The presentation choice

Learning objectives

• Distinguish the two permitted presentations of a grant related to assets (deferred income or deduction from the carrying amount) and their effect on the asset, the depreciation charge and profit or loss.L1, L2, L3
• Justify and defend in a professional file (L4) the treatment adopted for the "Asset grants: two permitted presentations" concept, distinguishing the IFRS requirement, the case data, the teaching assumption and judgement.L4

Normative references

• IAS 20 §24Grants related to assets: presented in the statement of financial position either as deferred income or by deducting the grant in arriving at the carrying amount of the asset.
• IAS 20 §25Grants related to assets: the two methods of presentation (deferred income, or deduction from the carrying amount of the asset) are regarded as acceptable alternatives.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

3 questions

• IAS 20 allows a grant related to assets to be presented in the statement of financial position either as deferred income or as a deduction from the asset's carrying amount.L1
• Cadet acquires equipment costing {asset_cost} and receives a grant of {grant_amount}. Useful life: {useful_life} years, straight-line depreciation with no residual value (case conventions). Calculate the net charge in profit or loss for the year if the grant is presented as deferred income (depreciation on gross cost less release), then the depreciation charge if it is deducted from the carrying amount, and the difference in profit or loss between the two methods.L3
• Giraud acquires a plant for EUR 800,000, depreciable over 10 years (straight-line, no residual value), and receives a grant of EUR 200,000. It hesitates between deferred income and deduction from the carrying amount. Which statement correctly describes the effect of the deferred income method, compared with deduction, on the first year?L4