In 2016 Sanford LTD. received a government grant of $100,000 to be used for the purchase of a machine. Sanford prepares its financial statements using IFRS. The grant must be recognized a. as revenue in 2016. b. as a reduction in the cost of the machine. c. as deferred income in the balance sheet and then recognized in the income statement systematically over the asset’s useful life. d. either b or c.
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
In 2016 Sanford LTD. received a government grant of $100,000 to be used for the purchase of a machine. Sanford prepares its financial statements using IFRS. The grant must be recognized a. as revenue in 2016. b. as a reduction in the cost of the machine. c. as deferred income in the
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