Ias 20

The Magician
The Magician Feels At HomeRegistered Posts: 96
Hi there,

Hoping someone well versed in IAS 20 Grants can help me, please.

It is actually taken from Osbourne Elearning.

Now, I know that Grants from the government can either be treated as revenue grants to pay wages or capital grants in the purchase, construction or acquisition of long-term assets.

Capital grants can either be credited to a deferred income account or deducted from the cost of the asset. Apparently.


I'm interested in HOW they got to these workings, and what amounts go in the SOCIE and the SOFP, as I cannot find any workings on the Osbourne site and this is really bothering me!


From the following information, indicate the carrying amount of the asset at the end of year 1 under the two accounting treatments.
Information: asset cost £100,000; useful life five years; no residual value; straight-line depreciation; government grant 25 per cent of asset's cost.

a) Accounting treatment: the amount of the grant is treated as a deferred credit.

The answer here was £80,000.

b) Accounting treatment: the assets carrying amount is reduced by the amount of the grant.

The answer here was £60,000.

Thanks very much.

Comments

  • coojee
    coojee Experienced Mentor Registered Posts: 794
    Accounting treatment a)

    Cost 100,000
    Depn 5 years straight line 20,000 per annum
    Carrying value = 80,000

    Accounting treatment b)
    Cost = 100,000
    Deduct grant = 25,000
    Leaves 75,000
    Depn 5 years SL = 15,000 per annum
    Carrying value = 60,000
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