FASB ISSUES Accounting Standards Update 2025-10 GOVERNMENT GRANTS (Topic 832) Accounting for Government Grants Received by Business Entities – December 2025

Summary

 Why Is the FASB Issuing This Accounting Standards Update?

 The FASB is issuing this Update to improve generally accepted accounting principles (GAAP) by establishing authoritative guidance on the accounting for government grants received by business entities.

GAAP does not provide specific authoritative guidance about the recognition, measurement, and presentation of a grant received by a business entity from a government. In the absence of specific guidance, many business entities analogize to the guidance in International Accounting Standard (IAS) 20, Accounting for Government Grants and Disclosure of Government Assistance, or, less commonly, the guidance in Topic 450, Contingencies, and Subtopic 958-605, Not-for-Profit Entities—Revenue Recognition. When applying that guidance by analogy, business entities may not apply all aspects of that guidance. Stakeholders observed that the lack of specific authoritative guidance on the accounting for government grants has led to questions about the acceptability of certain accounting approaches and has resulted in diversity in practice.

In November 2021, the FASB issued disclosure guidance in Accounting Standards Update No. 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance, to address requests from investors for increased transparency about government grants. Even with the disclosure requirements established in Update 2021-10, stakeholders continued to highlight the lack of specific guidance about recognition, measurement, and presentation as an area for potential improvement.

Stakeholder feedback, particularly from practitioners and preparers, including the respondents to the 2021 FASB Invitation to Comment, Agenda Consultation (2021 Agenda Consultation), the 2022 Invitation to Comment, Accounting for Government Grants by Business Entities—Potential Incorporation of IAS 20, Accounting for Government Grants and Disclosure of Government Assistance, into Generally Accepted Accounting Principles (2022 2 GG ITC), and the 2024 proposed Accounting Standards Update, Government Grants (Topic 832): Accounting for Government Grants by Business Entities, expressed support for developing specific authoritative guidance for recognition, measurement, and presentation of government grants. Those stakeholders noted that having guidance in GAAP on the accounting for government grants would reduce diversity in practice and increase consistency among business entities.

To view more of this article in The Cooperative Account, Spring 2026, please visit Connect