Manual - ICDS VII : Government Grants

Not being related to depreciable assets, these grants have, necessarily, to be recognized as incomes. However, para 6 of ICDS VII says that the recognition of income should be spread over the period during which the cost has been incurred for meeting obligations in relation to the assets. The prescription in this para dilutes the mandate of para 4 of ICDS VII that grants cannot be recognised as income beyond the year of receipt. In such circumstances, as the Act does not envisage a spread over beyond year of receipt, the prescription in para 6 of ICDS VII should yield to provisions of the Act. It is only when the grant is recognised because there is reasonable certainty of receipt, that the same may be recognised as income over the period of incurring costs in meeting the obligations in relation to non-depreciable assets.

 

Recognition of government grants: generally recognized as income on receipt unless reasonable certainty permits spreading with related costs. Grants for assets outside the block of depreciable assets are to be recognized as income; statutory tax provisions control and preclude spreading recognition beyond the year of receipt, except where there is reasonable certainty of receipt permitting deferral and matching with costs incurred for obligations related to the non-depreciable assets.