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Hi All,
For my knowledge, if a company wants to make an investment using only money received from a governmental grant , should this income be reflected in the DCF (Discounted Cash Flow)? if so, how should this income of money be reflected? This income being the total cost of the investment, with no obligations to pay back the grant.
Hope you can help me in my query.
Thank you,
MihaelaThink it should be deducted from Initial Investment then. As in case govt gives allowance on purchase of machine or Investment. But I’m not sure
it first depends on the method of accounting you wish to use. If you want to expense the grant immediately, say on purchase of an asset which was a condition on the granting of the grant, then you write it off immediately when you purchase the asset. Alternatively if you wish to recognize the grant as income, say the grant is to fund your payroll over a given period or to purchase an asset, you recognize the grant immediately by debiting the bank account and crediting the deferred grant income account, then over the course of the period you reduce your bank balance whilst writing off the deferred income. by recognizing it in bank you are actually incorporating it under the cash and cash equivalents.
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