Accounting Treatment of Grant in Lieu of Equity Received From Government Promoters Under Ind AS Framework

This document analyzes the accounting implications of financial contributions received by a project-focused entity from the Central Government, State Governments, and public sector undertakings. These contributions were structured as “grants in lieu of equity,” without the issuance of corresponding shares, to maintain equal ownership among promoter entities.

Key issues addressed include:

• Whether such contributions qualify as government grants under Ind AS 20
• The impact of ownership interest on their classification
• Appropriate presentation in the Balance Sheet and Cash Flow Statement
• The effect of differing views between the company and the C&AG on the accounting treatmentThe case offers valuable insights for professionals involved in government-funded infrastructure projects, particularly where grant arrangements and equity considerations overlap under Ind AS.

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