Accounting for Revocation of Interest-free Loan By the Government in Accordance With Ind AS 20

Para 32 of Ind AS 20, Accounting for Government Grants and Disclosure of Government Assistance, states that a government grant that becomes repayable shall be accounted for as a change in accounting estimate (see Ind AS 8, Accounting Policies, Changes in Accounting Estimates and Errors). Repayment of a grant related to income shall be applied first against any unamortized deferred credit recognized in respect of the grant. To the extent that the repayment exceeds any such deferred credit, or when no deferred credit exists, the repayment shall be recognized immediately in profit or loss. Repayment of a grant related to an asset shall be recognized 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 recognized in profit or loss to date in the absence of the grant shall be recognized immediately in profit or loss.

This story involves a discussion on a case explaining accounting of capitalization of government loan as grant and refunding of the loan to government on violation of conditions.

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