07 In most cases, the periods over which an enterprise recognizes the costs or expenses related to a government grant are readily ascertainable and thus grants in recognition of specific expenses are taken to income in the same period as the relevant expenses. Recognition of Government Grants Government grants available to the enterprise are considered for inclusion in accounts: i Where there is reasonable assurance that the enterprise will comply with the conditions attached to them; and ii. Where such benefits have been earned by the enterprise and it is reasonably certain that the ultimate collection will be made. Mere receipt of a grant is not necessarily conclusive evidence that conditions attaching to the grant have been or will be fulfilled. Non-monetary Government Grants Government grants may take the form of non-monetary assets, such as land or other resources, given at concessional rates. In these circumstances, it is usual to account for such assets at their acquisition cost. Non-monetary assets given free of cost are recorded at a nominal value. Presentation of Grants Related to Specific Fixed Assets Two methods of presentation in financial statements of grants related to specific fixed assets are regarded as acceptable alternatives. Method I : The grant is shown as a deduction from the gross value of the asset concerned in arriving at its book value. The grant is thus recognised in the profit and loss statement over the useful life of a depreciable asset by way of a reduced depreciation charge. Where the grant equals the whole, or virtually the whole of the cost of the asset, the asset is shown in the balance sheet at a nominal value. Illustration 15 Z Ltd. purchased a fixed asset for 750 lakhs, which has the estimated useful life of 5 years with the salvage value of 5,00,000. On purchase of the assets government granted it a grant for 7 10 lakhs. Pass the necessary journal entries in the books of the company for first two years if the grant amount is deducted from the value of fixed asset