FASB proposal addresses government assistance disclosures

The board is seeking to eliminate diversity in practice.

FASB proposed an Accounting Standards Update (ASU) designed to increase transparency related to business disclosures about government assistance arrangements.

The proposed ASU, Government Assistance (Topic 832): Disclosures by Business Entities About Government Assistance, would provide stakeholders with more information about existing government assistance agreements and help those stakeholders better assess the nature of the assistance, according to a FASB news release. The proposal would require disclosures about the accounting for government assistance and the disclosures' effect on the business organization's financial statements.

FASB's release said that current U.S. GAAP lacks explicit guidance for government assistance disclosures, resulting in "diversity of practice" in reporting on government assistance arrangements.

FASB's proposal would require businesses to make the following disclosures related to government assistance in annual financial statements:

  • Information about the nature of the assistance, significant categories, and the method applied to account for the assistance.
  • Line items on the balance sheet and income statement that are affected by government assistance and applicable amounts.
  • Significant terms and conditions of the agreement, including commitments and contingencies.
  • The amount of government assistance not recognized directly in any financial statement line item, unless impractical.

The guidance would apply to an organization other than a not-for-profit business already covered under ASC Topic 958, Not-for-Profit Entities, that enters into a legally enforceable agreement with a government to receive value. It would not apply to transactions (1) in which the government is "legally required to provide a nondiscretionary level of assistance to an entity simply because the entity meets applicable eligibility requirements that are broadly available without specific agreement between the entity and the government," and (2) in which the government is solely a customer.

Comments on the proposal are due Feb. 10 and can be made on FASB's website.

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