Derringdo acquired an item of plant of a gross cost of $$1000,000$ on $1$ October $20$X$2.$ The

plant has an estimated life of ten years with a residual value equal to $10\%$ of its gross cost.

Derringdo uses straight$-$line depreciation on a time apportioned basis. The company received

a government grant of $30\%$ of its cost price at the time of its purchase. The terms of the grant

are that if the company retains the asset for four years or more then no repayment liability

will be incurred. If the plant is sold within four years a repayment on a sliding scale would be

applicable. The repayment is $75\%$ if sold within the first year of purchase and this amount

decreases by $25\%$ per annum. Derringdo has no intention to sell the plant within the first four

years. Derringdo$$s accounting policy for capital$-$based government grants is to treat them as

deferred credits and release them to income over the life of the asset to which they relate.

Required: Discuss whether the company$$s policy for the treatment of government grants

meets the definition of a liability in the IASB$$s conceptual Framework. Show the carrying

value of the asset and grant and charge to SOPL for $4$ years.