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In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832). The new guidance, codified in ASC 832, requires business entities that account for transactions with a government by applying a grant or contribution model by analogy to disclose information about government assistance recorded during the period. ASU 2021-10 is effective for all entities for annual reporting periods beginning after December 15, 2021.
ASC 832 outlines the disclosure requirements for certain transactions with a government. For purposes of applying ASC 832, ASC 832-10-15-5 describes entities that are considered a government.

ASC 832-10-15-5

Transactions with a government, as used in this Topic, include assistance that is administered by domestic, foreign, local (for example, city, town, county, and municipal), regional (for example, state, provincial, and territorial), and national (federal) governments and entities related to those governments. Examples of entities related to governments include departments, independent agencies, boards, commissions, and component units. Government assistance also can be administered by intergovernmental organizations and other types of organizations such as nongovernmental organizations or government-sponsored enterprises that have authority from a government to administer assistance on its behalf.

The disclosure requirements in ASC 832 apply to transactions with a government that are accounted for by analogizing to a grant or contribution accounting model (e.g., ASC 958-605, IAS 20).
If the accounting for a transaction is specified in the scope of other US GAAP, it is not subject to the disclosure requirements in ASC 832. This would include:
  • tax credits accounted for under ASC 740;
  • gain contingencies accounted for under ASC 450;
  • revenue transactions accounted for under ASC 606; and
  • below-market loans or forgivable loans accounted for under ASC 470.
For transactions that are not in the scope of other US GAAP, a reporting entity should assess its accounting policy for that transaction to determine whether it is in the scope of ASC 832. Judgment may be required in the assessment of whether a reporting entity is analogizing to a grant or contribution accounting model.
If a transaction is in the scope of other US GAAP, reporting entities should apply the disclosure requirements within that guidance. Reporting entities should also consider the requirement in ASC 235 to disclose significant accounting policies (refer to FSP 1.2.4) for government assistance transactions that are determined to not be in the scope of ASC 832.
ASC 832-10-50-3 requires business entities to provide disclosures for annual periods that provide information about government assistance that will enable a user to better assess the overall nature of the transaction and its impact on the financial statements.

ASC 832-10-50-3

An entity shall disclose the following about government assistance transactions:
  1. The nature of the transactions, including a general description of the transactions and the form in which the assistance has been received (for example, cash or other assets)
  2. The accounting policies used to account for the transactions as required by paragraph 235-10-50-1
  3. The line items on the balance sheet and income statement that are affected by the transactions, and the amounts applicable to each financial statement line item in the current reporting period.

As discussed in ASC 832-10-50-4, business entities should also disclose information about the significant terms and conditions of a government assistance transaction. Such disclosures may include the following:
  • The duration of the agreement
  • Commitments made by both the reporting entity and the government
  • Provisions for recapturing government assistance, including the conditions under which recapture is allowed
  • Other contingencies
There may be instances when an organization is prohibited by the government from disclosing certain information required by ASC 832-10-50-1 through ASC 832-10-50-4. In these circumstances, ASC 832-10-50-5 requires reporting entities to disclose a description of the general nature of the arrangement and indicate that the specific omitted disclosures are legally prohibited from being disclosed.
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