IAS 20Workpapers (Step 4 of 5)

Workpaper template

Step 4 of 5

WorkpaperIAS 20 — Accounting for Government Grants and Disclosure of Government AssistanceL2 · L3 · L4

Asset grant file: presentation, release and effect on profit or loss

4 missions10 sections to document60 min

Prepared by: AI-assisted draft
Reviewed by: Not reviewed — human review required
Status: Published

Objective of the workpaper

For each asset financed in part by a grant (one instance per asset or per presentation), enter the cost, the grant, the useful life and the gross depreciation of the IAS 16 baseline, then compute the annual release (deferred income), the net cost and the reduced depreciation (deduction) and compare the net effect on profit or loss. An asset received as a grant is handled separately (fair value and consideration paid). Justify the presentation chosen: the choice is open to the entity and no amount imposes it.

10 sections · 37 blocks · 7 calculations · 6 entries

IAS 20 §12
IAS 20 §23
IAS 20 §24
IAS 20 §26
IAS 20 §27
IAS 20 §28
IAS 20 §39

Work this workpaper as a mission

Each case that uses this template opens in the mission workspace: data, analysis, calculation, entries, conclusion and review, with your progress saved.

4 instances from the cases: the calculations and entries below are run by the calculation engine.

File and entity

Equipment grant: deferred income or deduction from the carrying amount

Case tasks documented here

Compute the annual release of deferred income.
Compute the cost of the machine net of the grant.
Compute the annual depreciation on the net cost.
Compute the difference in net effect on profit or loss between the two presentations.
Record the grant and the depreciation with deferred income.
Record the grant and the depreciation with the deduction.

Inputs

Grant and asset: nature, agreement and conditions
Text
SUBVENTION_MACHINE_PRODUIT_DIFFERE
Cost of the asset (before the grant)
Number
500,000
Amount of the grant related to the asset
Number
100,000
Residual value of the asset
Number
0
Useful life of the asset (years)
Number
10 years
Part of the grant not released at the end of the life (normally 0)
Number
0
Gross annual depreciation of the asset (IAS 16 baseline, before any effect of the grant)
Number
50,000
Opening deferred income
Number
Grants received during the period
Number
Releases to profit or loss for the period
Number
Repayments applied against deferred income
Number
Reported closing deferred income
Number
Fair value of the asset received (appraiser data)
Number
Consideration, if any, paid for the asset received
Number

Supporting evidence

Evidence

Evidence obtained and referenced (category, document reference)
EvidenceRequired

Analysis

IAS 20 §12IAS 20 §23IAS 20 §24IAS 20 §26IAS 20 §27

Points reviewed: method, release basis, deduction, IAS 16 baseline
ChecklistRequired
- Method explicitly chosen and applied consistently
- Deferred income released on a systematic basis
- Deduction from the carrying amount and reduced depreciation checked
- IAS 16 baseline (cost, depreciation) used unchanged

Calculations

IAS 20 §12IAS 20 §23IAS 20 §24IAS 20 §26IAS 20 §27

Annual release of deferred income
Calculation
10,000
Amount of the grant related to the asset ; Part of the grant not released at the end of the life (normally 0) ; Useful life of the asset (years)
Net cost of the asset = cost − grant deducted
Calculation
400,000
Cost of the asset (before the grant) ; − Amount of the grant related to the asset
Annual depreciation on the net cost
Calculation
40,000
Net cost of the asset = cost − grant deducted ; Residual value of the asset ; Useful life of the asset (years)
Difference in net effect on profit or loss between the two presentations
Calculation
0
Gross annual depreciation of the asset (IAS 16 baseline, before any effect of the grant) ; − Annual release of deferred income ; − Annual depreciation on the net cost
Closing deferred income rebuilt
Calculation
Opening deferred income ; Reported closing deferred income ; Grants received during the period ; − Releases to profit or loss for the period ; − Repayments applied against deferred income
Deferred income reconciliation difference
Calculation
Opening deferred income ; Reported closing deferred income ; Grants received during the period ; − Releases to profit or loss for the period ; − Repayments applied against deferred income
Value of the grant in an asset received = fair value − consideration paid
Calculation
0
Fair value of the asset received (appraiser data) ; − Consideration, if any, paid for the asset received

