Major differences between AS 12 and Ind AS 20

Government loans with below market rate of interest

Under AS 12, there is no specific guidance for this topic.

Under Ind AS 20, Government loans with below market rate of interest are initially recognised as the difference between the initial carrying amount of the loan and proceeds received

Forgivable loans

Under AS 12, there is no specific guidance for forgivable loans.

Under Ind AS 20, such loans are treated as government grants when there is a reasonable assurance that the entity will meet the terms of the forgiveness of the loans

Non-monetary grants

Under AS 12, if an asset is given at the discounted price by the government, the grant and asset is recognised at the discounted price. Also, if asset is given free of cost, then, it is recorded at the nominal value.

Under Ind AS 20, non-monetary grants are measured at fair value only. Option to record at the nominal value is not there under Ind AS.

Note: There is carve out in Ind AS 20 that under IAS 20, an entity has option to measure such non-monetary grants either at the fair value or at nominal value.

Under AS 12, there are two approaches: Capital approach or the income approach.

Under capital approach, grants in the nature of promoter’s contribution are credited directly to shareholders fund. Under income approach, grants are recognised in statement of profit and loss on a systematic basis to match them with the related costs.

 Under Ind AS 20, government grants are not directed credited to the shareholder’s fund.  Government grants are recognised as income to match them with corresponding expenses in statement of profit and loss. Further, grants related to assets should be presented in the balance sheet only by setting up the grant as deferred income.

Note: There is carve out in Ind AS 20 that under IAS 20, an entity can present grants related to assets either by setting up the grant as deferred income or by deducting the grant in arriving at the carrying amount of the asset.