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reimburSemenT of exPenSeS from STAndPoinT of finAnCiAl rePorTinG

classified as short-term employee benefits, Accordingly, if the govt. reimburses the
post-employment benefits, termination benefits amount paid for purchase of any long-term
and other long-term employee benefits. assets or for any operating expenditure to
Short-term employee benefits are employee an entity then the same could be treated as
benefits expected to be settled wholly before government grants related to either assets or
12 months after the end of financial period. income, as the case may be. The requirements
Employee benefits other than short-term of Ind AS 20 and AS 12 should be applied
employee benefits, post-employment benefits accordingly for reporting in the financial
and termination benefits are treated as other statements.
long-term employee benefits.
Reimbursement by holding to subsidiary
Considering the above definitions and provisions
of Ind AS 19 & AS 15, reimbursement to company & vice-versa
employees should be recorded as either short-
term employee benefits or other long-term 4. In a group of companies, holding &
employee benefits, depending on the period subsidiary company may pay expenses &
of settlement and other terms & conditions others on behalf of each other and later on
of reimbursement. The relevant provisions they reimburses those payments.
of Ind AS 19 and AS 15 would apply at 4.1 Treatment in Standalone Financial Statements
the time of recognition, measurement and In standalone financial statements, each
disclosures in the financial statements.
company recognises any reimbursement to
Reimbursement from Government other group company, irrespective of treatment
by other group company.
3. From time-to-time the Central or State
Government provide financial assistance to A group company (first company) which pay
business entities to establish and to run their the amount on behalf of other group company
businesses. The financial assistance is provided (second company), recognises the amount
either before or after spending of money. Such as receivable from second company. On the
assistance is known as government grants. other hand, second company recognises the
reimbursement as revenue or capital expenditure
Ind AS 20, Accounting for Government Grants or as any other item and corresponding
and Disclosure of Government Assistance provides payable to the first company. Any other item
that government grants are assistance by govt. may include loans & advances.
in form of transfer of resources to an entity
in return for past or future compliances with However, if the amount paid by the first
certain conditions relating to the operating company is related to itself either as revenue
activities of the entity. Same definition is or capital expenditure then such payment
provided in AS 12, Accounting for Government should be recognised as related expenditure.
Grants. At the same time, first company shall record
other income or deferred income (if capital
Government grants can be related to assets or expenditure) and corresponding receivable
income. If the grant is paid for acquisition, from second company. Deferred income will be
construction or otherwise purchase of long- amortised over the useful life of capital asset on
term assets then it is classified as grant related a systematic basis. On the other hand, second
to assets and any other grant is classified as company shall recognise the reimbursement
grant related to income. Accounting treatment as other expense and corresponding liability
of both classes of grants is different. payable to first company.

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