Government Grant

Government Grants

Govt Grant and Govt Assistant

Government – Refers to a Government Government  Agencies and similar bodies whether

Local

National

International

Government Assistant

Government Grants

Government                                                                 Entity                                                                                                                                  

**Transfer of Resources in return for past or future compliance with certain conditions relating to operating activities of an enterprise.

Recognition of Government Grant

G Grant including non monetary grants should be recognized @fair value .

Government Grant should only be recognized when

*The entity will comply with the conditions attached to them

*The grant will be received

Government Grant

*related to asset

                *Grant related to depreciating assets

                *Grant related to non depreciating assets

*Related to income

Example

ABC Plc acquire a Machine

Machine Cost    100m@40%  Grant Percentage

Residual Value 20M

useful life of the machine 4YRS

Years                     Depreciation                                      Grant Income

Y1                           20                                                           10

Y2                           20                                                           10

Y3                           20                                                           10

Y4                           20                                                           10

                                80                                                           40

100@40%

40/4

10 (Grant Per Year)

100-20

80/4

20(Depreciation Per Year)

Presentation of Grants

**Grant Related to Assets

                ***Differed Income Method    

                ***Netting Off Method                              

Example

Cost of the Equipment 100m(01/01/2008)

Dep over the Useful life for 5yrs

Residual Value 0

Grant Value 10m

Deferred Income Method

Journal Entries

Asset A/C                                                            90

                Cash A/C                                                                              90

(Being Accounted Cash Payment)

Asset A/C                                                            10

                Differed Income                                                               10

(Being Accounted the Differed Income)

Depreciation  A/C                                            20

                Acc Depreciation                                                              20

(Being Accounted Depreciation)

Deferred Income A/C                                    2

                Profit and Loss A/C                                                          2

(Being Charged Relevant Portion of Def Income to P and L)

Balance Sheet Presentation

Non Current Asset                                          100         20           80

Non Current Liability                                                                       6

Current Liability                                                                                                2

Rough Works

100/5=20(Depreciation)                                                10/5=2(Deferred Income)

Netting Off Method

Asset A/C                                            100

                Cash/Bank                                          100

(Being Accounted Machine Cost)

Cash/Bank                                                          10

                Deffered Income                                                             10

(Being Accounted GR)

Depreciation A/C                                             18

                Acc Depreciation                                                                              18

(Being Accounted Depreciation Expense)

Working

Asset cost is netted off with Grant Amount

100m-10m = 90m/5 = 18(Depreciation Expense)    

Repayment of Government Grant