Journal entries

Entries

Receipt of the grant, presented as deferred income
Entry
Account Debit Credit
Cash 100,000
Deferred income 100,000
Annual release of deferred income to profit or loss
Entry
Account Debit Credit
Deferred income 10,000
Grant income 10,000
Receipt of the grant, deducted from the carrying amount of the asset
Entry
Account Debit Credit
Cash 100,000
Property, plant and equipment 100,000
Depreciation on the cost net of the grant
Entry
Account Debit Credit
Depreciation expense 40,000
Accumulated depreciation 40,000
Gross depreciation (deferred income presentation)
Entry
Account Debit Credit
Depreciation expense 50,000
Accumulated depreciation 50,000
Asset received as a grant, recognised at fair value
Entry
Debit Property, plant and equipment ← Fair value of the asset received (appraiser data) ; Credit Cash ← Consideration, if any, paid for the asset received ; Credit Deferred income ← Value of the grant in an asset received = fair value − consideration paid

Account	Debit	Credit
Cash	100,000
Deferred income		100,000

Account	Debit	Credit
Deferred income	10,000
Grant income		10,000

Account	Debit	Credit
Cash	100,000
Property, plant and equipment		100,000

Account	Debit	Credit
Depreciation expense	40,000
Accumulated depreciation		40,000

Account	Debit	Credit
Depreciation expense	50,000
Accumulated depreciation		50,000

Judgements

Judgment

IAS 20 §12IAS 20 §23IAS 20 §24IAS 20 §26IAS 20 §27

Presentation chosen for the grant
JudgmentRequired
Deferred income
Deferred income / Deduction from the carrying amount
Rule and cross-reference: a grant related to an asset is presented either as deferred income or as a deduction from the carrying amount of the asset (IAS 20, para. 24); the method is a choice allowed by the standard, not an amount it imposes.
Rationale: method chosen, consistency with the entity's policy
TextRequired
Measurement basis of an asset received as a grant
JudgmentRequired
Fair value / Nominal amount
Rule and cross-reference: a non-monetary asset received as a grant is recognised at its fair value, or at a nominal amount for both the asset and the grant (IAS 20, para. 23).
Rationale: source of the fair value or reason for a nominal amount
TextRequired

Conclusion

Presentation, effect on cost, depreciation and profit or loss submitted to the reviewer
ConclusionRequired

Effect on the financial statements

FS impact

Effect of the entries, line by line (derived from the entries)
Table

Disclosures

Disclosure

IAS 20 §28IAS 20 §39

Disclosures: policy and cash flows
ChecklistRequired
- Accounting policy and presentation of the grant stated
- Presentation of the grant in the statement of cash flows checked

Normative references

References

Paragraphs cited in this workpaper and their verification status
References

Checks and financial statement impact

Presentation of the grant documentedPass
Deferred income entry balancedPass
Deduction entry balancedPass

Assets: 10,000
Liabilities: 90,000
Profit or loss: -80,000
OCI: 0
Equity: -80,000

File and entity

Equipment grant: deferred income or deduction from the carrying amount

Case tasks documented here

Compute the annual release of deferred income.
Compute the cost of the machine net of the grant.
Compute the annual depreciation on the net cost.
Compute the difference in net effect on profit or loss between the two presentations.
Record the grant and the depreciation with deferred income.
Record the grant and the depreciation with the deduction.

Inputs

Grant and asset: nature, agreement and conditions
Text
SUBVENTION_MACHINE_DEDUITE_DE_LA_VALEUR_COMPTABLE
Cost of the asset (before the grant)
Number
500,000
Amount of the grant related to the asset
Number
100,000
Residual value of the asset
Number
0
Useful life of the asset (years)
Number
10 years
Part of the grant not released at the end of the life (normally 0)
Number
Gross annual depreciation of the asset (IAS 16 baseline, before any effect of the grant)
Number
Opening deferred income
Number
Grants received during the period
Number
Releases to profit or loss for the period
Number
Repayments applied against deferred income
Number
Reported closing deferred income
Number
Fair value of the asset received (appraiser data)
Number
Consideration, if any, paid for the asset received
Number

