In December 2025, the FASB issued Accounting Standards Update (ASU) 2025-10, Government Grants Received By Business Entities.  The ASU establishes authoritative guidance for the recognition, measurement, and presentation of government grants received by a business entity.  Existing guidance did not address this issue.  Under the new comprehensive guidance, grants are recognized when it is probable that the entity will comply with the conditions attached to the grant, and that the grant will be received.  For asset-related grants, entities will either record liability and amortize to income as costs are incurred or reduce the cost basis of the asset.  Income-related grants are recognized in earnings as related expenses are incurred. Grants will be recognized as other income or deducted from the related expense, based on facts and circumstances.

Entities can elect to adopt using any of the following approaches:

• Modified prospective – apply to grants open at adoption date
• Modified retrospective – apply grants open at the beginning of the earliest period presented date
• Full retrospective – apply to all grants

The amendments are effective for all public business entities for fiscal years beginning after December 15, 2029, and for all other entities for fiscal years beginning after December 15, 2030; early adoption is permitted for any period for which financial statements have not been issued.

The full text of the ASU can be found here.

 

Published: 01/05/2026

_{^{Readers should not act upon information presented without individual professional consultation.}}

_{^{Any federal tax advice contained in this communication (including any attachments): (i) is intended for your use only; (ii) is based on the accuracy and completeness of the facts you have provided us; and (iii) may not be relied upon to avoid penalties.}}