The differences between the total amount method and the net amount method are: definition, independence, transaction cost, risk management and scope of application.

1, definition

The total amount method is to recognize the full amount of government subsidies as income in one lump sum or by stages, rather than as a deduction of the book value or cost of related assets. The net method is to recognize government subsidies as the book value of related assets or the deduction of compensated costs and expenses.

2. Independence and self-reliance

The total amount method regards each transaction as independent and is not affected by other transactions, and each transaction is settled separately. The netting rule treats multiple transactions as a whole and calculates the results of all transactions together.

3. Transaction costs

The transaction cost of the lump sum method is higher because each transaction needs to be settled separately. The net amount rule can reduce the transaction cost because it can reduce the number of settlements.

4. Risk management

The total amount method improves the efficiency of risk management, because each transaction is independent. Net rules may increase risks because multiple transactions are cumulative.

5. Scope of application

The total amount method is applicable to financial transactions that require immediate settlement of each transaction, such as securities transactions. The net amount method is suitable for the consolidated settlement of multiple transactions, such as foreign exchange transactions.