A) Explain the accounting treatment for the two categories of Government Grant. B) Dermaga Sdn Bhd...

A) Explain the accounting treatment for the two categories of Government Grant.

B) Dermaga Sdn Bhd (DSB) acquired a plant at a gross cost of RM1.6 million on 1 October 2019. The plant has an estimated economic life of ten years with a residual value equal to 10% of its gross cost. Depreciation is allocated on time basis apportionment. The company received government grant of 30% from its cost price during the purchase time. If the company retains the plant for five years or more, there will be no repaymaent liability. If the company sells the plant within one year, it has to repay 75% of the cost. This amount decreases by 20% in suceeding years. DSB has no intention of disposing the plant witihn five years. Its policy for capital-based government is to treat them as deferred credits and release them to income over the life of the asset to which they relate. Required:

i. Discuss whether the company’s policy for the treatment of government grants meets the definition of a liability in MASB Conceptual Framework.

Prepare extract of DSB’s financial statements for the year ended 30 March 2020 in respect to the plant and grant , applying the company’s policy, and in compliance with the definition of liability in the Conceptual Framework

Expert Solution

ekkarill92 answered 2 years ago

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