Q1

In the event that a grant becomes repayable, how is the repayment of government grant accounted for in the books of the recipient if the company uses the deferred income approach?

Group of answer choices

The company is required to write off the grant and the grant income in its books, and will present a restatement of comparative prior year figures in the current year financial statements.

If the grant is related to an asset acquisition, the effect of the repayment will increase the carrying amount of the asset regardless of the approach used.

The adjustment will be prospective in nature. The repayment is charged against any remaining deferred income, with the excess written off as a loss during the period.

None of these statements describe the proper treatment.

Q2

Company A acquired a plot of land for a cost of P25,000,000. In order to complete the purchase, the company secured a loan from Unreliable Bank for P20,000,000 with an interest rate of 6%, with the land listed as collateral in case the company defaults on 6 consecutive interest payments.

Company A uses the revaluation model to measure PPE of this class and on year 3, the land was determined to have a fair value of P28,000,000.

Which of the following information are required to be disclosed in Company A's notes to financial statements?

1. The outstanding amount of the loan at the end of year 3 and the fact that the land is used as collateral.
2. The P3,000,000 revaluation surplus included in equity, including any restrictions on distribution to shareholders relative to this.
3. The terms of the loan, including interest rate and terms of repayment.