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Hello Sir, the following sentence is extracted from the bpp textbook regarded to Repayment of a grant related to an asset:
“The cumulative additional depreciation that would have been recognised to date in the absence of the grant should be immediately recognised
as an expense.”What is that mean?is it mean the additional depreciation incurred after the grant is repaid?or the retrospect depreciation(additional) should be charged?
Thank you.Hi,
Yes, it involves the rarely used netting off method whereby the depreciation charge is lower due to the lower net cost. Therefore on repayment of the grant where we credit the bank the other side of the entry is to record the depreciation that would have been charged if we hadn’t have netted off the initial grant received.
I doubt that you would see this too often in the exam however.
Thanks
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