FASB issues standard for reporting gov’t grants

The Financial Accounting Standards Board released an accounting standards update Wednesday that aims to improve transparency in financial reporting by requiring businesses to disclose information about some types of government assistance they receive, such as grants of cash and other assets, within the notes to their financial statements.

The amendments require a number of annual disclosures about transactions with a government that are accounted for by applying a grant or contribution accounting model in reference to some of the existing accounting guidance, such as a grant model within FASB Topic 958, "Not-for-Profit Entities," or International Accounting Standards 20, "Accounting for Government Grants and Disclosure of Government Assistance:"

• Information about the nature of the transactions and the related accounting policy used to account for the transactions;
• The line items on the balance sheet and income statement that are affected by the transactions, and the amounts applicable to each financial statement line item; and,
• Significant terms and conditions of the transactions, including commitments and contingencies.

The new accounting standards update comes as many businesses find they will need to take into account the assistance they received from federal, state and local government sources as a result of the COVID-19 pandemic.

“The new ASU responds to requests from investors and other capital allocators by adding disclosures that will provide transparent and comparable information about certain types of government assistance that entities receive,” said FASB chair Richard Jones in a statement. “This, in turn, will help them make better-informed decisions.”
The amendments in the update take effect for all entities within their scope, which excludes nonprofits and employee benefit plans, for financial statements issued for annual periods beginning after Dec. 15, 2021. FASB is allowing early application of the update.