Blade Limited is a furniture manufacturing company. You are acting as auditor to the company and have

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Blade Limited is a furniture manufacturing company. You are acting as auditor to the company and have been asked by the Board of Directors to indicate how the following item should be dealt with in the financial statements for the year ended 31 December 1996.
During 1996, Blade Limited*received a grant from the European Union of €500,000 towards the cost of a new machine which would be used in the production of wooden cabinets. The equipment has a useful economic life of 5 years.
Requirement Prepare a memorandum for the Board of Directors in which you explain how each of the above should be dealt with in the financial statements of Blade Limited for the year ended 31 December 1996.

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