How will you recognize and present the grants received from the Government in the following cases as per Ind AS 20? (i) A Ltd. received an amount of…

Entities should recognise the grants in the following manner: ₹ 40 lakhs have been received for immediate start-up of business. This should be recognised in Statement of Profit and Loss immediately as there are no further conditions attached to the grant.₹ 30 lakhs should be recognised in profit or loss on a systematic basis over the two-year period, in which the entity recognises as expense the related costs for which the grants are intended to compensate, provided that there is reasonable assurance that B Ltd. will comply with the conditions attached to the grant.Land should be recognised at fair value of 15 lakhs and government grant should be presented in the balance sheet by setting up the grant as deferred income. Alternatively, deduct the amount of grant from the cost of the asset. In the given case, since the land is granted at no cost, it will be presented in the books at nominal value.The benefits of a government loan at a below market rate of interest is treated as a government grant. The loan shall be recognized and measured in accordance with Ind AS 109 "Financial Instruments". The benefit of the below market rate of interest shall be measured as the difference between the initial carrying value of the loan determined in accordance with Ind AS 109 and the proceeds received. The benefit is accounted for in accordance with Ind AS 20. As per Ind AS 109, the loan should be initially measured at its fair value. The entity should recognise in profit or loss on a systematic basis over the periods in which the entity recognise as expense the related costs for which the grant is intended to compensate.₹ 20 lakhs should be recognised as deferred income and will be transferred to profit and loss over the useful life of the asset. In this case, 2 lakhs [ ₹ 20 lakhs / 10 years] should be credited to profit and loss each year over a period of 10 years. Alternatively, 20 lakhs will be deducted from the cost of the asset and depreciation will be charged at reduced amount of 7 lakhs [( ₹ 90 lakhs - 20 lakhs)/10 every year].