What is the primary purpose of government grants?

Government grants support businesses financially.

• Encourages economic growth and innovation.

• Often tied to specific conditions.

• Supports development of new projects.

Fill in the blank: Grants that cannot be reasonably measured or are indistinguishable from normal business activities are ___ considered government grants.

Not

True or False: Government grants are always expected to be repaid by the recipient.

False. Government grants are typically not expected to be repaid.

Explain the difference between the capital approach and the income approach in accounting for government grants.

Grants use different accounting methods.

• Capital approach affects balance sheet.

• Income approach recognizes income gradually.

• Choice impacts financial reporting significantly.

Non-monetary grants are typically recorded at what value?

They should be accounted for at the acquisition cost or nominal value if provided free of cost.

Fill in the blank: Grants that are treated as a proportion of total capital in a business are shown as ___ in the balance sheet.

Capital Reserves

What are the two methods for recognizing grants for specific fixed assets?

Two methods exist for recognizing grants.

• Deduct from asset value.

• Reduced depreciation recognized.

• Deferred income over asset life.

True or False: The purchase method of accounting for amalgamation involves combining the balance sheets of both companies based on their market values.

False. The purchase method involves accounting based on the acquisition cost of the assets rather than market values.

What is the treatment of goodwill arising from amalgamation according to AS-14?

Goodwill arising from amalgamation is treated as an asset and should be amortized over a period not exceeding five years.

Fill in the blank: The effective date of amalgamation is required to be disclosed in the financial statements under ___ accounting standard.

AS-14

What is meant by the pooling of interest method in the context of amalgamation?

Pooling of interest method explained.

• Combines financial statements directly.

• Uses book values, not fair values.

• Reflects true merger values for stakeholders.

Explain the conditions under which a government grant might need to be refunded.

Refund Conditions for Grants

• Failure to meet benchmarks.

• Non-compliance with usage terms.

• Misuse of funds allocated.

True or False: Reserves in a transferor company are not treated according to the scheme of amalgamation sanctioned under the law.

False. The treatment of reserves should be in accordance with the scheme of amalgamation sanctioned under the law.

What additional disclosures are required under the purchase method of amalgamation?

Purchase method disclosures are essential.

• Includes consideration details for amalgamation.

• Covers differences in assets and consideration.

• Specifies amortization period for goodwill.

What are the two primary methods of accounting for government grants, and how do they differ in treatment?

Government grants have two accounting methods.

• Capital Approach treats grants as capital.

• Income Approach defers income recognition.

• Methods affect financial statements differently.