FASB to consider disclosure requirements for government assistance

Businesses may one day have specific requirements under GAAP for making disclosures in their financial statements about the government assistance they receive, because of a new project that FASB added Wednesday to its technical agenda.

Board members said the lack of guidance on disclosure of government assistance leads to a significant shortcoming in financial statements. No GAAP standard currently exists for accounting for government assistance.

FASB Topic 958, Not-for-Profit Entities, provides guidance for contributions received and applies to all entities that receive contributions. But the guidance excludes tax exemptions, tax incentives, tax abatements, and the transfer of assets from governments to business entities.

“The fact that we have no disclosure right now is a real hole,” board member Daryl Buck said during Wednesday’s board meeting.

In addition, the board decided to drop from its technical agenda projects on:

• Emissions trading.
• Earnings per share.
• Income taxes. (The board dropped the short-term convergence project on accounting for income taxes, but it will continue considering improvements based on last year’s post-implementation review findings.)
• Not-for-profit financial reporting: Other financial communications.
• Investment property entities and investment companies: Real estate property investments.

FASB Chairman Russell Golden said he will ask for research on the following issues, some of which already are on the board’s technical agenda:

• Accounting issues in employee benefit plan financial statements.
• Accounting for financial instruments: Hedging. The board will consider whether GAAP could be improved by incorporating the new IFRS standard or developing targeted improvements building on a 2010 FASB exposure draft.
• Accounting for financial instruments: Liquidity and interest rate disclosures. The board would coordinate with others in the financial reporting spectrum, such as the SEC, to ensure that there are no redundancies.
• FASB’s conceptual framework. Additional analysis will be conducted to focus specific topic areas for this research.
• Financial statement presentation. This research would focus on targeted improvements rather than whether to retain the concept of other comprehensive income or mandate direct statement of cash flows.
• Liquidity and equity. The focus would be short-term improvements that could solve application problems for preparers on an issue that board members said results in a high number of restatements.
• Pensions: Cash balance plans.
• Simplification initiative. This project would identify narrow-scope, short-term fixes that could reduce cost and complexity while maintaining or enhancing usefulness of information.

Golden also will ask the Emerging Issues Task Force to research accounting for employee benefit plans and will ask the Private Company Council to consider a second phase of the project dedicated to defining a nonpublic entity.

—Ken Tysiac (ktysiac@aicpa.org) is a JofA senior editor.