A change in estimate

Learning objectives

• Determine the treatment of a grant that becomes repayable as a change in accounting estimate, without restating prior periods.L2, L3
• Justify and defend in a professional file (L4) the treatment adopted for the "Repayment: change in accounting estimate" 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.

3 questions

• When a government grant already recognised becomes repayable, the repayment is accounted for as a change in accounting estimate.L2
• Bastide had received EUR 120,000 for a 4-year machine, recorded as deferred income and released for one year. At the reporting date, the grant becomes repayable for {repayment_amount}. The deferred income not yet released is {deferred_income_balance}. Calculate the expense to recognise immediately.L3
• Meunier had received EUR 200,000 for a 5-year machine, presented as deferred income and released over 2 years. At the reporting date, the granting body demands repayment of {repayment_amount}; the deferred income not yet released is {deferred_income_balance}. The reversal is treated as a change in estimate. Record the entry.L4