The Financial Accounting Standards Board published a updating of accounting standards Wednesday, which aims to improve the transparency of financial reporting by requiring companies to disclose information about certain types of government assistance they receive, such as cash grants and other assets, in the notes of their financial state.
The changes require a certain amount of annual information about transactions with a government that is accounted for by applying a grant or contribution accounting model with reference to some of the existing accounting guidelines, such as a grant model in FASB Topic 958, ” Not-for- Recipient Entities ”or International Accounting Standards 20,“ Accounting for Government Grants and Disclosure of Government Assistance: ”
- Information on the nature of the transactions and the associated accounting method used to record the transactions;
- The balance sheet and income statement items that are affected by the transactions, and the amounts applicable to each balance sheet item; and,
- Important terms and conditions of transactions, including commitments and contingencies.
The new update to accounting standards comes as many companies find they will have to take into account the help they have received from federal, state and local government sources in the wake of the COVID-19 pandemic.
“The new ASU responds to the demands of investors and other capital distributors by adding information that will provide transparent and comparable information on certain types of government assistance that entities receive,” FASB Chairman Richard Jones said in a statement. communicated. “This in turn will help them make more informed decisions. “
The changes in the update take effect for all entities included in their scope, which excludes nonprofits and employee benefit plans, for financial statements published for annual periods open after December 15, 2021. The FASB authorizes the early application of the update.