Governments provide different forms of assistance to entities, and the forms of assistance have varying structures, complexities, and terms. Government assistance can include tax credits, cash grants, grants of other assets, and project grants. Often, government assistance is provided to an entity for a particular purpose, and the entity promises to take specific actions. Generally accepted accounting principles (GAAP) do not provide comprehensive recognition and measurement guidance for many forms of government assistance received by business entities.
This Topic provides guidance on disclosures for transactions with a government that are accounted for by applying a grant or contribution accounting model by analogy.
(P) December 16, 2028; (N) December 16, 2029
832-10-65-2This Topic provides guidance on the accounting for government grants received by business entities.The Scope Section of the Overall Subtopic establishes the scope for this Topic.
If an entity determines that the accounting for a transaction with a government is not specified within the scope of authoritative generally accepted accounting principles (GAAP), paragraph 105-10-05-2 requires that the entity first consider accounting principles for similar transactions or events within an authoritative source of GAAP for that entity and then consider nonauthoritative guidance from other sources. (P) December 16, 2028; (N) December 16, 2029
832-10-65-2The guidance in this Topic applies to all government grants received by entities within the scope of this Topic.The guidance in this Topic applies to entities that have accounted for transactions with a government by analogizing to a grant or contribution accounting model (for example, a grant model within IFRS Standards or a contribution model within Subtopic 958-605 on not-for-profit entities—revenue recognition). (P) December 16, 2028; (N) December 16, 2029
832-10-65-2The guidance in this Topic does not apply to the following:- a
Transactions within the scope of Topic 740 on income taxes (for example, nonrefundable, nontransferable income tax credits) - b
The benefit of below-market interest rate loans
- c
Government guarantees.
(P) December 16, 2027; (N) December 16, 2028
818-10-65-1The guidance in this Topic does not apply to the following:- a
Transactions within the scope of Topic 740 on income taxes (for example, nonrefundable, nontransferable income tax credits) - b
The benefit of below-market interest rate loans
- c
Government guarantees
- d
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.
(P) December 16, 2028; (N) December 16, 2029
832-10-65-2A government grant, as used in this Topic, includes grants that are 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. A government grant 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 grants on its behalf.(P) December 16, 2028; (N) December 16, 2029
832-10-65-2An entity shall not recognize a government grant until: - a
It is probable that both of the following criteria are met: - 1
The entity will comply with the conditions attached to the government grant.
- 2
The government grant will be received.
- b
(P) December 16, 2028; (N) December 16, 2029
832-10-65-2Receipt of a government grant does not, in and of itself, provide conclusive evidence that the conditions attached to the government grant have been or will be fulfilled. A government grant receivable or liability may be recognized because of differences in the timing between when an entity receives a government grant and when the guidance in paragraph 832-10-25-1 has been met. An entity shall not recognize a receivable on the balance sheet unless and until the recognition guidance in paragraph 832-10-25-1 is met. (P) December 16, 2028; (N) December 16, 2029
832-10-65-2A forgivable loan shall be treated as a government grant when the entity meets the guidance in paragraph 832-10-25-1, including when it is probable that the entity will meet the terms for forgiveness of the loan. (P) December 16, 2028; (N) December 16, 2029
832-10-65-2An entity shall recognize a grant related to an asset on the balance sheet as the entity incurs the related costs for which the government grant is intended to compensate using either of the following approaches: - a
Separately recognize the grant as deferred income. (This is referred to as the deferred income approach.)
- b
Reflect the grant as an adjustment to the cost basis in determining the carrying amount of the asset. (This is referred to as the cost accumulation approach.)
