FASB discusses business entities’ disclosures about government assistance

Published on: 28 Jul 2015

At its meeting on July 24, 2015, the FASB continued deliberating its project1 on entities’ disclosures about government assistance. The Board discussed many aspects of the project and reaffirmed and clarified a number of decisions reached at its December 2014 meeting. The FASB also directed its staff to draft a proposed Accounting Standards Update (ASU) with a 90-day comment period. The staff indicated that it expects the proposed ASU to be ready late in the third quarter or early in the fourth quarter of this year.


As the Board decided previously, the project’s scope would be limited to contractual arrangements that give an entity “value or benefit from the government.”2 Two exceptions are situations in which the government is the entity’s customer and the entity is receiving a benefit available under the law exclusively because it met the legal requirements to receive such a benefit.

At the meeting, the Board reaffirmed the project’s scope but asked the staff to clarify that entities would perform a scope assessment on the basis of a contract or a legally enforceable agreement. It requested this clarification because “[g]enerally, the agreement is negotiated and the government has some discretion over which entities to provide the assistance to and how much to give even if an entity meets the eligibility requirements.”3 The Board also tentatively decided to include in the proposed ASU illustrative examples of arrangements that typically would (and would not) result in legally enforceable agreements.

Disclosure Objectives

The Board’s tentative decisions generally reaffirmed the project’s disclosure objectives, under which entities would be required to provide information about existing government assistance agreements that enable a user of the entity’s financial statements to consider:

  • The nature of the government assistance to the entity and the entity’s related accounting policies.
  • The legally enforceable agreement’s significant terms and conditions.
  • The effects of government assistance on a reporting entity’s financial statements (including the potential effects on future periods of assistance that have not been recognized in the financial statements).

Annual and Interim Disclosures

The Board decided that in a manner consistent with the project’s objectives, entities should disclose (1) the accounting policies adopted and methods applied to account for government assistance and (2) the balance sheet and income statement line items for government assistance (i.e., the Board purposefully limited disclosures to this financial statement information). In addition, the Board tentatively decided “not to require quantitative disclosure of amounts of government assistance expected to affect future periods under existing agreements based on predictions, forecasts, or other similar assertions about uncertain or unknown future events that are beyond management’s control.”4 The Board also decided not to amend ASC 270.5

Materiality and Level of Aggregation of Disclosures

Rather than specifying how entities would consider materiality in determining (1) which disclosures should be included and (2) the level at which disclosures should be aggregated, the Board decided that the proposed ASU would refer entities to the decisions reached in the Board’s disclosure framework project and its proposed changes to ASC 235.6

Confidentiality Concerns

In response to its outreach, the Board reported that some stakeholders expressed concerns about potentially being forced to disclose sensitive information. As a result, the Board tentatively decided that in the proposed ASU it would solicit feedback about any perceived impediments to providing the required disclosures.

Private-Company Considerations

The Board decided not to prescribe alternative disclosure requirements for private companies.


The Board decided that an entity would apply the proposed disclosures on a “modified prospective basis” to (1) all existing legally enforceable agreements at the beginning of the period of adoption and (2) new legally enforceable agreements entered into after the date of adoption.

Further, the Boards agreed to permit entities to adopt the proposed disclosures on a full retrospective basis in accordance with ASC 250.7


1 As described on the FASB’s project page, the purpose of the project is to “develop disclosure requirements about government assistance that improves the content, quality and comparability of financial information and financial statements and that is responsive to the emerging issues in the changing financial and economic environment in which reporting entities operate.”

2 The FASB’s project page notes that the term “government” would include domestic and foreign local, regional, and national governments, related governmental entities, and intergovernmental organizations.

3 Quoted from the FASB staff’s summary of its July 24, 2015, tentative decisions.

4 See footnote 3.

5 FASB Accounting Standards Codification Topic 270, Interim Reporting.

6 FASB Accounting Standards Codification Topic 235, Notes to Financial Statements.

7 FASB Accounting Standards Codification Topic 250, Accounting Changes and Error Corrections.

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