Ind as 20/Ias 20/As 12 Non-monetary Government grant

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soundharya lakshmi (Querist)
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27 July 2021 As per the standards when a Govt. Grant takes the form of transfer of a Non-monetary asset, such as land or other resources. Both the grant & asset are accounted either at Fair value or at Nominal value.
Example: Govt. provides land to the entity
why should we recognize the same grant twice as the grant is only provided in the form of land once?

Aashok Kumar Sharma online

Aashok Kumar Sharma

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09 July 2024 When a government grant takes the form of a transfer of a non-monetary asset, such as land, the accounting treatment involves recognizing both the grant and the asset received. Here’s why it may appear as though the grant is recognized twice, and how it actually works in accounting:

### Recognition of Government Grant in the Form of Land

1. **Initial Recognition:**
- **Fair Value Approach:** Under accounting standards (such as IFRS), when a government grant is provided in the form of land or other non-monetary assets, it is typically recognized initially at fair value.
- The fair value of the land received is recognized as an asset on the recipient entity's balance sheet.

2. **Accounting for the Government Grant:**
- The grant itself, in the form of land, is recognized as revenue or income by the recipient entity. This is usually done at the fair value of the land received.

3. **No Double Recognition:**
- It's important to clarify that the grant is recognized as income or revenue only once, at the time when the land or non-monetary asset is received.
- The asset (land) and the revenue (grant income) are recognized simultaneously at fair value, but they represent the same economic transaction — the receipt of the land from the government.

### Example Illustration:

- Suppose a government provides land to an entity with a fair value of 1,000,000.
- The entity would:
- Recognize the land as an asset at 1,000,000.
- Recognize a government grant of 1,000,000 as income or revenue.

### Accounting Entries (Illustrative):

**Upon receipt of land:**
- Dr. Land (at fair value) 1,000,000
- Cr. Government Grant (Revenue) 1,000,000

### Why It Might Seem Like Double Recognition:

- **Initial Recognition:** The grant (in the form of land) is recognized as income or revenue when the entity receives the land, reflecting the economic benefit received.
- **Asset Recognition:** Simultaneously, the land is recognized as an asset on the balance sheet at its fair value.

### Conclusion:

The grant is recognized only once as income or revenue when the land or non-monetary asset is received from the government. The fair value of the land received is also recognized as an asset on the balance sheet. This process ensures that the financial statements accurately reflect both the receipt of the asset and the recognition of the associated income, without double-counting the grant. The appearance of double recognition arises from the fact that both the asset and the income from the grant are recorded at the same time and value, reflecting the economic transaction of receiving the land.

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