sethi Private and Confidential
A forgivable loan from government is treated as a GG WHEN
• there is reasonable assurance that the entity will meet the
terms for forgiveness of the loan.
Less
Initial carrying value of the loan per IndAS 109: Financial
Instruments
ZZ
Loan Proceeds received AA
*GOVT. GRANT =
Benefit of govt. loan of below market loan
BB
Accounting for forgivable loans:
Forgivable
loans
1. *The GG so quantified shall be amortized over the period of the loan as income grant in the
P&L.
2. The Loan proceeds shall be accreted using effective interest rate method to its fair value per
IndAS 109.
3. Per voluntary exemption in IndAS 101, FTA of IndAS, entities may opt not to fair value already
recorded loans on its books and carry them on books per their transaction value per previous
GAAP.

13. 201513
IndAS 20
Accounting for Government Grants
CA Varun
Sethi
09899766487
Presentation by : CA Varun Sethi Private and Confidential
Government grants should be recognized in
1. Profit or loss
2. on a systematic basis
3. over the periods in which the entity recognizes as expenses the related
costs for which the grant is intended to compensate.
Income
approach
Receipt basis
(Exception)
Accrual basis
(Generally)
Recognition of Government Grants
Recognition of government grants in
profit or loss on an accrual basis is in
accordance with the basic accrual
accounting assumption in IndAS 1.
Only if NO BASIS existed for allocating a
grant to periods other than the one in
which it was received.
NOTE: ICDS mandates recognition of
GG at the time of receipt.

14. 201514 Presentation by : CA Varun Sethi Private and Confidential
Grants
related to
depreciable
assets
Recognized in profit or loss
• over the periods and
• in the proportions in which depreciation expense on those
assets is recognized.
1
IndAS 20
Accounting for Government Grants
CA Varun
Sethi
09899766487
Income
approach
Grants
related to
Non
depreciable
assets
May require fulfillment of certain obligations & so recognized in P&L
• over the periods and
• that bear the cost of meeting the obligations.
2
Grants in
recognition
of specific
expenses
Grants in recognition of specific expenses are recognized in
profit or loss
• in the same period as the relevant expenses
3

15. 201515 Presentation by : CA Varun Sethi Private and Confidential
Grant for
expenses
or losses
incurred in
a previous
period
Such a grant is recognized in
• profit or loss of the period in which it becomes receivable,
• with disclosure to ensure that its effect is clearly
understood.
4
IndAS 20
Accounting for Government Grants
CA Varun
Sethi
09899766487
Income
approach
Note: Per AS 12, Such a grant is recognized in the income statement of the
period in which it becomes receivable, as an extraordinary item if appropriate
(see Accounting Standard (AS) 5
Grants as
immediate
financial
support
5
Recognize 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.
Note: Per AS 12, Financial support may warrant taking the grant
to income in the period in which the enterprise qualifies to receive
it, as an extraordinary item if appropriate (see Accounting
Standard (AS) 5)

16. 201516 Presentation by : CA Varun Sethi Private and Confidential
Non-
monetary
governme
nt grants
1. The fair value of the non-monetary asset is assessed and
2. BOTH grant and asset are accounted for at THAT fair value.1
IndAS 20
Accounting for Government Grants
CA Varun
Sethi
09899766487
Non-monetary
grants
Note:
• IAS 20 (IASB) gives an option to measure non-monetary government grants
EITHER at
• their fair value or
• at their nominal value.
• Per AS 12, In these circumstances, account for such assets at their
acquisition cost. Non-monetary assets given free of cost are recorded at a
nominal value.

17. 201517 Presentation by : CA Varun Sethi Private and Confidential
IndAS 20
Presentation of grants related to assets
CA Varun
Sethi
09899766487
Asset related
grants
Income statement Presentation of grants related to assets incl. non monetary assets
Assets
Non Currents assets
Asset being deferred income –
grants related to Assets XXX
Current assets
Total assets
Equity and Liabilities
Equity
Liabilities
Non Currents Liabilities
Government grants related to
Assets YYY
Current Liabilities
Total Liabilities
Total Equity and Liabilities
Allowedpresentationformat
Assets
Non Currents assets
Deferred income - grants related
to Assets XXX
Less
Government grants related to
Assets YYY
=NET Deferred Income
Current assets
Total assets
Equity and Liabilities
Equity
Liabilities
Non Currents Liabilities
Current Liabilities
Total Liabilities
Total Equity and Liabilities
NOTAllowedpresentationformat

18. 201518 Presentation by : CA Varun Sethi Private and Confidential
IndAS 20
Accounting for Government Grants
CA Varun
Sethi
09899766487
Non-monetary
grants
Note:
1. ICDS mandates presenting the grants related to depreciable assets at
actual cost/ WDV of block ONLY by deducting the grant in arriving at the
carrying amount of the asset
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
1. setting up the grant as deferred income or
2. by deducting the grant in arriving at the carrying amount of the asset.
The grant set up as deferred income is
1. recognized in profit or loss
2. on a systematic basis over the useful life of the asset.

19. 201519 Presentation by : CA Varun Sethi Private and Confidential
IndAS 20
Presentation of grants related to assets
CA Varun
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09899766487
Asset related
grants
Cash flow statement Presentation of grants related to assets incl. non monetary assets
Cash flow from operation activities
Total
Cash flow from investing activities
•Purchase of non current assets
•Purchase of non current assets
using grant YYY
Total
Cash flow from financing activities
•Share capital issued
•Receipt of government grant ZZZ
•Total
Opening cash and equivalents
Net cash from OA, IA, FA
Total cash from OA, IA, FA
Allowedpresentationformat
NOTAllowedpresentationformat
Cash flow from operation activities
Total
Cash flow from investing activities
•Purchase of non current assets
including FROM using grant
(Gross) YYY
•Purchase of non current assets
including FROM using grant
(Net) YYY
Total
Cash flow from financing activities
•Share capital issued
•Total
Opening cash and equivalents
Net cash from OA, IA, FA
Total cash from OA, IA, FA

20. 201520 Presentation by : CA Varun Sethi Private and Confidential
IndAS 20
Presentation of grants related to income
CA Varun
Sethi
09899766487
Income
related grants
Income statement Presentation of grants related to income
Grants related to income are presented
1. As part of profit or loss,
• either separately or
• under a general heading such as ‘Other income’;
2. alternatively, they are deducted in reporting the related
expense.
Note:
Under IAS 20, there is requirement regarding presentation of
grants related to income in the separate income statement, where
separate income statement is presented under paragraph 29A of
IAS 20.

21. 201521
IndAS 20
Accounting for Government Grants
CA Varun
Sethi
09899766487
Presentation by : CA Varun Sethi Private and Confidential
A government grant that becomes repayable shall be
accounted for as a change in accounting estimate*.
Less
Repayment (of a grant
related to income )
ZZ
Unamortized deferred
credit
AA
EXCESS: recognized in
P&L
BB
Repayment
of grants
Repayment of a grant
Repayment of a grant
related to asset
Repayment of a grant
related to income
Recognized by reducing the deferred
income balance by the amount
repayable.
*Note: Per AS 12: A refund of GG is required to be classified as extraordinary item