Ind AS 20 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Ind AS 20 prescribes the accounting for government grants and disclosure of government assistance. Grants are recognised only when there is reasonable assurance of compliance with conditions and receipt, and are matched in profit or loss with the related costs they are intended to compensate.
Overview
Ind AS 20, notified under the Companies (Indian Accounting Standards) Rules, 2015, deals with transfers of resources from government in return for past or future compliance with certain conditions — capital subsidies, revenue subsidies, export incentives, interest subventions and similar assistance. It follows the income (matching) approach rather than the capital approach.
Scope
Ind AS 20 applies to government grants and other forms of government assistance, but excludes government participation in ownership, tax benefits such as tax holidays and reduced tax rates (dealt with under Ind AS 12), and government assistance provided in the form of benefits available in determining taxable profit. Grants covered by Ind AS 41 (agriculture) are also outside its scope.
Recognition Principle
A government grant is recognised only when there is reasonable assurance that (a) the entity will comply with the conditions attached and (b) the grant will be received. The mere receipt of a grant is not conclusive evidence that conditions have been or will be fulfilled. Recognition follows the income approach: grants are taken to profit or loss on a systematic basis over the periods in which the entity recognises the related costs.
Grants Related to Assets
For grants related to the acquisition of an asset, Ind AS 20 permits two presentations: (1) recognise the grant as deferred income and release it to profit or loss over the useful life of the asset; or (2) deduct the grant from the carrying amount of the asset, so a reduced depreciation charge effectively spreads the benefit. Both yield the same net effect on profit over the asset's life.
Grants Related to Income
Grants related to income are either presented separately (e.g. as "other income") or deducted from the related expense. They are recognised over the periods that match the costs they subsidise. A grant receivable as compensation for expenses or losses already incurred, with no future related costs, is recognised in profit or loss immediately when it becomes receivable.
Non-Monetary Grants
Where a grant takes the form of a non-monetary asset — such as land or plant given at a concession — the entity normally records both the asset and the grant at fair value. Alternatively, both may be recorded at a nominal amount.
Worked Example
A company receives a ₹50,00,000 capital subsidy toward plant costing ₹2,00,00,000 with a useful life of 10 years. Under the deferred income method, it recognises the ₹50,00,000 as deferred income and credits ₹5,00,000 per year to profit or loss, matching the ₹20,00,000 annual depreciation. Under the netting method, it records the plant at ₹1,50,00,000 and depreciates ₹15,00,000 per year. Either way, the net annual charge to profit or loss is ₹15,00,000.
Repayment of Grants
A grant that becomes repayable is accounted for as a change in accounting estimate. Repayment of an income grant is first applied against any unamortised deferred credit, with any excess expensed. Repayment of an asset grant increases the asset's carrying amount (or reduces deferred income), and cumulative extra depreciation is recognised immediately.
Key Differences from AS 12
Ind AS 20 removes the option of crediting capital grants directly to shareholders' funds (the capital approach), requiring instead systematic recognition in profit or loss. It also provides clearer guidance on non-monetary grants and repayments.