Page 5 - 14. COMPILER QB - INDAS 20

MTPs QUESTIONS

Q4 (MTP Aug. 18 – 4 Marks)
A Limited received from the government a loan of Rs.1,00,00,000 @ 5% payable after 5 years in a bulleted

payment. The prevailing market rate of interest is 12%. Interest is payable regularly at the end of each year.
Calculate the amount of government grant and Pass necessary journal entry. Also examine how the
Government grant is realized. Also state how the grant will be recognized in the statement of profit or loss
assuming that the loan is to finance a depreciable asset.
Solution

The fair value of the loan is calculated at Rs. 74,76,656.
Year Opening Interest calculated @ 12% Interest paid @ 5% on Rs. Closing Balance
Balance 1,00,00,000 + principal paid
(a) (b) (c) = (b) x 12% (d) (e) =(b) + (c) – (d)

1 74,76,656 8,97,200 5,00,000 78,73,856
2 78,73,856 9,44,862 5,00,000 83,18,718
3 83,18,718 9,98,246 5,00,000 88,16,964
4 88,16,964 10,58,036 5,00,000 93,75,000
5 93,75,000 11,25,000 1,05,00,000 Nil

A Limited will recognise Rs. 25,23,344 (Rs. 1,00,00,000 – Rs. 74,76,656) as the government grant and will
make the following entry on receipt of loan:
Bank Account Dr. Rs. 1,00,00,000
To Deferred Income Rs. 25,23,344
To Loan Account Rs. 74,76,656

Rs. 25,23,344 is to be recognised in profit or loss on a systematic basis over the periods in which A Limited
recognises the related costs (which the grant intends to compensate) as expenses.
If the loan is to finance a depreciable asset, Rs. 25,23,344 will be recognised in profit or loss on the same

basis as depreciation.

Q5. (MTP Oct. 20 + Exam Nov. 18)
How will you recognize & present the grants received from the Government in the following cases as per
Ind AS 20?

(i) A Ltd. received one acre of land to set up a plant in a backward area (fair value of land Rs. 12 lakh and
acquired value by Government is Rs. 8 lakhs).
(ii) B Ltd. received an amount of loan for setting up a plant at concessional rate of interest from the
Government.
(iii) D Ltd. received an amount of Rs. 25 lakh for immediate start-up of a business without any condition.

(iv) S Ltd. received Rs. 10 lakh for purchase of machinery costing Rs. 80 lakh. Useful life of machinery is 10
years. Depreciation on this machinery is to be charged on a straight line basis.
(v) Government gives a grant of Rs. 25 lakh to U Limited for research and development of medicine for

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