Question

Repayment of grant related to income shall be:

1) recognized as component of other comprehensive income
2) Charged to retained earnings
3) Expensed immediately
4) Applied first against the deferred income balance and any excess shall be recognized immediately as an expense

Answer 1

Repayment of an income-related grant should be applied against any deferred income balance and any excess recognized as an expense immediately.

Step-by-step explanation:

The question relates to how a grant that is tied to income should be accounted for in financial statements. The correct treatment would be to apply the repayment of the grant against any related deferred income balance first. If the grant repayment exceeds the deferred income, the excess should be recognized immediately as an expense in the profit and loss statement.

This does not involve the other comprehensive income or retained earnings directly, unless the treatment of the expense subsequently impacts retained earnings as part of the broader income and retained earnings reporting process.