Everyone is solving the same examples. How do you account for a situation where a business receives a PPE from donors (as gift) without any condition, how do you account for this?
The first thing be done is verify if the gift qualifies to be recognize as a Government Grant or to be classify as other type of asset; especially, if the donor institution is a governmental institution? If all the above criteria are met, then an entity can proceed to recognize the gift as Government Grant. Next, the fair value or market value of the PPE must be established. Once the value of the PPE is known, the below treatment can be carried out on the asset the grant is received upon. The entity can decide to use the Gross Method or the Net Off method in accounting for the gift. If the gift does not qualify to be treated as Government Grant, then one can also verify if the gift meet government assistance criteria and treated as such accordingly.
@@ronasacademy What of a situation where an individual gifts a car to business, the individual is not a shareholder. How do you account for this? Where will the credit entry go?
@@judeandeh Is the individual classify as government? If yes, then we will account for the asset using Government Grant. If the individual in question is not considered to be government, then another appropriate accounting standard must be applied. We can also treat it as Government Assistance, because when a transaction fail to meet the recognition criteria of Government Grant, the item in question can then be treated as Government Assistance if the criteria is met. In the absence of the above and there is no accounting standard, the management of the entity must apply their judgement in accordance with the requirements in IAS 8 in treating the item. Please, I think your question needs more clarification for the appropriate feedback please. Thanks.
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Everyone is solving the same examples. How do you account for a situation where a business receives a PPE from donors (as gift) without any condition, how do you account for this?
The first thing be done is verify if the gift qualifies to be recognize as a Government Grant or to be classify as other type of asset; especially, if the donor institution is a governmental institution? If all the above criteria are met, then an entity can proceed to recognize the gift as Government Grant.
Next, the fair value or market value of the PPE must be established. Once the value of the PPE is known, the below treatment can be carried out on the asset the grant is received upon.
The entity can decide to use the Gross Method or the Net Off method in accounting for the gift.
If the gift does not qualify to be treated as Government Grant, then one can also verify if the gift meet government assistance criteria and treated as such accordingly.
@@ronasacademy What of a situation where an individual gifts a car to business, the individual is not a shareholder. How do you account for this? Where will the credit entry go?
@@judeandeh Is the individual classify as government? If yes, then we will account for the asset using Government Grant.
If the individual in question is not considered to be government, then another appropriate accounting standard must be applied.
We can also treat it as Government Assistance, because when a transaction fail to meet the recognition criteria of Government Grant, the item in question can then be treated as Government Assistance if the criteria is met.
In the absence of the above and there is no accounting standard, the management of the entity must apply their judgement in accordance with the requirements in IAS 8 in treating the item.
Please, I think your question needs more clarification for the appropriate feedback please.
Thanks.