A Ltd. has acquired equipment for 100 lakhs. The estimated useful life of the equipment is 10 years. Residual value at the end of useful life is…

Para 32 of Ind AS 20 under the heading "Repayment of Government Grants" inter alia states that a Government grant that becomes repayable shall be accounted for as a change in accounting estimate as per Ind AS 8. Repayment of a grant related to an asset shall be recognised by increasing the carrying amount of the asset or reducing the deferred income balance by the amount repayable. The cumulative additional depreciation that would have been recognised in profit or loss to date in the absence of the grant shall be recognised immediately in profit or loss. Further para 33 of the standard states that the circumstances giving rise to repayment of a grant related to an asset may require consideration to be given to the possible impairment of the new carrying amount of the asset. Following the above guidance, below is depreciation computation for the first 2 years where the grant is deducted from the carrying amount of the assets: Particular Government grant received /receivable in case of 10 lakhs ₹ in lakhs 5 lakhs ₹ in lakhs Cost of equipment 100.00 100.00 Grant received (10.00) (5.00) Cost of equipment (Net of Grant received) 90.00 95.00 Useful life (years) 10.00 10.00 Depreciation (per annum) for year 1 9.00 9.50 Written down value (WDV) of the equipment at the end of year 1 81.00 85.50 Depreciation for year 2 9.00 9.50 WDV of the equipment at the end of year 2 72.00 76.00 Total cumulative depreciation for years 1 and 2 18.00 19.00 Drawing an analogy from the accounting of the repayment of government grants, similar accounting may be applied for a change in the amount of government grant receivable. The cumulative additional depreciation of 1lakhs [i.e., 19 lakhs minus 18 lakhs], would have been recognized to date as an expense, had government grant receivable by entity from inception was INR 5. Therefore, A Ltd. may pass the following journal entry to recognise change in the amount of grant received/receivable: Particular Dr. Cr. Remark Equipment A/c Dr. 4 76 lakhs – 72lakhs Depreciation Dr. 1 Additional depreciation recognised in Profit and Loss A/c To Bank/Grant receivable 5 Payment of grant /adjustment to grant receivable A Ltd. to carry out impairment assessment of assets, as per Ind AS requirement, which may trigger in view of an increase in carrying amount of the assets due to repayment of government grant received/receivable.