Grant question

Barry Registered Posts: 101 Dedicated contributor 🦉
Hello everyone I just want to ask a quick question about a client I am working on. They are a small limited company and have received a grant to purchase a large item of machinery. What is the best way to account for this grant? I think you can debit bank credit assets but just want to see what anyone else thinks.


  • Paul C
    Paul C Registered Posts: 193 Dedicated contributor 🦉
    Is the grant liable for repayment? There may be specific conditions that need to be met to be able to keep the money. That will affect how you treat it.
  • PGM
    PGM Registered Posts: 1,954 Beyond epic contributor 🧙‍♂️
    If its a grant that doesn't need to be paid back.

    You can put the grant to the same fixed asset account, so as to record the asset at zero cost, or whatever the balance is.

    Or what may be better for presentation.

    Treat the asset as any other asset, hold the grant in another fixed asset account, bringing in the income in relation to depreciation, so in effect they cancel each other out.
  • Steve Collings
    Steve Collings Registered Posts: 997 Epic contributor 🐘

    Any part of the grant that is repayable should be left within creditors. As others have said, best to check the conditions first.

    In terms of accounting for the capital-based grant and assuming your client is a Ltd Co, the Companies Act prohibits you from offsetting the grant against the cost of the asset, therefore you should set up a deferred income account and write it off to the P&L over the life of the asset. If your client is not an incorporated client then you can offset the grant against the cost of the asset.

    Going back to Ltd Co's, SSAP 4 does permit the grant to be offset against the cost of the asset, but it does make reference to Counsel's opinion that 'offsetting' liabilities against assets is prohibited by the Companies Act and therefore does make reference that an incorporated entity adopting such an accounting treatment would be unlawful.

    Kind regards
  • Barry
    Barry Registered Posts: 101 Dedicated contributor 🦉
    Thanks everyone. It's not a repayable grant.

    @Steve my boss checked this out with ICAEW and they said exactly same as you so thanks. :)
Privacy Policy