FASB weighs standard on accounting for government grants

Accounting

The Financial Accounting Standards Board is asking its stakeholders to provide feedback on whether it should work on a new standard to account for government grants.

FASB issued an invitation to comment document on Monday requesting input from accountants and other constituents on whether an older international accounting standard, known as IAS 20, Accounting for Government Grants and Disclosure of Government Assistance, should be revised and updated for U.S. GAAP. The standard had originally been issued by the International Accounting Standards Committee in April 1983, and was later adopted in April 2001 by the International Accounting Standards Board after the IASC became the IASB.

Accounting for government grants has taken on more relevance during the COVID-19 pandemic, when both public and private companies received billions of dollars in aid from the federal government in the form of grants and forgivable loans from the Paycheck Protection Program and other widely used stimulus programs. FASB undertook an agenda consultation last year asking for new projects that its stakeholders wanted it to tackle, and requests for guidance on government grants was one of the areas where commenters expressed interest. Even though it’s an international accounting standard, IAS 20 could give FASB at least a starting point for adjusting its existing standards in this important area.

During last year’s agenda consultation, FASB asked stakeholders to weigh in on a wide variety of issues, including whether FASB should pursue a project on the recognition and measurement of government grants, and, if so, whether it should leverage an existing grant or contribution model or develop a new accounting model. Approximately three-quarters of stakeholders who gave specific feedback on that question, including investors, practitioners, preparers and state CPA societies, indicated they preferred FASB to leverage IAS 20.

FASB, GASB and FAF logos on the wall at headquarters in Norwalk, Connecticut
FASB, GASB and FAF logos on the wall at headquarters in Norwalk, Connecticut

Courtesy of GASB

In response to the feedback, FASB chair Richard Jones added a project, Accounting for Government Grants, Invitation to Comment, to the research agenda. As part of that research project, the ITC asks for further feedback from stakeholders on the relevant requirements in IAS 20 and includes some specific questions for investors about the importance and usefulness of government grant information in terms of analyzing a company’s financial performance.

The invitation to comment will give constituents more opportunity to provide feedback specifically on details related to whether IAS 20 represents a workable solution for improving GAAP in the U.S. financial reporting environment for business entities when it comes to accounting for government grants. FASB is encouraging its stakeholders to review and provide comments on the ITC proposal by Sept. 12, 2022.

“This ITC invites all our stakeholders to share input that will help the board decide whether to undertake a standard-setting project on the recognition, measurement and presentation of government grants for business entities,” said FASB technical director Hillary Salo in a statement.

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