Supporting evidence

Evidence

Evidence obtained and referenced (category, document reference)
EvidenceRequired

Analysis

IAS 20 §12IAS 20 §23IAS 20 §24IAS 20 §26IAS 20 §27

Points reviewed: method, release basis, deduction, IAS 16 baseline
ChecklistRequired
- Method explicitly chosen and applied consistently
- Deferred income released on a systematic basis
- Deduction from the carrying amount and reduced depreciation checked
- IAS 16 baseline (cost, depreciation) used unchanged

Calculations

IAS 20 §12IAS 20 §23IAS 20 §24IAS 20 §26IAS 20 §27

Annual release of deferred income
Calculation
Amount of the grant related to the asset ; Part of the grant not released at the end of the life (normally 0) ; Useful life of the asset (years)
Net cost of the asset = cost − grant deducted
Calculation
400,000
Cost of the asset (before the grant) ; − Amount of the grant related to the asset
Annual depreciation on the net cost
Calculation
40,000
Net cost of the asset = cost − grant deducted ; Residual value of the asset ; Useful life of the asset (years)
Difference in net effect on profit or loss between the two presentations
Calculation
-40,000
Gross annual depreciation of the asset (IAS 16 baseline, before any effect of the grant) ; − Annual release of deferred income ; − Annual depreciation on the net cost
Closing deferred income rebuilt
Calculation
Opening deferred income ; Reported closing deferred income ; Grants received during the period ; − Releases to profit or loss for the period ; − Repayments applied against deferred income
Deferred income reconciliation difference
Calculation
Opening deferred income ; Reported closing deferred income ; Grants received during the period ; − Releases to profit or loss for the period ; − Repayments applied against deferred income
Value of the grant in an asset received = fair value − consideration paid
Calculation
0
Fair value of the asset received (appraiser data) ; − Consideration, if any, paid for the asset received

Journal entries

Entries

Receipt of the grant, presented as deferred income
Entry
Account Debit Credit
Cash 100,000
Deferred income 100,000
Annual release of deferred income to profit or loss
Entry
Debit Deferred income ← Annual release of deferred income ; Credit Grant income ← Annual release of deferred income
Receipt of the grant, deducted from the carrying amount of the asset
Entry
Account Debit Credit
Cash 100,000
Property, plant and equipment 100,000
Depreciation on the cost net of the grant
Entry
Account Debit Credit
Depreciation expense 40,000
Accumulated depreciation 40,000
Gross depreciation (deferred income presentation)
Entry
Debit Depreciation expense ← Gross annual depreciation of the asset (IAS 16 baseline, before any effect of the grant) ; Credit Accumulated depreciation ← Gross annual depreciation of the asset (IAS 16 baseline, before any effect of the grant)
Asset received as a grant, recognised at fair value
Entry
Debit Property, plant and equipment ← Fair value of the asset received (appraiser data) ; Credit Cash ← Consideration, if any, paid for the asset received ; Credit Deferred income ← Value of the grant in an asset received = fair value − consideration paid

Account	Debit	Credit
Cash	100,000
Deferred income		100,000

Account	Debit	Credit
Cash	100,000
Property, plant and equipment		100,000

Account	Debit	Credit
Depreciation expense	40,000
Accumulated depreciation		40,000

Judgements

Judgment

IAS 20 §12IAS 20 §23IAS 20 §24IAS 20 §26IAS 20 §27

Presentation chosen for the grant
JudgmentRequired
Deduction from the carrying amount
Deferred income / Deduction from the carrying amount
Rule and cross-reference: a grant related to an asset is presented either as deferred income or as a deduction from the carrying amount of the asset (IAS 20, para. 24); the method is a choice allowed by the standard, not an amount it imposes.
Rationale: method chosen, consistency with the entity's policy
TextRequired
Measurement basis of an asset received as a grant
JudgmentRequired
Fair value / Nominal amount
Rule and cross-reference: a non-monetary asset received as a grant is recognised at its fair value, or at a nominal amount for both the asset and the grant (IAS 20, para. 23).
Rationale: source of the fair value or reason for a nominal amount
TextRequired

Conclusion

Presentation, effect on cost, depreciation and profit or loss submitted to the reviewer
ConclusionRequired

Effect on the financial statements

FS impact

Effect of the entries, line by line (derived from the entries)
Table

Disclosures

Disclosure

IAS 20 §28IAS 20 §39

Disclosures: policy and cash flows
ChecklistRequired
- Accounting policy and presentation of the grant stated
- Presentation of the grant in the statement of cash flows checked

Normative references

References

Paragraphs cited in this workpaper and their verification status
References

Checks and financial statement impact

Presentation of the grant documentedPass
Deferred income entry balancedPass
Deduction entry balancedPass

Assets: 60,000
Liabilities: 100,000
Profit or loss: -40,000
OCI: 0
Equity: -40,000

File and entity

Income grant and asset received free of charge: matching to costs and fair value

Case tasks documented here

Compute the value of the grant received in the form of an asset.
Record the three forms of support.

