UK Treatment of capital contribution as an increase in equity

[claire anderson]

Hi please consider a scenario where a company (IFRS reporting) received a capital contribution as an increase in equity. This sum included various investment properties and receivables, payables and provisions.
One such provision grew from say 10m in the capital contribution to say £40m over the years since the capital contribution and has now been released.
Would the accounting entry be DR provision 40m CR Income statement 30m and cr capital contribution 10m?

Needing to settle a disagreement in the office! Please help

 

[kirby]

Assume a 5m marketable security was a capital contribution increasing equity by 5m. Later it sold for 7m, would you record a 2m increase to equity? Follow that logic in your case.

 

[kirby]

So to be clear, no you would not. In your case, the subsequent reversal of the provision is part of net income not an adjustment of capital.