Treatment of Fixed assets recieved as free by the supplier : IFRS

My supplier is providing me a fixed asset free of cost. I have a contract with the supplier for 3 years where in he will provide me with 3 Million worth of raw materials and a machine worth 2 million independent of the raw material. I can use that machine for any purpose I want. 

I am planning to book that fixed asset as deferred revenue i.e. Fixed asset Dr and Deferred revenue Cr. and recognize revenue in 3 years over the period of contract validity. We follow IFRS. Is this treatment allowable under IFRS? If not what should I do?

Replies (2)
Quick Summary
A company is receiving a fixed asset worth £2 million for free from a supplier, as part of a three-year contract involving raw materials. The initial thought was to book it as deferred revenue, amortising it over the contract period. However, this is not considered appropriate under IFRS, as deferred revenue typically relates to cash-based transactions. Instead, the asset should be recognised directly, potentially as a 'Gain from promotions' or similar, with the cost credited and the machinery account debited.

Guidelines issued by ICAI FOR FIXED ASSET ACCOUNTING IS NOT ACCEPTABLE.

Think about it again. Because deferred revenue is cash basis accounting only. Assets dont bring in real cash and no such transaction existed apart from sale of fixed asset.. but you can treat it as deferred credit in profit and loss and recognise the machine cost ie credit it and debit machinery. 

Dr machinery

Cr. Gain from promotions

You use deferred income in accounting for grants but here no cash transaction occured.

 

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