Page 2 - 30. COMPILER QB - IND AS 101

INDAS 101 –

CONSOLIDATED FINANCIAL STATEMENTS

(TOTAL NO. OF QUESTIONS – 13)

INDEX
S.No. Particulars Page No.

1 RTP Questions 30.1
2 MTP Questions 30.11
3 Past Exam Questions 30.19

RTPs QUESTIONS

Q1 (May 18)
ABC Ltd is a government company and is a first-time adopter of Ind AS. As per the previous GAAP, the

contributions received by ABC Ltd. from the government (which holds 100% shareholding in ABC Ltd.) which
is in the nature of promoters’ contribution have been recognised in capital reserve and treated as part of
shareholders’ funds in accordance with the provisions of AS 12, Accounting for Government Grants.
State whether the accounting treatment of the grants in the nature of promoters’ contribution as per AS 12
is also permitted under Ind AS 20 Accounting for Government Grants and Disclosure of Government
Assistance. If not, then what will be the accounting treatment of such grants recognised in capital reserve as

per previous GAAP on the date of transition to Ind AS.
SOLUTION

Ind AS 20, “Accounting for Government Grants and Disclosure of Government Assistance” inter alia states
that the Standard does not deal with government participation in the ownership of the entity.
Since ABC Ltd. is a Government company, it implies that the government has 100% shareholding in the
entity. Accordingly, the entity needs to determine whether the payment is provided as a shareholder
contribution or as a government. Equity contributions will be recorded in equity while grants will be shown in

the Statement of Profit and Loss.
Where it is concluded that the contributions are in the nature of government grant, the entity shall apply the
principles of Ind AS 20 retrospectively as specified in Ind AS 101 ‘First Time Adoption of Ind AS’. Ind AS 20
requires all grants to be recognised as income on a systematic basis over the periods in which the entity

recognises as expenses the related costs for which the grants are intended to compensate. Unlike AS 12, Ind
AS 20 requires the grant to be classified as either a capital or an income grant and does not permit
recognition of government grants in the nature of promoter’s contribution directly to shareholders’ funds.
Where it is concluded that the contributions are in the nature of shareholder contributions and are recognised
in capital reserve under previous GAAP, the provisions of paragraph 10 of Ind AS 101 would be applied which
states that, which states that except in certain cases, an entity shall in its opening Ind AS Balance Sheet:
30. 1