Processing of investment subsidies Investment subsidies received by enterprises are recognized as income as a separate item in the income statement (investment grant | investment subsidy). The amount recognized annually and per farm is exactly equal to the depreciation share attributable to the portion of the assets financed by the investment subsidy. These are included in the depreciation cost items of the income statement. Thus, the recognized investment subsidy share, and the depreciation share offset each other, and the recognition of the investment subsidy does not artificially increase entrepreneurial income. However, for those enterprises that have not received investment subsidies, this income recognition is missing, resulting in a relatively lower entrepreneurial income. Receiving investment subsidies improves the farms' results and profitability compared to those who have financed their investments with other capital. Depreciation is the same in both groups, but those who have received investment subsidies have the income recognition of the investment subsidy increasing their returns. In the information system, the investment subsidy is allocated specifically to each building and machine. Income recognition continues if there is investment subsidy remaining for the specific building or machine. The total sum of the investment subsidy across all assets that has not yet been recognized as income--and therefore not yet depreciated--is shown in the balance sheet under equity on the row "of which investment grant". In the balance sheet, the share of capital financed by investment subsidies is included in the enterprise's equity, as the investment subsidy does not need to be repaid. Receiving investment subsidies thus also maintains a higher equity ratio, i.e., the share of equity out of the enterprise's total capital. If the investment subsidy were included in liabilities (external capital), omitted entirely from assets, or written off all at once, almost all indicators describing the enterprise's profitability and solvency (financial solidity) would be distorted. The calculation method complies with the requirements of EU regulations regarding how investment grants must be accounted for in the income statements and balance sheets of enterprises.
