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Grants as20

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Grants as20

  • This topic has 1 reply, 2 voices, and was last updated 6 years ago by P2-D2.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • May 22, 2019 at 11:20 pm #516932
    aliahmed1994
    Member
    • Topics: 38
    • Replies: 51
    • ☆☆

    Hi Chris.

    Q1: Assuming we are not told which method to use for the grants. Asset reduction or Deferred income. So by default (according to IFRS) we use Deferred income approach and If we get a grant of 50,000 related to assets depreciating within 10 years and we put this as a Credit to Deferred Income in the SOFP. The Debit of 50,000 on the SOFP would be the Bank/Cash?

    Q2: Continuing the example above: 1 year has passed. We have ammortised the Deferred Income by 5000, leaving the 45000 still in the Credit side of SOFP. Now we didn’t meet the govt requirements and now the govt has asked us to repay the grants. The entries would be

    A debit to Retained Earnings by 5000.
    A debit to Deferred Income by 45000.
    And a Credit to Bank/Cash by 50000?

    am I correct? (I’ve already gone through your lectures and practice tests). Just want to confirm since there was no practice question available for the deferred income method.

    May 24, 2019 at 7:30 pm #517204
    P2-D2
    Keymaster
    • Topics: 4
    • Replies: 7171
    • ☆☆☆☆☆

    @aliahmed1994 said:
    Hi Chris.

    Q1: Assuming we are not told which method to use for the grants. Asset reduction or Deferred income. So by default (according to IFRS) we use Deferred income approach and If we get a grant of 50,000 related to assets depreciating within 10 years and we put this as a Credit to Deferred Income in the SOFP. The Debit of 50,000 on the SOFP would be the Bank/Cash?

    Q2: Continuing the example above: 1 year has passed. We have ammortised the Deferred Income by 5000, leaving the 45000 still in the Credit side of SOFP. Now we didn’t meet the govt requirements and now the govt has asked us to repay the grants. The entries would be

    A debit to Retained Earnings by 5000.
    A debit to Deferred Income by 45000.
    And a Credit to Bank/Cash by 50000?

    am I correct? (I’ve already gone through your lectures and practice tests). Just want to confirm since there was no practice question available for the deferred income method.

    Q1. Correct, we’ve received the cash grant

    Q2. Correct, we use the deferred income remaining and then any excess is taken through profit or loss.

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