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Government grant

Forums › ACCA Forums › ACCA FR Financial Reporting Forums › Government grant

  • This topic has 1 reply, 2 voices, and was last updated 6 years ago by Kim Smith.
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  • April 5, 2019 at 4:31 pm #511318
    chinny98
    Member
    • Topics: 30
    • Replies: 16
    • ☆

    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

    April 5, 2019 at 6:18 pm #511321
    Kim Smith
    Keymaster
    • Topics: 135
    • Replies: 8322
    • ☆☆☆☆☆

    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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