The FASB has published an invitation to comment (ITC) related to the potential incorporation of IAS 20, Accounting for Government Grants and Disclosure of Government Assistance, into GAAP with comments to be accepted until September 12, 2022 in order to get feedback on recognition, measurement, and presentation requirements of IAS 20. The FASB is determining whether IAS 20 is a workable solution for GAAP for business entities related to accounting for government grants as GAAP does not provide specific guidance on how business entities should recognize, measure, and present grants received from a government. The COVID-19 pandemic created additional focus due to the disbursement of government funds as well as additional diversity in practice.
GAAP does have specific requirements related to disclosures of these funds including the following, which are generally consistent with IAS 20:
- The nature of the transactions and related accounting policy
- The line items on the balance sheet and income statement that are affected by the transactions and related amounts
- Significant terms and conditions of the transactions including commitments and contingencies
There are 5 points that the FASB would like to understand:
- Whether the requirements, including the scope and definition of terms government and government grants are understandable and operable in the United States
- Whether the requirements improve comparability for business entities
- Whether any suggested changes should be made to the provisions of IAS 20 related to government grants accounting
- Whether the requirements provide decision-useful information to users
- Any current practice issues that would arise when applying the government grant accounting requirements in IAS 20
The ITC includes questions related to whether incorporating IAS 20 into GAAP is needed and if so, what parts of IAS 20 should be incorporated and why, the types of government grants that business entities receive and the accounting treatment of those grants, what information investors need in order to analyze business entities that receive government grants, and whether the definition of the term government in IAS 20 is understandable and operable. Additionally, the ITC goes into scope questions including potential issues in applying the definition of government grants and questions on challenges, costs and understanding of the guidance. Recognition and measurement questions relate to understanding of the guidance and related costs of implementation, whether different accounting should exist for grants related to assets and grants related to income and comparability to not-for-profit entity accounting. Comments on presentation are requested related to gross or net asset and income presentation for grants related to assets and grants related to income as well as statement of cash flow presentation and how this affects investor analysis. Other questions relate to nonmonetary government grants, forgivable loans, loans with below-market interest rates, contingent liabilities and contingent assets and repayment of government grants.
The full text of the ITC is available here.
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