Repayment of an asset grant

Learning objectives

• Calculate the effect of repaying a grant related to assets (reduction of the deferred income balance or increase in the carrying amount of the asset, with the cumulative additional depreciation recognised immediately).L3
• Justify and defend in a professional file (L4) the treatment adopted for the "Repayment of an asset grant" concept, distinguishing the IFRS requirement, the case data, the teaching assumption and judgement.L4

Normative references

• IAS 20 §32A grant that becomes repayable is accounted for as a change in accounting estimate (IAS 8); (a) grant related to income: the repayment is applied first against any unamortised deferred credit, and any excess (or the whole amount when there is no deferred credit) is recognised immediately in profit or loss; (b) grant related to an asset: the repayment increases the carrying amount of the asset or reduces the deferred income balance, and the cumulative additional depreciation that would have been recognised in the absence of the grant is recognised immediately in profit or loss.

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

4 questions

• An asset grant, deducted from the asset's carrying amount, becomes repayable. Among these four statements about its treatment, which one is wrong?L3
• Lemaire acquired an asset costing {asset_cost} and deducted a grant of {grant_amount} from its carrying amount. The asset has a useful life of {useful_life} years, depreciated on a straight-line basis with no residual value (case conventions), and {years_elapsed} years have elapsed when the grant becomes repayable in full. Calculate the cumulative additional depreciation to recognise immediately and the carrying amount after the catch-up.L3
• Bouvier acquired an asset costing {asset_cost} and deducted a grant of {grant_amount} from its carrying amount. Useful life: {useful_life} years, straight-line depreciation with no residual value (case conventions). After {years_elapsed} years, the grant becomes repayable in full, which is treated as a change in estimate. Record the entry.L4
• Guérin acquired an asset for EUR 900,000, depreciated over 5 years (straight-line, no residual value), and deducted a grant of EUR 180,000 from its carrying amount. After 2 years, the grant becomes repayable in full. Which treatment is consistent with a change in estimate?L4