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The FASB recently issued ASU 2021-10, Government Assistance (Topic 832): Disclosures by Commercial Entities on Government Assistance, which aims to increase transparency by requiring business entities to disclose information about certain types of government assistance they receive in notes to financial statements. ASU 2021-10 also adds a new topic – ASC 832, Government assistance—to the FASB codification.
The disclosure requirements of ASU 2021-10 apply to all entities except not-for-profit entities under ASC 958, Not-for-profit entitiesand employee benefit plans under ASC 960, Plan Accounting – Defined Benefit Pension PlansCSA 962, Plan Accounting – Defined Contribution Pension Plansand 965, Plan Accounting – Health and Welfare Plans.
The disclosure requirements of ASC 832 only apply to transactions with a government that are accounted for by analogy to a grant model (for example, in International Accounting Standard (IAS) 20, Accounting for Government Grants and Disclosure of Government Assistance)or a contribution model (for example, in ASC 958-605, Not-for-Profit Entities – Revenue Recognition). The disclosure requirements do not apply to transactions with a government that are accounted for in accordance with other codification topics, such as ASC 450, contingencies; ASC 470, Debt; CSA 606, Income from contracts with customers; or ASC 740, Income taxes.
The FASB defined “government assistance” broadly in ASC 832 to ensure that assistance received from most types of government entities or other related organizations would be disclosed. Government assistance under ASC 832 includes assistance administered by national, foreign, local (such as city, county, or municipality), regional (such as state, province, or territory) governments , national (federal), as well as entities related to these governments (such as ministries, independent agencies, boards, commissions or component units). CSA 832 also includes government assistance from intergovernmental organizations (for example, global organizations such as the United Nations, regional organizations such as the European Union, and economic organizations such as the World Trade Organization).
ASC 832 requires the following disclosures about government assistance transactions in the notes to the annual financial statements:
- Information about the nature of the transactions, including a general description and the form (cash or other assets, for example) in which the assistance was received
- Accounting policies used to record transactions
- Balance sheet and income statement items affected by the transactions and amounts applicable to each item in the financial statements of the current reporting period
In addition, an entity is required to disclose information about the key terms and conditions of government transactions, which may include
- The duration or period of the agreement
- Any commitments made by the parties
- Provisions relating to recovery, including conditions that allow recovery
- Other eventualities
If an entity is legally prohibited from disclosing any of the information required by ASC 832, the entity must instead disclose a description of the general nature of the transaction and indicate that it is legally prohibited to disclose the omitted information .
Transition and effective date
Entities are required to disclose the new information prospectively for all transactions with a government entity that are accounted for under a grant or contribution accounting model and that are reflected in the financial statements at the date of initial application of the new amendments , and for new transactions. concluded after that date. Retrospective application of the guidelines is permitted.
ASU Guidance 2021-10 applies to financial statements of all entities, including private companies, for annual periods beginning after December 15, 2021, with earlier application permitted.