Government grant Received is an :- a) Ordinary Item b) Extra Ordinary Item c) Prior Period Item

IAS20 Accounting for Government Grants and Disclosure of Government Assistance outlines how to account for government grants and other assistance. Government grants are recognised in profit or loss on a systematic basis over the periods in which the entity recognises expenses for the related costs for which the grants are intended to compensate, which in the case of grants related to assets requires setting up the grant as deferred income or deducting it from the carrying amount of the asset.

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Prior Period Item

IAS20 doesn't define the government grant specifically with reference to any of the option above, though as per my understanding it may be option (a) because it is defined in IAS it suggests it is normal item so cross to option (b) and as option (c) prior period item grants are recognized in PL over the period of grant so it is not just a prior period item it will continue to have impact. Governments usually provide grants for the businesses it wants to promotes or which helps the government itself to achieve its economic and social targets. e.g helping private hospital to buy equipments by bearing50% of the cost or helping particular industry to grow by offering such costs sharing of equipments. It is important that these cost can only be recognized in books if the conditions attached with the government grant are probable to be met at the time of grant even co. fails to meet the conditions later then it would be dealt under IAS8 as "change in accounting estimate". Hope that answers your question.

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Government grants are assistance by government in cash or kind to an enterprise for past or future compliance with certain conditions. Prior period items are income or expenses which arise in the current period as a result of errors or omissions in the preparation of the financial statements of one or more prior periods.

A government grant is awarded for the purpose of giving immediate financial support to an enterprise rather than as an incentive to undertake specific expenditure. Such grants may be confined to an individual enterprise and may not be available to a whole class of enterprises. These circumstances may warrant taking the grant to income in the period in which the enterprise qualifies to receive it, as an extraordinary item if appropriate. Thus, C) Prior Period Item is the correct option.

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answer is

C)Prior period item

It is an Extra ordinary item