(P) December 16, 2028; (N) December 16, 2029
832-10-65-2A grant related to an asset that is accounted for using the deferred income approach shall be recognized in earnings on a systematic and rational basis over the periods in which the entity recognizes as expenses the related costs for which the government grant is intended to compensate. The expenses that are recognized for a grant related to an asset could include depreciation, gain or loss on sale, or impairment. (P) December 16, 2028; (N) December 16, 2029
832-10-65-2A government grant related to a nondepreciable asset that is accounted for using the deferred income approach shall be subsequently recognized in earnings on a systematic and rational basis over the periods in which the entity incurs the costs to which the grant relates. (P) December 16, 2028; (N) December 16, 2029
832-10-65-2For a grant related to an asset that is accounted for using the cost accumulation approach, there is no separate subsequent recognition of the government grant proceeds in earnings because they have been reflected in the carrying amount of the asset. The carrying amount of the asset that includes the government grant proceeds shall be used to determine depreciation or other subsequent accounting for that asset. (P) December 16, 2028; (N) December 16, 2029
832-10-65-2A government grant may take the form of a transfer of a tangible nonmonetary asset, such as land or other resources. The receipt of a tangible nonmonetary asset that is determined to be a grant related to an asset shall be recognized in accordance with paragraphs and measured in accordance with paragraph 832-10-30-1. (P) December 16, 2028; (N) December 16, 2029
832-10-65-2A grant related to income shall be recognized in earnings on a systematic and rational basis over the periods in which the entity recognizes as expenses the related costs for which the grant is intended to compensate. (P) December 16, 2028; (N) December 16, 2029
832-10-65-2A grant related to income that provides an entity with compensation for expenses or losses previously incurred or for the purpose of giving immediate financial support to the entity with no future related costs shall be recognized in earnings in the period in which the entity meets the guidance in paragraph 832-10-25-1.(P) December 16, 2028; (N) December 16, 2029
832-10-65-2If the deferred income approach is elected in accordance with paragraph 832-10-25-4(a), the receipt of a tangible nonmonetary asset that is determined to be a grant related to an asset shall be initially measured at fair value when the grant is recognized on the balance sheet. If the cost accumulation approach is elected in accordance with paragraph 832-10-25-4(b), the receipt of a tangible nonmonetary asset that is determined to be a grant related to an asset shall be recognized at the cost to the entity.(P) December 16, 2028; (N) December 16, 2029
832-10-65-2A government grant that becomes repayable shall be accounted for as follows:- a
Repayment of a grant related to income shall be applied first against the unamortized deferred income recognized related to the grant. To the extent that the repayment exceeds the unamortized deferred income or when no deferred income exists, the repayment shall be recognized immediately in earnings. - b
Repayment of a grant related to an asset shall be recognized by increasing the carrying amount of the asset (if the cost accumulation approach is applied) or by reducing the deferred income balance (if the deferred income approach is applied) by the amount repayable. When applying the cost accumulation approach, all related expenses such as the cumulative depreciation (or change in previously recognized gain or loss on sale) that would have been recognized in earnings to date in the absence of the government grant shall be recognized immediately in earnings. If the deferred income approach is applied, to the extent that the repayment exceeds the unamortized deferred income, the repayment shall be recognized immediately in earnings.
(P) December 16, 2028; (N) December 16, 2029
832-10-65-2If repayment of a grant related to an asset results in a new carrying amount of the asset, an entity shall consider the new carrying amount when evaluating the asset for impairment, determining depreciation, and determining other subsequent accounting for that asset. (P) December 16, 2028; (N) December 16, 2029
832-10-65-2A grant related to an asset that is accounted for using the deferred income approach in accordance with paragraph 832-10-25-4(a) shall be presented on the balance sheet as deferred income and presented as part of earnings in either of the following ways: - a
Separately under a general heading such as other income
- b
Deducted from the related expense (for example, depreciation, gain or loss on sale, or impairment).
(P) December 16, 2028; (N) December 16, 2029
832-10-65-2A grant related to an asset that is accounted for using the cost accumulation approach in accordance with paragraph 832-10-25-4(b) shall be presented on the balance sheet as part of the carrying amount of the asset. There shall be no separate subsequent presentation of the government grant proceeds in earnings because they have been reflected in the carrying amount of the asset.(P) December 16, 2028; (N) December 16, 2029
832-10-65-2A grant related to income shall be presented as part of earnings in either of the following ways: - a
Separately under a general heading such as other income
- b
Deducted from the related expense.
An entity shall provide the disclosures required by this Topic for annual periods.
The objective of disclosures about an entity's transactions with a government within the scope of this Topic is to provide information that enables an investor or other financial statement user to better assess all the following:- a
The nature of the transactions, the related accounting policies used to account for the transactions, and the effect of the transactions on an entity's financial statements
- b
Significant terms and conditions of the transactions.
