On 1 April 2016, Gidimadjor Ltd received a government grant of GH¢8 million towards the purchase of new plant with a gross cost of GH¢64 million. The plant has an estimated life of 10 years and is depreciated on a straight-line basis. One of the terms of the grant is that the sale of the plant before 31 March 2020 would trigger a repayment on a sliding scale as follows: Sale in the year ended: Amount of repayment 31 March 2017 100% 31 March 2018 75% 31 March 2019 50% 31 March 2020 25% Accordingly, the directors propose to credit to the statement of profit or loss GH¢2 million (GH¢8 million x 25%) being the amount of the grant they believe has been earned in the year to 31 March 2017.Gidimadjor Ltd accounts for government grants as a separate item of deferred credit in its statement of financial position. Gidimadjor Ltd has no intention of selling the plant before the end of its economic life. Required: Advise, and quantify where possible, how the above items should be treated in Gidimadjor LtD’s financial statements for the year ended 31 March 2017.
On 1 April 2016, Gidimadjor Ltd received a government grant of GH¢8 million towards the purchase
of new plant with a gross cost of GH¢64 million. The plant has an estimated life of 10 years and is
One of the terms of the grant is that the sale of the plant before 31 March 2020 would trigger a
repayment on a sliding scale as follows:
Sale in the year ended: Amount of repayment
31 March 2017 100%
31 March 2018 75%
31 March 2019 50%
31 March 2020 25%
Accordingly, the directors propose to credit to the statement of profit or loss GH¢2 million (GH¢8
million x 25%) being the amount of the grant they believe has been earned in the year to 31 March
2017.Gidimadjor Ltd accounts for government grants as a separate item of deferred credit in its
of its economic life.
Required:
Advise, and quantify where possible, how the above items should be treated in Gidimadjor LtD’s
financial statements for the year ended 31 March 2017.
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