Financial Accounting Standards Board Issues New Guidance for Government Grants

In December 2025, the Financial Accounting Standards Board (FASB) issued ASU 2025-10, Accounting for Government Grants Received by Business Entities. This update expands Topic 832 to provide comprehensive guidance on recognition, measurement, and presentation of government grants. Previously, U.S. GAAP offered only disclosure requirements for government assistance, leaving companies to rely on International Financial Reporting Standards (IFRS) or not-for-profit accounting guidance by analogy. ASU 2025-10 closes that gap and introduces a structured approach that aligns closely with IFRS while incorporating U.S. GAAP terminology and thresholds.

Impact on Not-for-Profit Organizations

Although the new guidance applies only to business entities and excludes not-for-profits and employee benefit plans, not-for-profit organizations should still pay attention. Many not-for-profits often collaborate with for-profit entities or participate in joint programs funded by government grants. Understanding this guidance can help not-for-profit boards and finance teams anticipate how their partners report grants, facilitate more transparent collaborations, and prepare for potential future changes in accounting standards. This is particularly relevant for organizations engaged in fiscal sponsorships, social enterprise ventures, or public-private partnerships (PPP).

Recognition and Measurement

Under the ASU, grants are recognized only when it is probable that the entity will comply with grant conditions and receive the funds. Recognition depends on whether the grant relates to an asset or to income. Asset-related grants, such as those tied to constructing or acquiring property, can be accounted for using either a cost accumulation approach — adjusting the asset's carrying amount — or a deferred income approach, which spreads recognition systematically over time. Income-related grants, such as reimbursements for operating expenses, are recognized in earnings as the related costs are incurred. Forgivable loans are treated as grants once the conditions for forgiveness are probable — an approach that will be familiar to organizations that managed PPP loans and similar arrangements.

Presentation and Disclosure

Entities may present grants either as other income or as a reduction of related expenses in the income statement. Disclosure requirements include the nature of the grant, accounting policies applied, affected financial statement line items, and significant terms and conditions. These disclosures aim to provide transparency for stakeholders and align with existing Topic 832 provisions.

Effective Dates and Transition

The guidance becomes effective for public business entities for annual and interim periods beginning after December 15, 2028, and for other entities after December 15, 2029. Early adoption is permitted, and companies may choose modified prospective, modified retrospective, or full retrospective transition methods. Organizations should begin evaluating their government grant portfolios now to determine which transition approach best aligns with their reporting needs and circumstances.

How Citrin Cooperman Can Help

Our dedicated Not-for-Profit Industry Practice is well-equipped to help your organization navigate ASU 2025-10 and understand its implications. Please contact John Eusanio or George Koutris to discuss how we can support your organization.