The Financial Accounting Standards Board (FASB) recently issued Accounting Standards Update (ASU) 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance, which is intended to increase transparency in financial reporting by requiring business entities to disclose information about certain types of government assistance (e.g., forgivable loans, cash grants and grants of other assets) they receive. Currently, U.S. generally accepted accounting principles lack specific authoritative guidance regarding the recognition, measurement, presentation and disclosure of government assistance received by business entities.
The ASU requires business entities to make 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 Subtopic 958-605, Not-for-Profit Entities – Revenue Recognition, or International Accounting Standard 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
- Significant terms and conditions of the transactions, including commitments and contingencies
ASU 2021-10 is effective for financial statements issued for annual periods beginning after December 15, 2021. Early application is permitted. An entity should apply the amendments either (a) prospectively to all transactions within the scope of the ASU that are reflected in financial statements at the date of initial application and new transactions that are entered into after the date of initial application or (b) retrospectively to those transactions.