Dive Brief:

• The Financial Accounting Standards Board issued new standards providing specific guidance for how companies should account for government grants they receive, according to a Thursday press release from U.S. accounting standards setter. The rules go into effect for annual reporting periods beginning after Dec. 15, 2028 for public companies and a year later for private firms.   
• The standards fill a gap in the generally accepted accounting principles that has raised questions for many companies that had previously turned to international rules for guidance on the matter, even though they were uncertain whether such approaches were acceptable, according to the Accounting Standards Update 2025-10 for Government Grants (Topic 832) published this week. 
• “During the more than 50 years that the FASB has existed, there has been a lack of authoritative GAAP guidance on how to account for government grants received by business entities,” FASB Chair Richard Jones said in a statement in the release.“The new ASU adds guidance in an area where stakeholders have consistently highlighted a need for it, benefiting both preparers and investors.”

Dive Insight:

The ASU is the 10th issued this year to date, with the new guidance’s publication marking the culmination of one of the FASB’s years-long projects. When the FASB undertook the initiative, the board cited the rise of government programs during the pandemic as a driver of the push to provide specific standards.

The rules apply to all business entities, except for non-profits and employee benefit plans, which receive a government grant it defined as “a transfer of a monetary asset or a tangible nonmonetary asset,” according to the rules. Some of the main provisions of the update state that a government grant shouldn’t be recognized until it is “probable” it will be received, and that businesses should disclose the nature of the grant received, the accounting policies used to account for it and its terms and conditions.

Last year, the FASB opted to effectively borrow the accounting framework for the project from an existing International Financial Reporting Standards (IAS 20) rule, a move that at the time drew opposition from Board Member Christine Botosan who said she believed that the international standards were too loose and wanted to improve upon them, CFO Dive previously reported. But Jones said he felt the approach was helpful. “One thing I know is by doing nothing we don’t make any progress,” Jones said in an April meeting last year. 

The newly published ASU states that the board included “targeted improvements” to the IAS 20 guidance in areas where stakeholders said it was “challenging to apply.”