How is grant income classified under the accrual model in UK GAAP?

Under UK GAAP, grant income is classified as either revenue or asset-related based on the nature of the grant and the conditions attached to it. This classification reflects the specific circumstances surrounding the grant.

When a grant is intended to support the expenditure on specific activities or income-generating processes, it is recognized as revenue. This means that the grant directly offsets expenses incurred, thus, aligning the recognition of income with the expenses that it is designed to subsidize.

On the other hand, if the grant relates to the construction or purchase of an asset, it may be classified as asset-related income. In this case, the grant is recognized in a way that reflects the depreciation of the asset over its useful life, often by providing a systematic method to recognize the grant income in the financial statements as the asset is used.

This flexibility in classification allows organizations to present their financial position more accurately by ensuring that the recognition of grants aligns with their associated expenditures or the benefits derived from the related assets. Therefore, the classification of grant income as either revenue or asset-related accurately embodies the economic substance of such transactions.