ACCA FR · Chapter 2 · Question 7 of 11
Under IAS 20 Accounting for Government Grants, how may a grant related to the purchase of an asset be presented?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Either as deferred income released over the asset's life, or by deducting it from the asset's carrying amount
Explanation
IAS 20 allows two presentations for grants related to assets: set the grant up as deferred income and recognise it in profit or loss over the asset's useful life, or deduct it from the asset's carrying amount, which reduces depreciation. Either way, the grant is recognised in profit or loss as the asset is depreciated. Crediting the grant straight to equity is not allowed.
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