Inputs

Grant and asset: nature, agreement and conditions
Text
ENTREPOT_CEDE_PAR_UNE_COMMUNE
Cost of the asset (before the grant)
Number
Amount of the grant related to the asset
Number
Residual value of the asset
Number
Useful life of the asset (years)
Number
Part of the grant not released at the end of the life (normally 0)
Number
Gross annual depreciation of the asset (IAS 16 baseline, before any effect of the grant)
Number
Opening deferred income
Number
Grants received during the period
Number
Releases to profit or loss for the period
Number
Repayments applied against deferred income
Number
Reported closing deferred income
Number
Fair value of the asset received (appraiser data)
Number
80,000
Consideration, if any, paid for the asset received
Number
20,000

Supporting evidence

Evidence

Evidence obtained and referenced (category, document reference)
EvidenceRequired

Analysis

IAS 20 §12IAS 20 §23IAS 20 §24IAS 20 §26IAS 20 §27

Points reviewed: method, release basis, deduction, IAS 16 baseline
ChecklistRequired
- Method explicitly chosen and applied consistently
- Deferred income released on a systematic basis
- Deduction from the carrying amount and reduced depreciation checked
- IAS 16 baseline (cost, depreciation) used unchanged

Calculations

IAS 20 §12IAS 20 §23IAS 20 §24IAS 20 §26IAS 20 §27

Annual release of deferred income
Calculation
Amount of the grant related to the asset ; Part of the grant not released at the end of the life (normally 0) ; Useful life of the asset (years)
Net cost of the asset = cost − grant deducted
Calculation
0
Cost of the asset (before the grant) ; − Amount of the grant related to the asset
Annual depreciation on the net cost
Calculation
Net cost of the asset = cost − grant deducted ; Residual value of the asset ; Useful life of the asset (years)
Difference in net effect on profit or loss between the two presentations
Calculation
0
Gross annual depreciation of the asset (IAS 16 baseline, before any effect of the grant) ; − Annual release of deferred income ; − Annual depreciation on the net cost
Closing deferred income rebuilt
Calculation
Opening deferred income ; Reported closing deferred income ; Grants received during the period ; − Releases to profit or loss for the period ; − Repayments applied against deferred income
Deferred income reconciliation difference
Calculation
Opening deferred income ; Reported closing deferred income ; Grants received during the period ; − Releases to profit or loss for the period ; − Repayments applied against deferred income
Value of the grant in an asset received = fair value − consideration paid
Calculation
60,000
Fair value of the asset received (appraiser data) ; − Consideration, if any, paid for the asset received

Journal entries

Entries

Receipt of the grant, presented as deferred income
Entry
Debit Cash ← Amount of the grant related to the asset ; Credit Deferred income ← Amount of the grant related to the asset
Annual release of deferred income to profit or loss
Entry
Debit Deferred income ← Annual release of deferred income ; Credit Grant income ← Annual release of deferred income
Receipt of the grant, deducted from the carrying amount of the asset
Entry
Debit Cash ← Amount of the grant related to the asset ; Credit Property, plant and equipment ← Amount of the grant related to the asset
Depreciation on the cost net of the grant
Entry
Debit Depreciation expense ← Annual depreciation on the net cost ; Credit Accumulated depreciation ← Annual depreciation on the net cost
Gross depreciation (deferred income presentation)
Entry
Debit Depreciation expense ← Gross annual depreciation of the asset (IAS 16 baseline, before any effect of the grant) ; Credit Accumulated depreciation ← Gross annual depreciation of the asset (IAS 16 baseline, before any effect of the grant)
Asset received as a grant, recognised at fair value
Entry
Account Debit Credit
Property, plant and equipment 80,000
Cash 20,000
Deferred income 60,000

