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Hey Guys
I have a question regarding the best approach in terms of accounting to fixed assets or other asset one can capitalize recieved as a gift.

I have the following approach:

D-Fixed assets
C-Deferred Income
H: Gift recieved from entity X

D-Depreciation Fixed asset
C-Accumulated depreciation
H: asset depreciation

D-Deferred Income
C -Income
H: recognition/realization of gift income ( with the same method as the depreciation method of the underlying asset).


Since the benefits of the asset will flow over time using the asset, I think this approach is reasonable to recognize the income.

Do you have any alternative to this method?

Hi,

I assume the giving party is not government and you're not in the scope of IAS 20?

I think that you don't have any basis to defer that income. You received that asset and it's fully yours right away, so there should be immediate recognition of income. But the commercial substance is important here. What is the reason your company receives these gifts?

Ps what does 'H' stand for when you show accounting entries?

Thank you for the reply.

Exactly, the giving entity is not government and we are not in scope of IAS 20, nonetheless, I tried to take the same approach. As you said it's your asset and should be recognized immediately in P&L.

Regarding the reason of the gifts, it's a state entity which develops some joint projects with international partners. The partner acquires assets which are then gifted to the entity upon conclusion of a project.

I'm a portuguese native speaker and "h:" stands for "histórico" which means description of the journal entry().

Right, so I agree with your analogy to IAS 20 and the journal entries that you've given.

And I've learnt some Portuguese

Thank's again.