As_12_accounting_for_govt_grants.ppt

 ACCOUNTING FOR GOVERNMENT GRANTS

 AS – 12

 AS 12 DEALS WITH Grants given by Government Agencies and similar bodies in the form of subsidies and cash incentive.  Government Agencies or Government includes Local, National and International. 

 AS 12 DOES NOT DEAL  WITH Government Assistants provided in the form of Tax Holiday in bac!ard area or Tax "xemption in noti#ed area.  "nterprises !here Government participation is there. 

RECOGNITION OF GOVERNMENT GRANTS The "nterprise should recogni$e only !hen there is an assurance that the "nterprise !ill comply !ith the conditions attached to them.  The "nterprise should also have con#dence that the Grants !ill be received.  The "nterprise should not be of the impression that, they have ful#lled all the conditions once the Grant is received. 

KINDS OF GOVERNMENT GRANTS 

Non – monetary Goernment Grant! Grants in the form of Assets such as Land, %lant and &achinery, etc.,

Monetary Grant! Grants related to 'epreciable (ixed  Assets in the form of &oney to ac)uire the (ixed Assets.

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 ACCOUNTING TREATMENT FOR GRANTS RECEIVED FOR DE"RECIA#LE ASSET ðod * + Grant received !ill be deducted from the Gross -alue of the Assets purchased. If the Grant received e)uals to the ost of the  Asset, the Asset should be sho!n in the /alance 0heet at Nominal -alue and 'epreciation has to be provided on the Net  -alue of the Asset.  ðod * 1 Grant received !ill be treated on par !ith deferred income and each year the amount e)uivalent to 'epreciation !ill be credited to %ro#t and Loss Account from this 'eferred Grant 

 ACCOUNTING TREATMENT FOR GRANTS RECEIVED FOR NON – DE"RECIA#LE ASSET ðod * + Grant received !ill be deducted from the Gross -alue of the Assets purchased. If the Grant received e)uals to the ost of the Asset, the Asset should be sho!n in the /alance 0heet at Nominal -alue.  ðod * 1 2hen the Grant is received on ful#lling the conditions laid do!n for receiving the Grant then, the receipt of Grant has to be credited to apital 3eserve  Account.  ðod * 4 2hen the Grant is received before ful#lling the conditions laid do!n for receiving the Grant, then the receipt has to be credited to 'eferred Government Grants and should be sho!n under Liability side of the /alance 0heet. After ful#lling the conditions or the conditions are partly ful#lled to that extent the amount !ill be credited to income proportionately. 

 ACCOUNTING TREATEMENT FOR GRANTS RECEIVED RELATED TO REVENUE IN NATURE AND RECEIVED IN THE $EAR S"ENT The Grant received should be credited to %ro#t and Loss Account in the period in !hich the related costs are debited. The ðod of  Accounting Treatment to be adopted are 5a6 The Grant can be credited as 7ther Income. 5b6 The Amount of Grant received !ill be deducted from the expenses debited to %ro#t and Loss  Account.

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FOR GRANTS RECEIVED RELATED TO REVENUE IN NATURE AND RECEIVED IN A LATER "ERIOD 

The Grant received should be credited to %ro#t and Loss Account in the period in !hich it is received as an extraordinary item !hich is not related to the year of receipt.

 ACCOUNTING TREATEMENT FOR GRANTS RECEIVED IN THE NATURE OF "ROMOTER%S CONTRI#UTION 

The Grant received should be credited to apital 3eserve and it should form part of the 0hare Holder8s (und.

REFUND OF GOVERNMENT GRANTS ALREAD$ RECEIVED 

Government Grants become refundable because of non9ful#llment of the conditions attached to the Grant.

TO #E ADO"TED IN CASE OF GRANT RECEIVED RELATING TO REVENUE REFUNDED AT A LATER STAGE DUE TO NON& FULFILLMENT OF THE CONDITIONS The amount of refund to the extent available in the unamorti$ed 'eferred Government Grants has to be ad:usted to that account.  The remaining balance amount of refund has to be debited to %ro#t ; Loss Account as extraordinary item. 

 ACCOUNTING TREATEMENT TO #E  ADO"TED IN CASE OF GRANT RECEIVED RELATING TO S"ECIFIC  ASSETS REFUNDED AT A LATER STAGE DUE TO NON&FULFILLMENT OF THE CONDITIONS If the Asset has been sho!n at a value by reducing the Asset !hen the Grant is received then, refund has to be debited to the Asset Account and for the increased value the 'epreciation has to be re!ored based on the remaining useful life of the Asset.  If at the time of receiving the Grant, the Grant !as credited to %ro#t and Loss Account on a matching basis of 'epreciation then, the Grant refunded should be debited to %ro#t ; Loss Account as extraordinary item.  If at the time of receiving the Grant, the Grant is credited to apital 3eserve Account then, at the time of refund the Grant returned should be debited to apital 3eserve  Account. 

OCCURRED AFTER THE #ALANCE SHEET DATE RELATED TO GOVERNMENT GRANTS If after the /alance 0heet date any event has been occurred because of !hich the refund has been made after the /alance 0heet date but, before the approval date by the &embers then, the guidelines given in the  Accounting 0tandard < has to be follo!ed.

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DISCLOSURE The Accounting %olicy adopted for Government Grants including the methods of presentation in the (inancial 0tatement has to be disclosed.  The Nature and extent of Government Grants recogni$ed in the (inancial 0tatements including Grants of non9 monetary assets given at a concessional rate or free of cost. 