Asset Management

Accounting treatment of grants income related to depreciable assets

  • 1.  Accounting treatment of grants income related to depreciable assets

    Posted 22 May 2019 17:40

    According to AASB120, are we treating the grants related to depreciable assets are usually recognised in profit or loss over the periods and in the proportions in which depreciation expense on those assets is recognised?

    If not, when it comes to the cost of spending (depreciation) the ratepayer picks up the bill for the life of the asset.





    ------------------------------
    Regards
    Vivek
    ------------------------------
    BlogPageSpacerBlank


  • 2.  RE: Accounting treatment of grants income related to depreciable assets

    Posted 14 days ago
    Vivek,

    Interesting topic/ highly specialised accounting / finacial reporting treatment, I guess.....

    Standard clarifies as below, but I dont believe any Asset Register/ Financial System can treat an asset - as per item 26 or 27 from AASB 120 (funded partially or fully by grant $ differently to Fair value method), it can be adjusted manually, it may not be a common practice? or it happens with special accoutning adjustment/ line item perhaps?

    Presentation of grants related to assets
    24 Government grants related to assets, including non-monetary grants at fair value, shall be presented in the statement of financial position either by setting up the grant as deferred income or by deducting the grant in arriving at the carrying amount of the asset.
    25 Two methods of presentation in financial statements of grants (or the appropriate portions of grants) related to assets are regarded as acceptable alternatives.
    26 One method recognises the grant as deferred income that is recognised in profit or loss on a systematic basis over the useful life of the asset.
    27 The other method deducts the grant in calculating the carrying amount of the asset. The grant is recognisedin profit or loss over the life of a depreciable asset as a reduced depreciation expense.
    28 The purchase of assets and the receipt of related grants can cause major movements in the cash flow of an entity. For this reason and in order to show the gross investment in assets, such movements are often disclosed as separate items in the statement of cash flows regardless of whether or not the grant is deducted
    from the related asset for presentation purposes in the statement of financial position.


    ------------------------------
    Ashish Shah
    Program Leader - Road Asset Management
    M:04 33 205 395
    E: ashishshah@logan.qld.gov.au
    Logan City Council
    Logan Central QLD
    ------------------------------

    BlogPageSpacerBlank