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As per you mentioned in previous post, amortisation of the grant can be in either 2 ways:
1) is to credit the amt government provided to your company against the NCA and thn the carrying amount will be depreciated
2) is to credit the amt government provided to your company to a deferred income and then depreciation will based on the original amount. Meanwhile, the company need to take a portion of the deferred credit to stmt of profit or loss.May I know the company need to take the whole amount that we have credited to deferred income or just partial amount and recognised in profit and loss ?
May I knw amortisation of government grant is constituted as income or expense?
because once I saw the word “amortisation” my first sense will think that it is expense. However, in this case it seems like it is not an expense. Can explain to me ?Thanks You Sir
If the grant is in relation to an expense (such as employment costs) the full amount will be credited against that expense heading … unless the grant relates to more than one accounting period in which case it will be allocated to the respective periods
If the grant relates to an asset, the choice is either one method or the other but cannot be a mixture of the two methods
The word “amortisation” derives from the French word “mort” meaning “death”
The concept as applied to accounting suggests that the grant will “die” over the time period to which it relates but that clearly doesn’t necessarily mean that it is an expense – government grants are “killed” over the respective accounting periods
Better?
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