Amortisation

What is Amortisation?
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Quick Summary
Amortisation is similar to depreciation but applies to intangible assets like software. For grants, businesses can use a direct or indirect method to account for them, both leading to the same outcome but requiring annual amortisation. The treatment in a cash flow statement typically falls under investing activities, though it can be classified as financing if the asset was purchased on loan.

That is also like depreciation for intangible assets. 

Software is amortised

Machinery is depreciated

Same as depreciation
What is amortisation of grants ?

In grants business, there are two methods to accont for asset grants

1. Direct method- reduce the grant amount from asset and then depreciate

2. Indirect method- reduce the asset value by depreciating and then reduce the grant amount.

Both the ways, results are the same. However, you have to amortise the grant annually for both the processes.

eg. if grant amount is 60,000 and asset life is three years

then grant amount= twenty thousand

Please tell it's treatment in Cash Flow Statement

in cash flow statement it will be shown under investing activities

If the asset is purchased on loan, it will be classified as financing activity. As 3 doesn’t have this classification but IndAS doesnt as well. IAS 7 classifies it as both investment and financing. But since cash is involved, it’s into cash flow statement.

In IndAS and as, cash receipts from refund of loans and advances must be used to recognise. 

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