I've got a problem with accounting for the asset that has been acquired by the way of grant.
We recognised the asset at cost 100
We recognised grant as a deferred income (70)
when we test for the impairment we compair value in use (revenues) 30
and the carrying amount 100 and get to Impairment loss 100-30=70 (debit to PL)
Then we write off the grant amount in proportion to the impairment:
70*70/100=(49) (credit to PL).
So net effect on PL= 70-49=21
Our auditors insist on including the grant in value in use calculation
so value in use equils 30 (revenues)+70 (grant)=100
When doing like this we have no impairment of the asset.
Please comment on this problem.
We recognised the asset at cost 100
We recognised grant as a deferred income (70)
when we test for the impairment we compair value in use (revenues) 30
and the carrying amount 100 and get to Impairment loss 100-30=70 (debit to PL)
Then we write off the grant amount in proportion to the impairment:
70*70/100=(49) (credit to PL).
So net effect on PL= 70-49=21
Our auditors insist on including the grant in value in use calculation
so value in use equils 30 (revenues)+70 (grant)=100
When doing like this we have no impairment of the asset.
Please comment on this problem.