IAS 23 · Workpapers (Step 4 of 5)
Workpaper assignment
- Course
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File of an asset financed by a specific borrowing and an asset grant: Grant deducted from cost
Asset financed by a specific borrowing and an asset grant: cost, depreciation, profit or loss and financial statements
Section 1 of 9
Objective
Section brief
- What to document
- The engagement, its scope and the working mode chosen.
- Why
- A workpaper answers one precise question: framing it avoids off-topic work.
- How
- Read the objective and the assignment, then choose the mode (guided, semi-guided, professional).
- Expected result
- You know which question the workpaper must settle, and for which reporting date.
- Your role
- Preparer of the IAS 23 workpaper
- Level
- Expert
- Estimated time
- ≈ 70 min
- Progress
- 0 / 5 steps done (review excluded)
Context
Aérolis Énergie SA (fictitious entity) builds a biomass boiler, a qualifying asset, from 1 January to 31 December 20X5 and places it in service on 1 January 20X6. It finances it with a specific loan of 1,800,000 EUR (annual effective rate of 8%) drawn on 1 January 20X5 and with an equipment grant of 400,000 EUR. The entity has not fixed the presentation of the grant: it compares deferred income with deduction from cost. The financial statements studied are those of 20X6, the first full year of operation (cumulative effects over 20X5 and 20X6).
Assignment
File of the asset financed with a grant
Purpose of the workpaper
For the asset (one instance per presentation of the grant, then a comparison instance), enter the expenditure, the grant received, the actual borrowing costs and the investment income, then compute the eligible expenditure net of the grant, the cost of the asset, the annual depreciation and the difference in net effect on profit or loss between the two presentations. Compare the carrying amount with the recoverable amount and prepare the entries. The presentation method of the grant is a choice of the entity; no amount imposes it.
Questions of the file covered by this workpaper
- Compute the eligible expenditure net of the grant.
- Compute the eligible borrowing costs of the specific loan.
- On what date does inclusion end? Justify.
- Compute the cost of the asset under each presentation of the grant.
- Compute the annual depreciation under each presentation.
- Compute the difference in net effect on profit or loss between the two presentations.
- Record the borrowing costs and the investment income, common to both presentations.
- Record the grant, the transfer, the depreciation and the release with deferred income.
- Record the grant, the transfer and the depreciation with the deduction.
Documents in the file
Open the documents to pick out the relevant information.