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We have received a 5 acre land from the Government free of charge to set up a manufacturing plant for a period of 50 years. The conditions for obtaining this land are that we invest a particular US$ amount and provide at least 1000 jobs for the people in this particular district. How do we account for this under IFRS/IAS? Should we recognize this land as an asset? What should be the double entries?
in IAS 20 - Accounting for Government Grants by Level 1 Member (2.5k points)
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2 Answers

0 votes
Yes you are required to recognize the land as an asset in your accounts. However the amount may be either the fair value or a nominal value.
Accounting entries could be:
Land A/C             Dr (Balance sheet)
Government Grant A/C    Cr (Balance sheet)
by
0 votes
You need to focally review the Government grant terms and condition to check whether its (The grant / Donation) is restricted or not.

In case the grant was restricted, the credit side of entry shall be a part from Equity as "Government Grants". In case the grant was free from restrictions or all of them were met then the credit side shall be Unearned Revenues which is the best way of applying the Matching principle in such cases

So referring to your question, i believe the entry will be:

   Dr.   Land

      Cr.   Unearned revenues (Amortized as per the expected project life or as normal Company's Depreciation useful life pretaining to Lands
by Level 2 Member (4k points)


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