MCQs on Ind AS 20 - Government Grants

Which of the following is the primary objective of Ind AS 20?

• To prescribe the accounting treatment for government grants

• To regulate how governments provide grants

• To set tax policies for governmenubsidies

• To govern the financial performance of public sector entities

Government grants related to assets should be recognized as:

• A direct credit to equity

• Deferred income and recognized in profit or loss over the useful life of the asset

• Revenue in the year of receipt

• A deduction from the cost of the asset

Government grants should be recognized in financial statements when:

• There is reasonable assurance that the entity will comply with the grant conditions

• The grant is received in cash

• The government provides verbal assurance of grant approval

• The company applies for the grant

A government grant related to income should be recognized in:

• Equity

• Other Comprehensive Income (OCI)

• Profit or loss systematically over the periods in which the entity recognizes the related expenses

• The statement of changes in equity

Ind AS 20 requires disclosure of:

• The nature and extent of government grants

• The unfulfilled conditions and contingencies attached to the grant

• The method of accounting followed for the grants

• All of the above

How should non-monetary government grants, such as free land or equipment, be accounted for?

• At nominal value

• At fair value or nominal value if fair value is not available

• Should not be recorded

• At the original cost of the government

Which of the following is NOT covered under Ind AS 20?

• Grants related to assets

• Income tax benefits such as tax holidays

• Grants related to income

• Non-monetary government assistance

If a government grant is received but there is uncertainty about compliance with conditions, it should be:

• Recognized immediately as income

• Recognized as a liability until reasonable assurance of compliance is obtained

• Recognized in Other Comprehensive Income (OCI)

• Ignored in financial statements

Government grants received as compensation for expenses or losses already incurred should be recognized:

• In the period in which they are received

• In the period in which the related expenses or losses occurred

• Over the next five years

• As equity

According to Ind AS 20, a government grant that becomes repayable should be:

• Recognized as an expense immediately

• Treated as an adjustment to equity

• Accounted for as a change in accounting estimate

• Treated as a liability in the period of repayment obligation