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Hello sir,
1.I would like to know when we calculate gearing ratio (Debt/Equity), do I need to include government grants in the debt portion??
If yes, it will increase gearing level is it?2. Do we need to repay the government grants ?
3. It is considered as under debt financing right?
Thanks
Again you have posted this for a student response rather than to a relevant tutor.
If you look in the notes – Chapter 5 – a grant is only recognised as such when the entity expects to comply with the conditions attached to it and receive it.
So when it is recognised there can be no liability (otherwise it would not be a grant) and hence it does not affect gearing.A grant related to assets will reduce the cost of the asset in the statement of financial position. A grant related to income (i.e. a grant that is not related to assets) will be included in the statement of profit or loss (either as other income of deducted from the related expense).
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