A FASB standard issued Nov. 17 will require businesses to disclose information in the notes to the financial statements about certain government assistance they receive.
Previously, GAAP contained no specific, authoritative guidance for business entities on accounting for or disclosing government assistance they receive.
The types of assistance the new standard requires to be disclosed include cash grants and grants of other assets. The standard requires transactions with a government to be accounted for by applying a grant or contribution model by analogy to other accounting guidance such as a grant model within FASB ASC Topic 958, Not-for-Profit Entities, or International Accounting Standard 20, Accounting for Government Grants and Disclosure of Government Assistance.
The following annual disclosures are required:
- 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.
- Significant terms and conditions of the transactions, including commitments and contingencies.
"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," FASB Chair Richard Jones said in a news release. "This, in turn, will help them make better-informed decisions."
The standard takes effect for financial statements issued for annual periods beginning after Dec. 15, 2021. Not-for-profits and employee benefit plans are excluded from the standard. Early application is permitted.
— Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is the JofA's editorial director.