(P) December 16, 2028; (N) December 16, 2029
832-10-65-2The objective of disclosures about a government grantis to provide information that enables an investor or other financial statement user to better assess all the following:- a
The nature of the grant, the related accounting policies used to account for the grant, and the effect of the grant on an entity's financial statements
- b
Significant terms and conditions of the grant.
An entity shall disclose the following about transactions with a government within the scope of this Topic:- a
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)
- b
The accounting policies used to account for the transactions as required by paragraph 235-10-50-1 - c
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.
(P) December 16, 2028; (N) December 16, 2029
832-10-65-2| Editor's Note: Paragraph 832-10-50-3 will be amended upon transition, together with its heading: |
| > Nature of the Government Grant, Related Accounting Policies, and Effect on Financial Statement Amounts |
An entity shall disclose the following about a government grant:- a
The nature of the grant, including a general description of the grant and the form in which the grant has been received (for example, cash or tangible nonmonetary assets)
- b
The accounting policies used to account for the grant as required by paragraph 235-10-50-1(for example, for a grant related to an asset, whether the deferred income approach or the cost accumulation approach is applied or for a grant related to income, whether the grant is presented separately under a general heading such as other income or deducted from the related expense). - c
(P) December 16, 2028; (N) December 16, 2029
832-10-65-2For a grant related to an asset that is accounted for using the deferred income approach in accordance with paragraph 832-10-25-4(a) or a grant related to income, an entity shall disclose the line items on the balance sheet and income statement that are affected by the grant and the amounts applicable to each financial statement line item in the current reporting period. (P) December 16, 2028; (N) December 16, 2029
832-10-65-2For a grant related to an asset that is accounted for using the cost accumulation approach in accordance with paragraph 832-10-25-4(b), an entity shall disclose, in the period in which the government grant is recognized on the balance sheet, the following:- a
The line items on the balance sheet that are affected by the grant and the amounts applicable to each financial statement line item
- b
The useful life of any related depreciable or amortizable asset.
(P) December 16, 2028; (N) December 16, 2029
832-10-65-2An entity shall disclose the fair value of a tangible nonmonetary asset that is received as a government grant in the period in which the grant is recognized on the balance sheet, even if the cost accumulation approach is applied.An entity shall disclose information about the significant terms and conditions of transactions with a government within the scope of this Topic. Terms and conditions that might be appropriate to disclose include, but are not limited to, any of the following:- a
The duration or period of the agreement
- b
Commitments made by both the reporting entity and the government
- c
Provisions, if any, for recapture (for example, when the government can recapture amounts awarded), including the conditions under which recapture is allowed
- d
Other contingencies.
(P) December 16, 2028; (N) December 16, 2029
832-10-65-2An entity shall disclose information about the significant terms and conditions of a government grant. Terms and conditions that might be appropriate to disclose include, but are not limited to, any of the following:- a
The duration or period of the grant
- b
Commitments made by both the reporting entity and the government
- c
Provisions, if any, for recapture (for example, when the government can recapture amounts awarded), including the conditions under which recapture is allowed
- d
Other contingencies.
(P) December 16, 2028; (N) December 16, 2029
832-10-65-2The Implementation Guidance and Illustrations Section is organized as follows:- a
Implementation guidance is provided in paragraphs . - b
Illustrations are provided in paragraphs .
(P) December 16, 2028; (N) December 16, 2029
832-10-65-2Paragraphs are an integral part of this Topic. These paragraphs provide additional guidance that addresses the application of the guidance on government grants.(P) December 16, 2028; (N) December 16, 2029
832-10-65-2Different terms can be used to describe various types of government assistance (for example, grants, awards, or subsidies). Therefore, an entity should consider the individual facts and circumstances to determine whether assistance received from a government meets the definition of a government grant and, therefore, is within the scope of this Topic.(P) December 16, 2028; (N) December 16, 2029
832-10-65-2A government grant is received in the form of a monetary asset or a tangible nonmonetary asset from a government. Examples of a government grant include the following:- a
A transfer of cash to fund future expenditures or reimburse expenditures already incurred (for example, capital expenditures, wages, training and other employee-related costs, research and development expenses, or other operating expenses)
- b
A transfer of a tangible nonmonetary asset such as a long-lived asset (for example, a building, land, or equipment)
- c
The proceeds of a forgivable loan when an entity meets the guidance in paragraph 832-10-25-1, including when it is probable that the entity will meet the terms for forgiveness of the loan - d
A refundable tax credit that is not within the scope of Topic 740 on income taxes.