Account	Debit	Credit
Property, plant and equipment	80,000
Cash		20,000
Deferred income		60,000

Judgements

Judgment

IAS 20 §12IAS 20 §23IAS 20 §24IAS 20 §26IAS 20 §27

Presentation chosen for the grant
JudgmentRequired
Deferred income / Deduction from the carrying amount
Rule and cross-reference: a grant related to an asset is presented either as deferred income or as a deduction from the carrying amount of the asset (IAS 20, para. 24); the method is a choice allowed by the standard, not an amount it imposes.
Rationale: method chosen, consistency with the entity's policy
TextRequired
Measurement basis of an asset received as a grant
JudgmentRequired
Fair value
Fair value / Nominal amount
Rule and cross-reference: a non-monetary asset received as a grant is recognised at its fair value, or at a nominal amount for both the asset and the grant (IAS 20, para. 23).
Rationale: source of the fair value or reason for a nominal amount
TextRequired

Conclusion

Presentation, effect on cost, depreciation and profit or loss submitted to the reviewer
ConclusionRequired

Effect on the financial statements

FS impact

Effect of the entries, line by line (derived from the entries)
Table

Disclosures

Disclosure

IAS 20 §28IAS 20 §39

Disclosures: policy and cash flows
ChecklistRequired
- Accounting policy and presentation of the grant stated
- Presentation of the grant in the statement of cash flows checked

Normative references

References

Paragraphs cited in this workpaper and their verification status
References

Checks and financial statement impact

Presentation of the grant documentedNot filled in this instance
Deferred income entry balancedNot evaluated
Deduction entry balancedNot evaluated

Assets: 60,000
Liabilities: 60,000
Profit or loss: 0
OCI: 0
Equity: 0

File and entity

Government grants file: recognition, presentation, repayment and below-market government loan

Case tasks documented here

Compute the annual release of the deferred income of B.
Compute the cost of B net of the grant.
Compute the annual depreciation of B on the net cost.
Compute the difference in net effect on profit or loss between the two presentations of B.
Which presentation should be adopted for grant B? Justify.
Record the four forms of support.

Inputs

Grant and asset: nature, agreement and conditions
Text
SUBVENTION_DE_LA_MACHINE_DE_TISSAGE
Cost of the asset (before the grant)
Number
600,000
Amount of the grant related to the asset
Number
120,000
Residual value of the asset
Number
0
Useful life of the asset (years)
Number
8 years
Part of the grant not released at the end of the life (normally 0)
Number
0
Gross annual depreciation of the asset (IAS 16 baseline, before any effect of the grant)
Number
75,000
Opening deferred income
Number
Grants received during the period
Number
Releases to profit or loss for the period
Number
Repayments applied against deferred income
Number
Reported closing deferred income
Number
Fair value of the asset received (appraiser data)
Number
Consideration, if any, paid for the asset received
Number

Supporting evidence

Evidence

Evidence obtained and referenced (category, document reference)
EvidenceRequired

Analysis

IAS 20 §12IAS 20 §23IAS 20 §24IAS 20 §26IAS 20 §27

Points reviewed: method, release basis, deduction, IAS 16 baseline
ChecklistRequired
- Method explicitly chosen and applied consistently
- Deferred income released on a systematic basis
- Deduction from the carrying amount and reduced depreciation checked
- IAS 16 baseline (cost, depreciation) used unchanged

Calculations

IAS 20 §12IAS 20 §23IAS 20 §24IAS 20 §26IAS 20 §27

Annual release of deferred income
Calculation
15,000
Amount of the grant related to the asset ; Part of the grant not released at the end of the life (normally 0) ; Useful life of the asset (years)
Net cost of the asset = cost − grant deducted
Calculation
480,000
Cost of the asset (before the grant) ; − Amount of the grant related to the asset
Annual depreciation on the net cost
Calculation
60,000
Net cost of the asset = cost − grant deducted ; Residual value of the asset ; Useful life of the asset (years)
Difference in net effect on profit or loss between the two presentations
Calculation
0
Gross annual depreciation of the asset (IAS 16 baseline, before any effect of the grant) ; − Annual release of deferred income ; − Annual depreciation on the net cost
Closing deferred income rebuilt
Calculation
Opening deferred income ; Reported closing deferred income ; Grants received during the period ; − Releases to profit or loss for the period ; − Repayments applied against deferred income
Deferred income reconciliation difference
Calculation
Opening deferred income ; Reported closing deferred income ; Grants received during the period ; − Releases to profit or loss for the period ; − Repayments applied against deferred income
Value of the grant in an asset received = fair value − consideration paid
Calculation
0
Fair value of the asset received (appraiser data) ; − Consideration, if any, paid for the asset received

