United States: FASB Considers Proposal On Required Financial Statement Disclosure Of Government Assistance

Currently, U.S. generally accepted accounting principles (GAAP) do not have explicit requirements for government assistance disclosure.1 On July 24, 2015, the Financial Accounting Standards Board (FASB) considered a requirement that companies disclose in the footnotes of their financial statements the types and amounts of government assistance they receive. FASB has directed its staff to draft a proposed Accounting Standards Update (ASU), which would then be subject to a 90-day comment period before going final.2


In July 2012, a Securities and Exchange Commission (SEC) staff report comparing International Financial Reporting Standards to GAAP concluded that GAAP lacked explicit requirements for government assistance disclosure. As such, FASB conducted an outreach effort to connect with various stakeholders of public and private companies to determine if companies utilized a consistent reporting method. Following this initiative, FASB concluded that reporting government financial assistance is inconsistent and diverse among financial statement preparers.3 FASB determined that this inconsistency inhibits financial statement analysts to perform trend analysis, make comparisons among companies, and make informed decisions about an entity. To mitigate these inconsistencies, FASB is considering a potential requirement that business entities disclose government assistance to provide uniformity and transparency to the market. Specifically, the objective is to provide the reviewer of financial statements the ability to assess the following:

  • Nature of the assistance and related accounting policies used to account for government assistance;
  • Significant terms and conditions of the legally enforceable agreement;
  • Effect of government assistance on a reporting entity's financial statements; and
  • Assistance that has not been recognized in the financial statements but may have an effect on the financial statements in future periods.4

Information to Be Reported

Under the proposed change, companies would not be required to report all government assistance. The FASB proposal considers any benefit that is readily available and eligible by general law for all companies to be outside the scope of financial statement disclosure (including statutory incentives that are available as of right, fast-track permits and fee waivers).5 Also generally excluded from disclosure would be contracts with governments in which the government is solely a customer.

However, the FASB proposal considers government assistance received through negotiation and covered under legally enforceable agreements to be eligible for financial statement disclosure. This type of government assistance may include, but is not limited to, negotiated government assistance such as grants, loans or tax incentives.6

Interestingly, the Board decided not to prescribe alternative disclosure requirements for private companies, nor to require specific interim disclosure requirements.7

Under the proposal, companies would need to examine government assistance in the aggregate rather than on a case-by-case basis.8 For example, if a company has three separate facilities, each with a property tax abatement, the company would be required to report on the combined rather than the individual requirements. The following example is instructive:

The disclosure would also include the following information:

  • A description of how the accounting policies relate to the nature of the agreements and include:

    • The nature of the assistance, including a general description of the significant categories, such as grants, loans, or tax incentives and mechanisms by which the assistance has been received;
    • The accounting policy used to account for government assistance; and
    • Where the government assistance is presented on the balance sheet and income statement and the amounts recognized.
  • Significant terms and conditions of the agreement. This could include, but is not limited to the following

    • The duration or period of the agreement, the tax rate, or interest rate;
    • Commitments made by both the reporting entity and the government;
    • Any provisions for recapturing government assistance, including the conditions under which recapture is allowed; and
    • Other contingencies.
  • Amounts not recognized in an entity's financial statements but that affect cash flows in the current period.9

Consideration of Materiality

FASB is considering the concept of materiality and level of aggregation of information. The level of materiality and level of aggregation of information required to be disclosed has yet to be formally agreed upon as FASB is deliberating on these issues.10 However, when considering what to report annually, a company should follow the general precept of financial reporting that requires a consideration of whether or not any omission of disclosure would cause the financial statements to be materially misstated as a whole.

Transition Provisions

The FASB proposal would apply the disclosures on a modified prospective basis for financial statements prepared following the effective date of the standards update. However, retrospective application also would be permitted. Agreements affected would include:

  • All agreements existing at the beginning of the current period; and
  • All agreements entered into after the beginning of that period.11


If adopted, these changes would allow financial statement users a potential benefit with the proposed disclosure requirements. These changes would make financial statements more transparent by allowing financial statement users to analyze how much of a company's income is generated from government assistance. Further, users would be able to easily compare companies' government assistance disclosure in the financial statements. However, while greater transparency may provide more information for financial statement users, this proposed standard may provide more issues with respect to a company's private matters.

Recipients of negotiated government assistance may not favor the proposed standard. Successfully negotiating a benefit normally provides a competitive advantage for the recipient. By making this information available via disclosure, competitors may be able to level the playing field by requesting and ultimately attaining the same government assistance. Companies that receive government assistance might be concerned with the possibility that enhanced disclosure could affect government spending or endanger ongoing or future negotiations with the government. The Board stated that the ASU would "include a question" about any impediments, legal or otherwise, that may exist in government assistance agreements that would preclude disclosure otherwise required by the ASU.12

Furthermore, if these changes are adopted, companies which are relatively active in securing government assistance programs should consider formalizing a compliance and tracking system to better understand the level of benefits associated with such programs, the value of the benefits, and the financial impact to the business.

Finally, this FASB project should be viewed in conjunction with the pending issuance by the Government Accounting Standards Board (GASB) of new disclosure rules requiring state and local governmental entities to reveal how much revenue is forfeited via tax relief programs.13 Both projects have proven to be controversial to the parties involved in such agreements and to reflect the perceived lack of current disclosures.


1. Minutes of July 24, 2015 Board Meeting on Disclosures by Business Entities about Government Assistance, Financial Accounting Standards Board, Aug. 6, 2015; Board Meeting Handout: Disclosures by Business Entities about Government Assistance, Financial Accounting Standards Board, July 24, 2015. The minutes include the following disclaimer: "The Board meeting minutes are provided for the information and convenience of constituents who want to follow the Board's deliberations. All of the conclusions reported are tentative and may be changed at future Board meetings. Decisions become final only after a formal written ballot to issue an Accounting Standards Update or a Statement of Financial Accounting Concepts." The handout provides the following disclaimer: "The staff prepares Board meeting handouts to facilitate the audience's understanding of the issues to be addressed at the Board meeting. This material is presented for discussion purposes only; it is not intended to reflect the views of the FASB or its staff. Official positions of the FASB are determined only after extensive due process and deliberations."

2. According to FASB's Web site, the estimated completion of the exposure draft is the fourth quarter of 2015.

3. Board Meeting Handout: Disclosures by Business Entities about Government Assistance, Financial Accounting Standards Board, July 24, 2015, at 3.

4. Minutes of July 24, 2015 Board Meeting on Disclosures by Business Entities about Government Assistance, Financial Accounting Standards Board, Aug. 6, 2015, at 2.

5. Id.

6. Id. at 3.

7. Id. at 4.

8. Board Meeting Handout: Disclosures by Business Entities about Government Assistance, Financial Accounting Standards Board, July 24, 2015, at 8.

9. Minutes of July 24, 2015 Board Meeting on Disclosures by Business Entities about Government Assistance, Financial Accounting Standards Board, Aug. 6, 2015, at 3. Note that the Board decided not to require quantitative disclosure of amounts of government assistance expected to affect future periods under existing agreements based on predictions or forecasts about uncertain or unknown future events that are beyond management's control.

10. Id. at 4. According to FASB, the proposed amendments should refer to the guidance on materiality that is based on the decisions in the Disclosure Framework Project and the proposed changes to Topic 235, Notes to Financial Statements.

11. Id.

12. Id.

13. See proposed GASB Statement No. 77, Tax Abatement Disclosures.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.