What does FRS 102 state about grants related to assets regarding their carrying amount?

FRS 102 outlines the treatment of grants related to assets in a way that ensures a clear representation of financial information. According to the standard, when a grant is received for the purpose of acquiring or constructing an asset, it is not permitted to directly deduct this grant from the asset's carrying amount. Instead, the grant must be recognized as income over the useful life of the related asset. This treatment emphasizes the matching principle, where the revenue from the grant is recognized in a manner that reflects the consumption of the economic benefits of the asset it funded.

This approach aids in maintaining transparency in financial statements, providing a clearer picture of both the asset's carrying value and the income derived from the grant. By recognizing the grant income separately over time, users of the financial statements can more easily assess the performance of the entity and its funding sources, rather than seeing a reduced asset value that could obscure the actual resource available for use.

Other treatments, such as immediate deduction from the asset's carrying amount or treating the grant as a liability, are not in line with the guidance provided by FRS 102, further clarifying why the selected answer aligns with the standard's requirements.