(P) December 16, 2028; (N) December 16, 2029
832-10-65-2The scope of the guidance in this Topic is limited to government grants and, therefore, excludes the following:- a
The transfer of an intangible asset or provision of a service
- b
A reduction of an entity’s liabilities (for example, sales, property, payroll, or other tax abatement)
- c
Government participation in the ownership of an entity
- d
A contribution to a business entity from a nongovernmental source within the scope of Subtopic 958-605 on not-for-profit entities—revenue recognition - e
A transaction within the scope of Topic 606 on revenue from contracts with customers or Subtopic 610-20 on other income—gains and losses from the derecognition of nonfinancial assets.
(P) December 16, 2028; (N) December 16, 2029
832-10-65-2In most cases, the period over which an entity recognizes the costs or expenses related to a government grant is readily ascertainable. Thus, a government grant that is intended to reimburse specific expenses should be recognized in earnings on a systematic and rational basis over the periods in which the entity recognizes the relevant expenses. Similarly, a government grant related to a depreciable asset that is accounted for using the deferred income approach in accordance with paragraph 832-10-25-4(a) should be recognized in earnings on a systematic and rational basis over the periods in which depreciation expense on that asset is recognized (in the absence of impairment or disposal).(P) December 16, 2028; (N) December 16, 2029
832-10-65-2Government grants may be received as part of a package of financial or fiscal aid that contains a number of conditions. In such cases, judgment is needed to identify the conditions related to the costs that determine the periods over which the government grant will be recognized. (P) December 16, 2028; (N) December 16, 2029
832-10-65-2Entity A is awarded a government grant of $5 million to assist with the cost of purchasing a building, which is the only condition attached to the grant. The government grant proceeds will be received after the purchase of the building. When the building is purchased, Entity A has incurred the related costs for which the government grant is intended to compensate and determines that the probable criteria in paragraph 832-10-25-1(a)(1) through (a)(2) have been met. The building has a useful life of 40 years.(P) December 16, 2028; (N) December 16, 2029
832-10-65-2Entity A can elect to recognize the government grant as deferred income on the balance sheet using the deferred income approach in accordance with paragraph 832-10-25-4(a) or reflect the government grant as an adjustment to the cost basis in determining the carrying amount of the building using the cost accumulation approach in accordance with paragraph 832-10-25-4(b). (P) December 16, 2028; (N) December 16, 2029
832-10-65-2If Entity A elects the deferred income approach, it should recognize the government grant as deferred income. Once the building is placed into service, Entity A begins recognizing the government grant of $5 million in earnings on a systematic and rational basis over the 40-year period in proportion to the depreciation expense recognized in accordance with paragraphs 832-10-25-5 and 832-10-55-6. Entity A may elect to present the grant in earnings either separately under a general heading such as other income or deducted from the related expense (for example, depreciation). Entity A should revise the pattern of recognition if the building is disposed of or impaired.(P) December 16, 2028; (N) December 16, 2029
832-10-65-2If Entity A elects the cost accumulation approach, it should reflect the government grant as an adjustment to the cost basis in determining the carrying amount of the building. Once the building is placed into service, there is no subsequent separate recognition of the government grant proceeds in earnings. The carrying amount of the building, which reflects the government grant proceeds, should be used to determine the depreciation expense or subsequent accounting in accordance with paragraph 832-10-25-7.(P) December 16, 2028; (N) December 16, 2029
832-10-65-2Entity B is awarded a government grant of $2 million for qualifying expenditures associated with the research and development of a new drug. Entity B will receive cash from the government on a cost-reimbursement basis by submitting proof that it has incurred qualifying expenditures. Entity B determines that the probable criteria in paragraph 832-10-25-1(a)(1) through (a)(2) have been met because it is probable that it will comply with the condition of the government grant (to incur qualifying expenditures) on the basis of its detailed project plan and budget and that the grant will be received. (P) December 16, 2028; (N) December 16, 2029
832-10-65-2Entity B incurs the qualifying expenditures associated with the research and development of a new drug over a 2-year period and recognizes the government grant of $2 million on a systematic and rational basis over the 2-year period as those costs are incurred in accordance with paragraphs and 832-10-55-6. No government grant proceeds would be recognized in earnings until Entity B incurs the related expenses. In addition, a receivable would not be recognized on the balance sheet unless and until Entity B incurs the qualifying expenditures associated with the research and development of a new drug.(P) December 16, 2028; (N) December 16, 2029
832-10-65-2Entity B can elect to present the government grant proceeds either separately under a general heading such as other income in accordance with paragraph 832-10-45-3(a) or as a deduction from the related expenses in accordance with paragraph 832-10-45-3(b).Paragraph superseded on 07/10/2023 after the end of the transition period stated in Accounting Standards Update No. 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance.
