US GAAP prescribes a contribution model for not-for-profit entities in the scope of ASC 958 to account for government grants but does not contain specific guidance for business entities receiving government grants. This lack of guidance has led to diversity in practice and has left business entities to analogize to other GAAP or IFRS® Accounting Standards.
Many business entities account for their government grants by analogy to the grant model under IFRS® Accounting Standards – specifically IAS 20 (government grants and government assistance). Others analogize to the not-for-profit contribution model under ASC 958-605.
In November 2021, the FASB issued ASU 2021-10, which created ASC 832 (government assistance). This ASC requires business entities to disclose information about certain government assistance they receive but does not contain guidance on recognition, measurement or presentation.
In June 2022, the FASB sought feedback from stakeholders through an Invitation to Comment on whether to incorporate the recognition, measurement and presentation guidance on accounting for government grants in IAS 20 into US GAAP.
After adding the project to its research agenda and engaging in the Invitation to Comment and other stakeholder outreach, the FASB met on November 1, 2023 to refine the project’s scope and discuss recognition, measurement, presentation and disclosure. The FASB noted throughout the meeting the importance of developing guidance that is operable and decision-useful to investors.
At its April 3, 2024 meeting, the FASB decided to pursue an IAS 20 accounting model, with targeted improvements to scope and recognition threshold based on previous Board decisions. It also decided to include some implementation guidance for the areas that will differ from IAS 20.
In its most recent meeting on June 4, 2024, the FASB discussed disclosures, accounting for government grants in a business combination, transition, and the comment letter period of a proposed ASU.
The following are key highlights from the tentative decisions reached on the project to date:
