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Treatment of grant received towards cost of asset

If a company receives a grant towards the cost of a new machine then do you just credit this to the cost and then depreciate the lower figure, or do you show as deferred income and apportion over length of useful life of the machine?

thank you for any help

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Deduct from purchase cost

 It is not deferred and it is not income.

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It's rare I disagree with Phil

But I do this time. The grant is a source of funding, not a discount on the asset. Put the grant to a reserve and amortise over the life of the asset.

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Perhaps You're Both Right

SSAP 4 (now FRS 20) give two options - either deduct from the capital cost before depreciating or set up a deferred credit in the balance sheet and amortise over the life of the asset. I guess either gives the same result. Not sure about capital allowances though I suppose they're given on the net cost?

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Capital allowances

And you can only claim capital allowances on the net cost to you ie deduct the grant from the cost.

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