📊 AS 12 – Accounting for Government Grants ✍️ Remember the basic classification: ❓ Grant related to Revenue → Recognise in P&L over the periods necessary to match the related costs ❓ Grant related to Fixed Asset → Treat according to the prescribed asset-related treatment ❓ Grant received for a specific purpose → Match it with the related expense/asset 💡 Exam Trick (Very Important ⚡) In the exam, follow these steps: 👉 Step 1: Identify the purpose of the Government Grant 👉 Step 2: Decide whether it is related to Revenue or Fixed Asset 👉 Step 3: Apply the appropriate recognition and presentation treatment 👉 Step 4: Check whether any conditions attached to the grant are fulfilled 🧠 Golden Lines (for MCQs + Theory): 📌 Revenue Grant → Recognise in P&L to match related costs 📌 Asset Grant → Deduct from cost of asset OR treat as deferred income, as permitted under AS 12 📌 Grant for a specific fixed asset → Related to that specific asset 📌 Grant towards promoter’s contribution → Capital Reserve 📌 Grant should not be recognised until there is reasonable assurance that conditions will be complied with and the grant will be received ⚡ Easy Memory Trick: Purpose → Classify → Recognise → Match → Present 🎯 Pro Tip: In the exam, first identify what the grant is meant for. Don’t directly treat every government grant as income—the purpose and conditions of the grant determine its accounting treatment.
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