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Hi dear tutors, I have some questions
Extract from NOTE (ii)
(ii) The details of the property, plant and equipment are:
During the year Tabba sold its factory for its fair value $12m. At the date of sale it had a carrying value of $7.4m based on a previous revaluation to $8.6m less depreciation of $1.2m since the revaluation. The profit on the sale of the factory has been included in operating profit. The revaluation surplus related entirely to the factory. No other disposals of non-current assets were made during the year.
Plant acquired under leases during the year gave rise to right-of-use assets of $1.5m.
Other purchases of plant during the year qualified for government grants of $950,000.
Amortisation of government grants has been credited to cost of sales.Question:
How we can calculate “Amortisation of government grants”?. What does mean “release of grant” ?
Does “Amortisation of government grants” = “release of grant” ?Please help me to understand these issues.
Hi,
When the grant is initially recognised it will be shown as deferred income. This deferred income is then released over the life of the asset which has been purchased using the grant received. The release of the deferred income through profit or loss is the amortisation of the government grant.
So, if the grant was $100,000 and the life 10 years then $10,000 is released through profit or loss each period.
Thanks
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