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ABA: The American Bankers Association
Comment Letter

ABA Letter to FASB on Government Grants

  • From Josh Stein
  • Published March 31, 2025

RE: File Reference No. 2024-ED700. Re: Government Grants (Topic 832) Accounting for Government Grants by Business Entities
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Dear Mr. Day:

The American Bankers Association (ABA) welcomes the opportunity to comment on the exposure draft - Proposed Accounting Standards Update (ASU) on Government Grants (Topic 832) Accounting for Government Grants by Business Entities ("the Exposure Draft," or "ED"). The Exposure Draft seeks to establish specific recognition, measurement, and presentation guidance for a business entity that receives a government grant. Currently, Accounting Standards Codification (ASC) Topic 832 provides disclosure requirements for government assistance without specific accounting. Rather, entities apply the most relevant accounting standards based on the nature of the transaction.

Under the ED, a government grant would be recognized when it is probable that both (1) the conditions attached to the grant will be met and (2) the grant will be received. The ED differentiates government grants as either a grant related to an asset, or a grant related to income. A grant related to income is recognized in earnings on a systematic and rational basis over the periods in which the related expenses are recognized ("deferred income approach"). The ED provides the option to apply the amounts as either income (on a "gross" basis) or as a reduction of expenses (on a "net" basis). Grants related to assets may be accounted for under the deferred income approach or as a reduction to the carrying amount of the asset ("cost accumulation approach").

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