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capital grant

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › capital grant

  • This topic has 1 reply, 2 voices, and was last updated 3 years ago by Stephen Widberg.
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  • July 28, 2021 at 12:44 pm #629667
    Jiya024
    Member
    • Topics: 168
    • Replies: 56
    • ☆☆☆

    Professor there are 2 methods for recognition of Capital Grant,

    method 1:deferred income method and
    method 2: the method in which the carrying amount of the asset is reduced,

    in which of the two methods is the gearing higher?

    July 28, 2021 at 5:30 pm #629690
    Stephen Widberg
    Keymaster
    • Topics: 16
    • Replies: 3411
    • ☆☆☆☆☆

    If debt is only ‘interest bearing’ as it should be, then assets would be lower under method 2, so gearing would be higher.

    Method 1, as stated above, the deferred income would not be treated as debt.

    That’s my best guess, but, in practice, you may be able to think of numbers that may send it off in a different direction!

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