The following represents the transition and effective date information related to Accounting Standards Update No. 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities:Effective date and early adoption
- a
The pending content that links to this paragraph shall be effective for a public business entity for annual reporting periods beginning after December 15, 2028, and interim reporting periods within those annual reporting periods. - b
For an entity other than a public business entity, the pending content that links to this paragraph shall be effective for annual reporting periods beginning after December 15, 2029, and interim reporting periods within those annual reporting periods.
- c
Early adoption of the pending content that links to this paragraph is permitted in both interim and annual reporting periods in which financial statements have not yet been issued or made available for issuance. If an entity adopts the pending content that links to this paragraph in an interim reporting period, it shall adopt the pending content as of the beginning of the annual reporting period that includes that interim reporting period.
Transition method
- d
An entity shall apply the pending content that links to this paragraph using one of the following transition methods:
- 1
A modified prospective approach for both:
- i
- ii
Government grants that are not complete as of the effective date. A government grant is complete when substantially all of the government grant proceeds have been recognized before the effective date of the pending content that links to this paragraph.
Prior-period results shall not be restated, and there shall be no cumulative-effect adjustment to the opening balance of retained earnings as of the beginning of the year of adoption. - 2
A modified retrospective approach for both:
- i
Government grants that are entered into on or after the beginning of the earliest period presented.
- ii
Government grants that are not complete as of the beginning of the earliest period presented. A government grant is complete when substantially all of the government grant proceeds have been recognized before the beginning of the earliest period presented in which the pending content that links to this paragraph is adopted.
All prior period results shall be restated for government grants that are not complete as of the beginning of the earliest period presented through a cumulative-effect adjustment to the opening balance of retained earnings as of the beginning of the earliest period presented. - 3
A retrospective approach to all government grants through a cumulative-effect adjustment to the opening balance of retained earnings as of the beginning of the earliest period presented.
- e
For purposes of the transition guidance in (d)(1)(ii): A grant related to an asset that was accounted for by reflecting the grant as an adjustment to the cost basis in determining the carrying amount of the asset before the effective date is considered recognized when substantially all of the grant is reflected in the carrying amount of the asset on the balance sheet. For all other government grants, a government grant is considered recognized when substantially all of the government grant proceeds have been recognized in the income statement before the effective date of the pending content that links to this paragraph.
- f
For purposes of the transition guidance in (d)(2)(ii): A grant related to an asset that was accounted for by reflecting the grant as an adjustment to the cost basis in determining the carrying amount of the asset before the beginning of the earliest period presented is considered recognized when substantially all of the grant is reflected in the carrying amount of the asset on the balance sheet. For all other government grants, a government grant is considered recognized when substantially all of the government grant proceeds have been recognized in the income statement before the beginning of the earliest period presented.
- g
An entity shall apply the pending content that links to this paragraph prospectively to government grants acquired in business combinations that occur after the effective date of the pending content.
Transition disclosures
- h
An entity that applies the pending content that links to this paragraph using a modified prospective approach in accordance with (d)(1) shall disclose the nature of and reason for the accounting change.
- i
An entity that applies the pending content that links to this paragraph using a modified retrospective approach or a retrospective approach in accordance with (d)(2) or (d)(3) shall provide the transition disclosures required by paragraphs in the period of adoption, except for the requirements in paragraph 250-10-50-1(b)(2) for the current reporting period and the requirements in paragraph 250-10-50-1(b)(4) through (c)(1).