FASB Improves Transparency Around Government Grants
The FASB issued Accounting Standards Update (ASU) No. 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance, which is expected to increase transparency in financial reporting by requiring business entities to disclose, in notes to their financial statements, information about certain types of government assistance they receive. Examples of such government assistance include cash grants and grants of other assets.
The amendments in the ASU require the following annual disclosures about transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy to other accounting guidance such as a grant model within FASB Accounting Standards Codification® Topic 958, Not-for-Profit Entities, or International Accounting Standards (IAS) 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 amendments are effective for all entities within their scope, which excludes not-for-profit entities and employee benefit plans, for financial statements issued for annual periods beginning after December 15, 2021. Early application is permitted.