Journal entries

Entries

Receipt of the grant, presented as deferred income
Entry
Account Debit Credit
Cash 120,000
Deferred income 120,000
Annual release of deferred income to profit or loss
Entry
Account Debit Credit
Deferred income 15,000
Grant income 15,000
Receipt of the grant, deducted from the carrying amount of the asset
Entry
Account Debit Credit
Cash 120,000
Property, plant and equipment 120,000
Depreciation on the cost net of the grant
Entry
Account Debit Credit
Depreciation expense 60,000
Accumulated depreciation 60,000
Gross depreciation (deferred income presentation)
Entry
Account Debit Credit
Depreciation expense 75,000
Accumulated depreciation 75,000
Asset received as a grant, recognised at fair value
Entry
Debit Property, plant and equipment ← Fair value of the asset received (appraiser data) ; Credit Cash ← Consideration, if any, paid for the asset received ; Credit Deferred income ← Value of the grant in an asset received = fair value − consideration paid

Account	Debit	Credit
Cash	120,000
Deferred income		120,000

Account	Debit	Credit
Deferred income	15,000
Grant income		15,000

Account	Debit	Credit
Cash	120,000
Property, plant and equipment		120,000

Account	Debit	Credit
Depreciation expense	60,000
Accumulated depreciation		60,000

Account	Debit	Credit
Depreciation expense	75,000
Accumulated depreciation		75,000

Judgements

Judgment

IAS 20 §12IAS 20 §23IAS 20 §24IAS 20 §26IAS 20 §27

Presentation chosen for the grant
JudgmentRequired
Deferred income
Deferred income / Deduction from the carrying amount
Rule and cross-reference: a grant related to an asset is presented either as deferred income or as a deduction from the carrying amount of the asset (IAS 20, para. 24); the method is a choice allowed by the standard, not an amount it imposes.
Rationale: method chosen, consistency with the entity's policy
TextRequired
Measurement basis of an asset received as a grant
JudgmentRequired
Fair value / Nominal amount
Rule and cross-reference: a non-monetary asset received as a grant is recognised at its fair value, or at a nominal amount for both the asset and the grant (IAS 20, para. 23).
Rationale: source of the fair value or reason for a nominal amount
TextRequired

Conclusion

Presentation, effect on cost, depreciation and profit or loss submitted to the reviewer
ConclusionRequired

Effect on the financial statements

FS impact

Effect of the entries, line by line (derived from the entries)
Table

Disclosures

Disclosure

IAS 20 §28IAS 20 §39

Disclosures: policy and cash flows
ChecklistRequired
- Accounting policy and presentation of the grant stated
- Presentation of the grant in the statement of cash flows checked

Normative references

References

Paragraphs cited in this workpaper and their verification status
References

Checks and financial statement impact

Presentation of the grant documentedPass
Deferred income entry balancedPass
Deduction entry balancedPass

Assets: -15,000
Liabilities: 105,000
Profit or loss: -120,000
OCI: 0
Equity: -120,000

Inputs

Grant and asset: nature, agreement and conditions
Text
Cost of the asset (before the grant)
Number
Amount of the grant related to the asset
Number
Residual value of the asset
Number
Useful life of the asset (years)
Number
Part of the grant not released at the end of the life (normally 0)
Number
Gross annual depreciation of the asset (IAS 16 baseline, before any effect of the grant)
Number
Opening deferred income
Number
Grants received during the period
Number
Releases to profit or loss for the period
Number
Repayments applied against deferred income
Number
Reported closing deferred income
Number
Fair value of the asset received (appraiser data)
Number
Consideration, if any, paid for the asset received
Number

