MedCol Limited during the financial year 2024-2025, received the following grants from the State Government for its newly established Medical Centre…

Grant 1: Government grants shall be recognised in profit or loss 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. In the given case, the grant would be recognised as a liability (deferred income) and presented in the balance sheet as a split between current and non-current amounts. 20.00 lakhs would be recognized as income over 5-year period on straight line basis. Accordingly, MedCol Limited will recognise - 4.00 lakhs to the Statement of Profit and Loss every year. Assuming that the Grant was received at the beginning of the year,4 lakhs [20 lakhs x (1 year/5 years)] of the grant value forming part of the deferred grant liability would be considered as current and be recognised in the statement of profit and loss for the year ended 31st March 2025. The balance amount of 16 lakhs will be split into current and non-current and shown in the balance sheet as 4 lakhs current deferred grant liability and 12 lakhs as non-current deferred grant liability. Grant 2: MedCol Limited will set up 6.00 lakhs as deferred income and will credit 1 lakhs equally to its statement of profit and loss over next 6 years. The cost of the machinery would appear in the books as 15.00 lakhs and depreciation of 2.50 lakhs (₹ 15.00 lakhs / 6 years) will be charged to Statement of Profit and Loss every year. Net impact on Statement of Profit and Loss every year would be - 1.50 lakhs expense (₹ 2.50 lakhs -1.00 lakhs) every year. Alternatively, MedCol Limited will deduct - 6.00 lakhs from the cost of radiology machinery of 15.00 lakhs. In such a situation, the cost of the machinery would appear in the books initially at 9.00 lakhs (₹ 15.00 lakhs - 6.00 lakhs) and depreciation of 1.50 lakhs (9.00 lakhs / 6 years) will be charged to Statement of Profit and Loss every year. Net impact on the Statement of Profit and Loss every year, in both the cases, would be same. Grant 3: In case a government grant is in the form of a transfer of a non-monetary asset, such as land, then the same will be accounted for at its fair value both as grant and asset. Accordingly, land and grant will be recorded in the books at 30 lakhs (i.e. 15 lakhs x 2 acres). Alternatively, entity may record both asset and grant at a nominal amount. Grant 4: No condition is attached with the grant received except that the Medical Centre to be opened in the backward area. Since MedCol Limited has opened the Medical Centre in the backward area in the year 2024-2025, the entire grant of 50.00 lakhs should be recognised immediately in the statement of profit and loss in the year 2024-2025.