Advise wisdom ltd on the treatment of the grant

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Reference no: EM132613818

Wisdom Ltd

Wisdom Ltd received a Government grant of GHS150 million in January 2019 to install and run a solar energy system in an economically backward area. Wisdom Ltd has estimated that such a system would cost GHS250 million to construct. The secondary condition attached to the grant is that the entity should hire labour in the local market (i.e., from the economically backward area where the windmill is located) instead of employing workers from other parts of the country. It should maintain a ratio of 1:1 local workers to workers from outside in its labor force for the next 5 years. The windmill is to be depreciated using the straight-line method over a period of 10 years. The management of Wisdom has adopted the policy of treating unearned government grant on a deferral basis.

Required

Question 1: Advise Wisdom Ltd on the treatment of this grant in the 2019 financial statements ( Statement of Profit and Loss for 2019 and Statement of financial position as at 31 December 2019) in accordance with IAS 20.

Reference no: EM132613818

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