The following is an extract of the Notes to the Accounts of Diva Land Bhd, annual report 2018.

	Intangible assets
	Construction rights	2018 RM	2017 RM
	Cost
	At 31 Dec	8,900,000	8,900,000
	Construction rights This represents the exclusive rights granted to a subsidiary of the Company to develop 2 parcels of lands adjacent to and encompassing Gombak LRT in Taman Melati, Gombak, into a commercial development area. The construction right is stated at cost less accumulated amortisation and impairment losses and is amortised on a systematic basis to reflect the pattern in which the asset’s economic benefits are consumed. Amortisation on construction rights not provided as the project is yet to commence as at the reporting date. It is expected that the useful life of the commercial area to be 50 years.

During the annual report of 2018, the amortisation on the construction right was not present as the project was yet to commence. The project started on 1January 2019. The commercial building was valued at cost of RM30 million and expected to have a 2 per cent depreciation rate. At the beginning of 2019, Diva Land Berhad also received RM1 million government grants to start off the project.

Required:

• Briefly explain the accounting treatment for the construction rights for the year ended 2019.
• For the government grant received in 2019, explain the accounting treatment for the year ended 2019 if the grant is treated as:
• Deferred income
• Deduction from asset (if the grant is used to purchase a machinery that cost RM5 million)

Answer rating: 100% (QA)

Estimated cost value of building RM 30 Million Expected depreciation r... View the full answer