IAS 20 Government Grants

I am not entirely sure what you mean by capital approach. There are basically two ways ,of which I am familiar, of handling the recognition of government grants under IAS 20 (in terms of grants relating to capital expenditure).The carrying amount of the asset could be reduced by the amount of the grant and this would result in the depreciation charges being lower than they otherwise would have been. In your example $1,600 per year lower; assuming a straight line depreciation approach is taken. Alternatively a deferred income credit could be established. In this approach the income statement would be credited by $1,600 as the deferred income account would be reduced by $1,600 as benefit of government grant is matched with economic consumption cost of the computer being utilised (again assuming straight line depreciation over five years).In either case the economic benefit to the organisation of the government grant related to the asset will be recognised in the financial statements.