FASB publishes guidance on accounting for government grants

FASB on Thursday published an Accounting Standards Update (ASU) that establishes authoritative guidance on the accounting for government grants received by business entities, filling in a long-standing hole in GAAP.

“During the more than 50 years that the FASB has existed, there has been a lack of authoritative GAAP guidance on how to account for government grants received by business entities,” FASB Chair Richard Jones said in a news release. “The new ASU adds guidance in an area where stakeholders have consistently highlighted a need for it, benefiting both preparers and investors.”

When FASB issued the proposed ASU a year ago, it noted that many businesses apply International Accounting Standard 20, Accounting for Government Grants and Disclosure of Government Assistance, in the absence of specific authoritative guidance in GAAP about the recognition, measurement, and presentation of government grants received by business entities.

The new ASU, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities, applies to business entities (specifically, all entities except for not-for-profit entities and employee benefit plans) that receive a government grant.

The ASU:

• Defines government grants and clarifies their scope;
• Establishes recognition criteria; and
• Includes disclosure requirements regarding the nature of government grants, accounting policies applied, and significant terms and conditions.

For public business entities, the ASU is effective for annual reporting periods beginning after Dec. 15, 2028, and interim reporting periods within those annual reporting periods. For other entities, the ASU is effective for annual reporting periods beginning after Dec. 15, 2029. Early adoption is permitted.

— To comment on this article or to suggest an idea for another article, contact Bryan Strickland at Bryan.Strickland@aicpa-cima.com.