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FASB Proposes Rule on Recognizing Government Grants

S.J. Steinhardt
Published Date:
Jun 5, 2024

iStock-826741128 Accounting Standards

The Financial Accounting Standards Board (FASB) has proposed a rule on how companies account for government grants in their financial reports, The Wall Street Journal reported.

While this move is intended to help investors compare businesses with each other, most companies already recognize grants in their reports by applying an existing International Accounting Standards Board (IASB) standard on government-aid accounting. 

The proposal focuses on the transfer of both monetary assets, such as cash and loans expected to be forgiven, as well as physical assets, such as buildings, land and equipment between a government and a company. A finalized rule would not apply to certain loans, government guarantees or tax credits.

A rule that the FASB set in 2021 in response to the wave of government assistance amid the COVID-19 pandemic required companies to disclose details about the nature of the grant, its terms and conditions, and the line items in the financial statements affected by the transaction. Despite this existing rule, the absence of more specific requirements has made it difficult for investors to compare the underlying accounting of grants across public companies, the Journal explained.

Board members Joyce Joseph, Fred Cannon and Christine Botosan said the new proposal’s costs would exceed the benefits. “In my view, this proposal doesn’t do anything to improve the information that investors will receive,” Botosan said, the Journal reported. “Instead of cleaning up the mess that is IAS 20, we’re codifying that mess,” she added, referring to the international standard. 

There are no specific U.S. rules on such accounting, the Journal reported.“It’s hard to believe, in our five volumes of accounting literature, that’s one of the few topics we don’t have guidance telling people how to do the accounting,” FASB Chair Rich Jones said in an interview last December. “Plugging that hole and working on that project is important particularly as we see the rise of government grants.” 

“Very often it’s easier to say, ‘Let’s just drop it’ than to have some hard decisions,” said Jones, referring to the reasons for the lack of a proposal over the decades.

Businesses received 4,841 new grants from the U.S. government last year, down by 2  percent from the annual average over the prior decade, according to, a public website that tracks federal spending, the Journal reported. 

The FASB aims to issue a formal proposal in the fall and ask the public for feedback over a 90-day period, a spokeswoman told the Journal.

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