Determine when the grant becomes repayable
Ind AS 20 paragraph 32 requires a government grant that becomes repayable to be accounted for as a change in accounting estimate. Establish the grant terms, relevant breach or repayment trigger and the amount repayable. This focused procedure assumes the original recognition was valid; it does not turn an original recognition error into a change of estimate merely by calling a later entry repayment. Keep any error assessment separate. ICAI Ind AS 20: paragraphs 24, 32, 33 and 39.
For income grants, use the related deferred credit first
Repayment of a grant related to income is applied first against any unamortised deferred credit recognised for that grant. The excess over that credit, or the full repayment where no credit exists, is recognised immediately in profit or loss. Do not offset the repayment against an unrelated scheme's balance simply because both appear under one grant ledger heading. Maintain scheme-level records. ICAI Ind AS 20: paragraphs 24, 32, 33 and 39.
For asset grants, preserve the original presentation route
Paragraph 24 permits deferred-income presentation or deduction in arriving at the asset's carrying amount. Paragraph 32 addresses repayment by reducing the deferred-income balance or increasing the carrying amount of the asset. A journal template must therefore know which presentation was actually used. Do not debit both deferred income and the asset for the same amount. Preserve the link to the affected asset and its depreciation history. ICAI Ind AS 20: paragraphs 24, 32, 33 and 39.
Reproduce the depreciation catch-up where relevant
The cumulative additional depreciation that would have been recognised to date without the grant is recognised immediately in profit or loss. Under the net-asset model, calculate the asset's no-grant carrying amount and compare it with the adjusted balance after the repayment and catch-up entries. The examples assume straight-line depreciation, nil residual value, exact full-year periods and no impairment or other changes. These are explicit calculation assumptions, not default rates prescribed by the standard. ICAI Ind AS 20: paragraphs 24, 32, 33 and 39.
Review impairment and future depreciation separately
Paragraph 33 says circumstances causing repayment of an asset-related grant may require considering impairment of the asset's new carrying amount. A repayment-driven increase is not proof that the enlarged amount is recoverable. After completing the repayment entries and any necessary impairment review, use the appropriate remaining carrying amount and life for future depreciation. Do not replay the same catch-up in every later period. ICAI Ind AS 20: paragraphs 24, 32, 33 and 39.
Keep recognition, payable and cash distinct
Recognise the accounting effect when the grant becomes repayable on the established facts, and reconcile later cash settlement against the payable. The bank debit should not trigger a second expense for an amount already recognised. Keep grant principal separate from interest, penalties or another scheme-specific charge, which need their own legal and accounting assessment. Paragraph 39 also requires the relevant grant policies, nature, extent and unfulfilled conditions or contingencies to be disclosed. ICAI Ind AS 20: paragraphs 24, 32, 33 and 39.
Applicable primary references
ICAI Ind AS 20: paragraphs 24, 32, 33 and 39
Six worked illustrations
All facts and amounts below are fictional. Assumptions describe the model, not additional statutory rules.
Illustrative example 1: Income grant exceeds its deferred credit
Assume ₹12 lakh becomes repayable on an income grant with related unamortised deferred credit ₹5 lakh. Apply ₹5 lakh to that credit and recognise the ₹7 lakh excess immediately in profit or loss. The payable is ₹12 lakh; it is not ₹7 lakh merely because that is the immediate expense.
Illustrative example 2: Income repayment fully covered
Assume ₹3 lakh repayable and ₹8 lakh of related deferred credit. The repayment reduces that credit to ₹5 lakh, with no excess requiring immediate profit-or-loss recognition in this model. Unrelated grant balances are excluded.
Illustrative example 3: No deferred credit remains
Assume an income-grant repayment of ₹6 lakh and no related deferred credit. The full ₹6 lakh is recognised immediately in profit or loss and as a payable before settlement. Payment then clears the payable rather than creating another ₹6 lakh expense.
Illustrative example 4: Net asset presentation and catch-up
Assume asset cost ₹100 lakh, grant ₹20 lakh deducted from the asset, ten-year straight-line life and nil residual value. After two full years, net-method depreciation totals ₹16 lakh and carrying amount is ₹64 lakh. Full grant repayment increases the asset by ₹20 lakh to ₹84 lakh; catch-up depreciation ₹4 lakh reduces it to ₹80 lakh, equal to cost ₹100 lakh less no-grant depreciation ₹20 lakh.
Illustrative example 5: Future depreciation after catch-up
Continue the preceding model with eight years remaining and no impairment or other changes. The ₹80 lakh adjusted carrying amount gives ₹10 lakh annual depreciation. Continuing the old ₹8 lakh charge would understate annual depreciation by ₹2 lakh in this model; the ₹4 lakh historical catch-up is not charged again each year.
Illustrative example 6: Settlement after recognition
Assume a supported grant payable of ₹12 lakh has already been recognised and ₹7 lakh is paid against it. Remaining payable is ₹5 lakh. The ₹7 lakh cash payment does not produce a fresh expense where the corresponding accounting effects have already been recognised.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Establish the repayment trigger | Preserve scheme terms and the relevant determination. |
| 2 | Validate original recognition | Separate a true later repayment from an original error. |
| 3 | Measure the repayable amount | Distinguish grant principal from other charges. |
| 4 | Classify the grant | Identify income-related or asset-related treatment. |
| 5 | Locate related deferred balances | Exclude other schemes' credits. |
| 6 | Confirm asset presentation | Identify deferred-income or net-asset accounting. |
| 7 | Calculate immediate effects | Reconcile credit utilisation and any depreciation catch-up. |
| 8 | Consider impairment | Assess recoverability of the new asset carrying amount where relevant. |
| 9 | Reconcile cash and payable | Avoid expensing the same obligation again on settlement. |
| 10 | Approve future schedules and notes | Update depreciation, grant disclosures and remaining conditions. |
Sixteen practitioner FAQs
1. What does paragraph 32 call a grant becoming repayable?
A change in accounting estimate, subject to the actual facts.
2. Does that wording excuse an original recognition error?
No. Assess a possible original error separately.
3. What is used first for an income-grant repayment?
The related unamortised deferred credit.
4. What happens to the excess?
It is recognised immediately in profit or loss.
5. What if there is no deferred credit?
The repayment is recognised immediately in profit or loss.
6. Can another scheme's credit automatically absorb it?
No. Track the related grant balance.
7. Why does the original asset presentation matter?
Repayment entries differ between deferred income and net-asset presentation.
8. Can the same repayment reduce deferred income and increase the asset in full?
Do not post both routes for the same amount.
9. What depreciation catch-up is relevant?
Cumulative additional depreciation that would have been recognised to date without the grant.
10. Do the models prescribe a ten-year life?
No. It is an explicit illustrative assumption.
11. Does the asset increase prove recoverability?
No. Paragraph 33 calls for considering possible impairment in relevant circumstances.
12. Should catch-up depreciation repeat every future year?
No. Separate the immediate catch-up from future depreciation.
13. Does cash settlement always create a new expense?
No. It may simply clear an already recognised payable.
14. Are penalties automatically part of grant principal?
No. Review their legal and accounting treatment separately.
15. Are the examples a tax computation?
No. They isolate the stated accounting entries.
16. What should the reviewer reconcile?
Repayment trigger and amount, related balances, presentation route, immediate entries, impairment review and final settlement.
Conclusion
A grant becoming repayable requires the paragraph 32 working, not simply a reversal of every historical entry. Separate income grants, asset presentation, immediate effects and cash settlement.