R&D Grants, how to treat

R&D Grants, how to treat

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My company is in receipt of a couple of grants for R&D Jobs.

Within the context of Job Costing, would one normally treat the grant receipt as a credit to the overall expenses of the job, or as income into the job?

(When the contract concludes, the grant will be disclosed separately in the P&L - so this is more of a management accounts question).

My preference would be as a credit within the groups of expenses incurred, but our overseas parent wishes 'sales' invoices to be raised to the grant provider, and income recorded in the job.

Thanks in advance, - this is one of those questions that is fiddly to explain in writing...

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By john cottam
14th Jun 2012 13:08

R&D Grants

The general rule relating to grants both revenue and capital is that they are recognised in the P&l in the same period as the associated expenditure, or in the case of capital grants over the useful life of the related assets. To the extent that grant has been received but not recognised in the p&l it should be shown as deferred income. The direct answer to your question then is that it should be treated as a credit against the associated costs. I cannot see how you can raise sales invoices, you are not selling  anything, also if you are registered for VAT how would you treat it? 

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