Page 6 - 14. COMPILER QB - INDAS 20

breast cancer, even though similar medicines are available in the market but are expensive. The company
is to ensure by developing a manufacturing process over a period of two years so that the cost comes
down at least to 50%.

Solution
1. The land and government grant should be recognized by A Ltd. at a fair value of Rs. 12,00,000 and this

government grant should be presented in the books as deferred income. Alternatively, if the company is
following the policy of recognising non-monetary grants at nominal value, the company will not recognise
any government grant. Land will be shown in the financial statements at Rs. 1
2. As per Ind AS 20 ‘Accounting for Government Grants and Disclosure of Government Assistance’, loan at
concessional rates of interest is to be measured at fair value and recognised as per Ind AS 109. Value of

concession is 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 as a Government grant.
3. Rs. 25 lakh has been received by D Ltd. for immediate start-up of business. Since this grant is given to
provide immediate financial support to an entity, it should be recognised in the Statement of Profit and
Loss immediately with disclosure to ensure that its effect is clearly understood, as per Ind AS 20.
4. Rs. 10 lakh should be recognized by S Ltd. as deferred income and will be transferred to profit and loss

over the useful life of the asset. In this case, Rs. 1,00,000 [Rs. 10 lakh/10 years] should be credited to
profit and loss each year over a period of 10 years. Alternatively, if the company is following the policy of
recognising non-monetary grants at nominal value, the company will not recognise any government grant.
The machinery will be recognised at Rs. 70 lakhs (80 – 10). Reduced depreciation will be charged to the

Statement of Profit and Loss.
5. As per Ind AS 20, the entire grant of Rs. 25 lakh should be recognized immediately as deferred income
and charged to profit and loss over a period of two years based on the related costs for which the grants
are intended to compensate provided that there is reasonable assurance that U Ltd. will comply with the
conditions attached to the grant.

14. 5