An item of plant and equipment was purchased for €25,000 on 1 May 20X0. It is expected that its useful life will be 4 years and that its residual value will be €1,000 at the end of it life. A government grant of €6,000 was received to assist with the cost of purchase, and a further grant of €500 was received to subsidise the wages of the skilled employees who will operate the plant and equipment during the first year of its use.

Requirement The Chief Accountant wishes to have your opinion as to how this should be reflected in the company’s published financial statements for the year ended 30 April 20X1. Your answer should include reference to appropriate International Accounting Standards.