Supporting evidence

Evidence

Evidence obtained and referenced (category, document reference)
EvidenceRequired

Analysis

IAS 20 §12IAS 20 §23IAS 20 §24IAS 20 §26IAS 20 §27

Points reviewed: method, release basis, deduction, IAS 16 baseline
ChecklistRequired
- Method explicitly chosen and applied consistently
- Deferred income released on a systematic basis
- Deduction from the carrying amount and reduced depreciation checked
- IAS 16 baseline (cost, depreciation) used unchanged

Calculations

IAS 20 §12IAS 20 §23IAS 20 §24IAS 20 §26IAS 20 §27

Annual release of deferred income
Calculation
Amount of the grant related to the asset ; Part of the grant not released at the end of the life (normally 0) ; Useful life of the asset (years)
Net cost of the asset = cost − grant deducted
Calculation
Cost of the asset (before the grant) ; − Amount of the grant related to the asset
Annual depreciation on the net cost
Calculation
Net cost of the asset = cost − grant deducted ; Residual value of the asset ; Useful life of the asset (years)
Difference in net effect on profit or loss between the two presentations
Calculation
Gross annual depreciation of the asset (IAS 16 baseline, before any effect of the grant) ; − Annual release of deferred income ; − Annual depreciation on the net cost
Closing deferred income rebuilt
Calculation
Opening deferred income ; Reported closing deferred income ; Grants received during the period ; − Releases to profit or loss for the period ; − Repayments applied against deferred income
Deferred income reconciliation difference
Calculation
Opening deferred income ; Reported closing deferred income ; Grants received during the period ; − Releases to profit or loss for the period ; − Repayments applied against deferred income
Value of the grant in an asset received = fair value − consideration paid
Calculation
Fair value of the asset received (appraiser data) ; − Consideration, if any, paid for the asset received

Journal entries

Entries

Receipt of the grant, presented as deferred income
Entry
Debit Cash ← Amount of the grant related to the asset ; Credit Deferred income ← Amount of the grant related to the asset
Annual release of deferred income to profit or loss
Entry
Debit Deferred income ← Annual release of deferred income ; Credit Grant income ← Annual release of deferred income
Receipt of the grant, deducted from the carrying amount of the asset
Entry
Debit Cash ← Amount of the grant related to the asset ; Credit Property, plant and equipment ← Amount of the grant related to the asset
Depreciation on the cost net of the grant
Entry
Debit Depreciation expense ← Annual depreciation on the net cost ; Credit Accumulated depreciation ← Annual depreciation on the net cost
Gross depreciation (deferred income presentation)
Entry
Debit Depreciation expense ← Gross annual depreciation of the asset (IAS 16 baseline, before any effect of the grant) ; Credit Accumulated depreciation ← Gross annual depreciation of the asset (IAS 16 baseline, before any effect of the grant)
Asset received as a grant, recognised at fair value
Entry
Debit Property, plant and equipment ← Fair value of the asset received (appraiser data) ; Credit Cash ← Consideration, if any, paid for the asset received ; Credit Deferred income ← Value of the grant in an asset received = fair value − consideration paid

Judgements

Judgment

IAS 20 §12IAS 20 §23IAS 20 §24IAS 20 §26IAS 20 §27

Presentation chosen for the grant
JudgmentRequired
Deferred income / Deduction from the carrying amount
Rule and cross-reference: a grant related to an asset is presented either as deferred income or as a deduction from the carrying amount of the asset (IAS 20, para. 24); the method is a choice allowed by the standard, not an amount it imposes.
Rationale: method chosen, consistency with the entity's policy
TextRequired
Measurement basis of an asset received as a grant
JudgmentRequired
Fair value / Nominal amount
Rule and cross-reference: a non-monetary asset received as a grant is recognised at its fair value, or at a nominal amount for both the asset and the grant (IAS 20, para. 23).
Rationale: source of the fair value or reason for a nominal amount
TextRequired

Conclusion

Presentation, effect on cost, depreciation and profit or loss submitted to the reviewer
ConclusionRequired

Effect on the financial statements

FS impact

Effect of the entries, line by line (derived from the entries)
Table

Disclosures

Disclosure

IAS 20 §28IAS 20 §39

Disclosures: policy and cash flows
ChecklistRequired
- Accounting policy and presentation of the grant stated
- Presentation of the grant in the statement of cash flows checked

Normative references

References

Paragraphs cited in this workpaper and their verification status
References