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Hi, I was wondering if I could ask for some help in relating to two options below. The original question is as below:
Recognition is the process of including within the financial statements items which meet the definition of an element according to the IASB’s Conceptual Framework for Financial Reporting.
Which of the following items should be recognised as an asset in the statement of financial position of a company?C. A government grant relating to the purchase of an item of plant several years ago, which has a remaining life of four years.
D. A receivable from a customer which has been sold(factored) to a finance company. The finance company has full recourse to the company for an losses.
Thank you very much.
Hi,
The government grant would give rise to deferred income and hence a liability.
The receivable would remain in the books as an asset as it will not have been derecognised when sold as the factor has full recourse. We would just recognise a liability for the money received from the factor on the sale.
Thanks
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