Beta Ltd which prepares its financial statements to December 31 each year is an Irish company involved in manufacturing The company has decided to expand its operations by the addition of a new production facility This expansion involves the purchase of a site, the construction of a factory premises and the installation of machinery The following information is available from the records of the company in the year ended December 31 2018 Payment Date Payment 000s Purchase of Freehold Land Cost 01 01 2018 260 Legal Fees 01 02 2018 20 Construction and Related Costs Construction Payment (1) 01 02 2018 3,000 Construction Payment (2) 01 12 2018 2,500 Architects Fees 01 02 2018 500 Machinery Costs Invoice cost 01 08 2018 580 Import Duties 01 08 2018 20 Installation Costs 01 09 2018 200 The following information is also available Construction commenced on January 1, 2018 and the whole facility (including the machinery) was ready for use on October 1 2018 The new production facility is deemed to be a qualifying asset in the context of IAS 23 Borrowing Costs Construction works were suspended for the month of August 2018 due to an industrial dispute The construction and related costs pertaining to the factory buildings were financed by way of debt borrowed specifically for the purpose at a pre tax cost of 10 per annum The borrowings were drawn down at the time of each payment The interest charges were paid as they were incurred out of the companys existing cash resources Repayment of the capital sum borrowed does not commence until November 1, 2021 The site and machinery acquisition together with the respective related costs were financed out of the companys existing cash resources Beta Ltd depreciates its Non Current Assets as follows Factory Buildings Straight Line Basis 25 years Nil Residual Value Machinery Straight Line Basis 10 years Nil Residual Value The company charges depreciation on a strict monthly basis The company received a capital grant equating to 20 of the invoice cost of the machinery and has decided to account for this grant by reducing the cost of the asset Ignore taxation Required For the purposes of financial reporting in accordance with International Accounting Standards Calculate the separate cost of the Land, Factory Building and Machinery at December 31, 2018 and justify your calculations by reference to the relevant accounting standards Calculate the total depreciation charge and interest costs which will be included in the Statement of profit or loss and other comprehensive income for the year ended December 31, 2018 IAS 20 permits a second method for the accounting of capital based grants i e the deferred credit method Explain the deferred credit method and discuss why it might be considered preferable to the reduction of cost method in the context of the Conceptual Framework and relevant Accounting standards

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Beta Ltd which prepares its financial statements to December 31 each year is an Irish company involved in manufacturing. The company has decided to expand

Beta Ltd which prepares its financial statements to December 31 each year is an Irish company involved in manufacturing.

The company has decided to expand its operations by the addition of a new production facility. This expansion involves the purchase of a site, the construction of a factory premises and the installation of machinery.

The following information is available from the records of the company in the year ended December 31 2018:

	Payment Date	Payment 000s
Purchase of Freehold Land
Cost	01.01.2018	260
Legal Fees	01.02.2018	20
Construction and Related Costs
Construction Payment (1)	01.02.2018	3,000
Construction Payment (2)	01.12.2018	2,500
Architects Fees	01.02.2018	500
Machinery Costs
Invoice cost	01.08.2018	580
Import Duties	01.08.2018	20
Installation Costs	01.09.2018	200

The following information is also available:

Construction commenced on January 1, 2018 and the whole facility (including the machinery) was ready for use on October 1 2018.
The new production facility is deemed to be a qualifying asset in the context of IAS 23 Borrowing Costs.
Construction works were suspended for the month of August 2018 due to an industrial dispute.
The construction and related costs pertaining to the factory buildings were financed by way of debt borrowed specifically for the purpose at a pre-tax cost of 10% per annum. The borrowings were drawn down at the time of each payment. The interest charges were paid as they were incurred out of the companys existing cash resources. Repayment of the capital sum borrowed does not commence until November 1, 2021.
The site and machinery acquisition together with the respective related costs were financed out of the companys existing cash resources.
Beta Ltd depreciates its Non-Current Assets as follows:

Factory Buildings Straight Line Basis 25 years Nil Residual Value

Machinery Straight Line Basis 10 years Nil Residual Value

The company charges depreciation on a strict monthly basis.

The company received a capital grant equating to 20% of the invoice cost of the machinery and has decided to account for this grant by reducing the cost of the asset.
Ignore taxation.

Required:

For the purposes of financial reporting in accordance with International Accounting Standards:

Calculate the separate cost of the Land, Factory Building and Machinery at December 31, 2018 and justify your calculations by reference to the relevant accounting standards.
Calculate the total depreciation charge and interest costs which will be included in the Statement of profit or loss and other comprehensive income for the year ended December 31, 2018.
IAS 20 permits a second method for the accounting of capital-based grants i.e. the deferred credit method. Explain the deferred credit method and discuss why it might be considered preferable to the reduction of cost method in the context of the Conceptual Framework and relevant Accounting standards.