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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?
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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