The IMA® (Institute of Management Accountants) Financial Reporting Committee (FRC or Committee) issued a comment letter in response to the Financial Accounting Standards Board (FASB or Board) Invitation to Comment (ITC), 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 (Proposal).
The FASB issued the Proposal to obtain feedback on International Accounting Standard 20, Accounting for Government Grants and Disclosure of Government Assistance (IAS 20). Specifically, the FASB seeks to understand whether this IFRS Standard provides a workable means of improving U.S. Generally Accepted Accounting Principles (U.S. GAAP). Today, U.S. GAAP does not provide authoritative guidance on how business entities must account for grants received from the government.
In its comment letter, the FRC supports the FASB’s consideration of IAS 20 as a workable solution for U.S. GAAP. In potentially adopting this guidance, however, the Committee recommends that the FASB consider:
- Limiting the options provided in IAS 20 to reduce the possible diversity in application among business entities.
- Addressing the definition of “government” as the definition in FASB Accounting Standards Codification Section 832-10-15, Government Assistance—Overall—Scope and Scope Exceptions, differs from the definition in IAS 20.
- Specifying the classification of government grants within the statement of cash flows.
- Modifying terminology used in IAS 20 to align with the terminology in U.S. GAAP.