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Grants related to promoter’s contribution

Grant should be treated as Capital Reserve.

Bank A/c Dr.

To Gov Grant

Gov Grant A/c Dr.

To Capital Reserve

Grants related to compensation for expenses

Government grants receivable as compensation for expenses or losses (with no further costs)

should be recognised as an income in the year of receivable as an Extra-ordinary item.

REFUND OF GOVERNMENT GRANT

Government grants sometimes become refundable because certain conditions are not fulfilled. The

grant refundable is treated as an extraordinary item.

The amount refundable in respect of a government grant related to a specific asset is recorded by

increasing the book value of the asset or by reducing the capital reserve or the deferred income

balance, as appropriate, by the amount refundable. (Where the book value of asset is increased, the

depreciation should be provided on new asset value prospectively)

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