The Financial Accounting Standards Board (FASB) has released a proposed Accounting Standards Update (ASU) that introduces authoritative guidance on accounting for government grants received by business entities.
It is seeking public feedback, with stakeholders invited to review and comment on the proposed ASU by 31 March 2025.
This proposal aims to address the current lack of specific guidance under US Generally Accepted Accounting Principles (GAAP) for recognising, measuring, and presenting such grants.
The proposed amendments would apply to business entities receiving government grants, defined as transfers of monetary or tangible nonmonetary assets from a government, excluding exchange transactions.
Currently, many businesses use International Accounting Standard (IAS) 20 as a reference for accounting government grants due to the absence of specific GAAP guidance.
In 2022, the FASB issued an Invitation to Comment on potentially incorporating IAS 20 into GAAP.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataA majority of the stakeholders supported this approach, suggesting it would reduce diversity in practice by providing clear guidance rather than relying on analogies or other standards.
This would help narrow the variability in accounting for government grants.
The proposed ASU intends to leverage IAS 20 with targeted improvements, establishing guidance on recognising, measuring, and presenting government grants.
It covers grants related to assets and income.
The ASU states that: “The amendments in this proposed Update would require a consistent initial recognition threshold for all government grants. In accordance with the proposed amendments, a government grant would be initially recognised when it is probable that (1) a business entity will comply with the conditions attached to the grant and (2) the grant will be received.”
Additionally, it requires disclosures about the nature of the grant, accounting policies used, and terms and conditions, aligning with current disclosure requirements.
Earlier this month, FASB released an invitation to comment on financial key performance indicators (KPIs), with a deadline for feedback set for 30 April 2025.
