Page 9 - 14. COMPILER QB - INDAS 20

NEW QUESTION ADDED IN ICAI MODULE FOR MAY 22 ONWARDS

Q8. (Same as Q2)

Entity A is awarded a government grant of Rs.60,000 receivable over three years (Rs.40,000 in year 1 and
Rs.10,000 in each of years 2 and 3), contingent on creating 10 new jobs and maintaining them for three
years. The employees are recruited at a total cost of Rs.30,000, and the wage bill for the first year is
Rs.1,00,000, rising by Rs.10,000 in each of the subsequent years. Calculate the grant income and deferred

income to be accounted for in the books for year 1, 2 and 3.
Solution
The income of Rs.60,000 should be recognised over the three year period to compensate for the related costs.

Calculation of Grant Income and Deferred Income:
Year Labour Grant Income Deferred
Cost Income
Rs. Rs. Rs.
1 1,30,000 21,667 60,000 x (130/360) 18,333 (40,000 – 21,667)
2 1,10,000 18,333 60,000 x (110/360) 10,000 (50,000 – 21,667 –18,333)
3 1,20,000 20,000 60,000 x (120/360) - (60,000 – 21,667 – 18,333 –
20,000)
3,60,000 60,000
So Grant income to be recognised in Profit & Loss for years 1, 2 and 3 are Rs. 21,667, Rs. 18,333 and Rs.
20,000 respectively.
Amount of grant that has not yet been credited to profit & loss i.e; deferred income is to be reflected in the
balance sheet. Hence, deferred income balance as at year end 1, 2 and 3 are Rs. 18,333, Rs. 10,000 and Nil

respectively.

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