When a company acquires an asset through a government grant, the asset's cost is zero so the cost recorded is the direct cost, such as legal fees, incurred.

Question

Quizplus · Accepted Answer

This statement is incorrect. When a company acquires an asset through a government grant, the cost recorded is the fair value of the asset, not the direct cost incurred. The fair value of the asset reflects the economic value of the asset received by the company. However, sometimes the fair value of the asset is not determinable, in which case, the asset is recorded at a nominal or zero value, and any costs incurred for the asset are expensed as they are incurred.

When a Company Acquires an Asset Through a Government Grant