government grants

Recognition

Recognise when REASONABLE assurance conditions will be complied with and grants will be received

Grants relating to income

Either relates to income or expenses

Can either present as income or offset against the expense

In the operating section.

Always release grant over the useful life (eg 60k towards 5 years of accountant, defer 48k & release £12k per year)

Grants for assets

SOFP either

1) as deferred income and released to P&L over asset useful life

2) deducting grant in calculating CA of asset eg DR bank, CR deferred income/ Cr asset ca

Grants for non- depn assets

Recognise as income (operating) over the periods in which the cost of meeting the obligation is incurred eg

Land granted on condition building erected on it, recognise income from grant over useful life of building

Repayment of grants - read exam q… ask for current or non- current portion!

Income grants

• first unreleased deferred credit, then P&L

Asset grants

• increase CA or reduce deferred income balance. Resultant extra cumulative depn recognised in P&L immediately (what would have been shown had you not recd the grant?)