Revision question on Government Grants and Disclosure of Government Assistance.

Bosco Aluworks Ltd, a manufacturer and supplier of aluminum utensils for households, has recently established a new facility in Kumasi. To help in this new operation, Bosco Aluworks Ltd has secured a number of grants from the Government of Ghana and is unsure how the grants are to be accounted for in the financial statements. The company has a year-end of 30 April 2017 and all the following transactions took place at 1 May 2016.

i)    Bosco Aluworks Ltd has been awarded a grant for TZS 80,000, to be received over three years, in respect of providing employment to fresh graduates in the area.

ii)  Bosco Aluworks Ltd received a TZS 5,000 grant from the Ministry of Business Development for the initial training of the new employees.

iii) The company also received a grant of TZS 120,000 from the Ministry of Special Development Initiative towards the acquisition of a TZS 600,000 machine. The machine has a useful economic life of 8 years and an estimated residual value of TZS 60,000. Depreciation is on the straight-line basis.

Required:

Explain how each of the above should be accounted for in the financial statements of Bosco

Aluworks Ltd for the year ended 31 April 2017, in accordance with IAS 20 Accounting for government Grants and Disclosure of Government Assistance.                             

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