Page 31 - Microsoft Word - 00 IWB ACCA F7.docx

Tangible non-current assets

Example 1

Revenue grant

A company receives a government grant of $6 million on 1 January 20X4 to
keep staff employed within a deprived area. The company must not make
redundancies for the next three years, or the grant is to be repaid in full.

By 31 December 20X4 no redundancies have taken place and none are
planned.

How should the grant be treated in the financial statements for the year
ended 31 December 20X4?

Solution

The grant should be initially recorded as deferred income within liabilities and
released over three years, meaning that $2m is taken to the statement of profit
or loss each year.

This income can be shown as a separate line in the statement of profit or loss or
deducted from wherever staff costs are charged.

As $2m has been released to the statement of profit or loss in 20X4, the
remaining $4m will be held in deferred income, to be recognised over the next
two years. Of this, $2m will be released during 20X5 so will be shown within
current liabilities. The remaining $2m will be shown as a non-current liability.

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