March 31, 2025
Jackson M. Day
Technical Director
Financial Accounting Standards Board
801 Main Avenue (P.O. Box 5116)
Norwalk, CT 06856-5116
File Reference No. 2024-ED700
Sent via email: [email protected]
Proposed Accounting Standards Update, Accounting for Government Grants by Business Entities (Topic 832)
Dear Mr. Day:
The Virginia Society of CPAs (VSCPA) Accounting & Auditing Advisory Committee (Committee) has reviewed the Exposure Draft (ED) Accounting for Government Grants by Business Entities (Topic 832), issued by the Financial Accounting Standards Board (FASB). The VSCPA is the leading professional association in Virginia dedicated to enhancing the success of all CPAs and their profession by communicating information and vision, promoting professionalism, and advocating members’ interests. The VSCPA membership consists of nearly 12,000 individual members who actively work in public accounting, private industry, government, and education.
The Committee generally supports the FASB’s project to provide specific authoritative guidance for the recognition, measurement, and presentation of government grants by business entities. Guidance in GAAP on the accounting for government grants would reduce diversity in practice and increase consistency among business entities. In general, the FASB proposes to codify some existing practices by incorporating certain aspects of International Accounting Standards 20, Government Grants, with amendments to Accounting Standards Codification Topic 832.
However, the Committee does not support the proposal for the following reasons:
a. Sub-topic 958-605 already provides significant guidance on governmental and non-governmental grants. It is not clear why separate guidance is needed. (Question 1)
b. The Committee believes there is no substantial difference between a grant related to an asset and a grant related to income. The basis for an alternative approach for the accounting of a grant related to an asset under the cost accumulation approach (v. the deferred income approach) is not well defined. Also, proposing alternative approaches is not congruent with the objective of increasing consistency and comparability. (Questions 2,4)
c. The non-recognition of grant revenue under the cost accumulation approach does not provide useful financial statement information on the grant. Further, the option to record the related asset net of the grant proceeds is inconsistent with the guidance in ASC 360. (Questions 4,9,10)
d. The proposed recognition threshold of “probable” for government grant recognition raises significant auditing challenges, given the subjective and often unclear conditions of government grants. To promote consistency in application, additional implementation guidance and examples are required. (Question 2)
e. The option to report revenue, expenses, or assets on a “net basis” is less useful than reporting the transactions on a gross basis. (Questions 7,9)
f. The measurement of a nonmonetary asset should be at fair value, consistent with the measurement in other US GAAP requirements such as ASC 958-605. (Question 6)
The responses to the specific questions are included in the attachment.
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The VSCPA appreciates the opportunity to respond to this ED. Please direct any questions or concerns to VSCPA Vice President, Advocacy & Pipeline Emily Walker, CAE, at [email protected] or (804) 612- 9428.
Sincerely,
Michael Phillips, CPA
Chair 2024-2025
VSCPA Accounting & Auditing Advisory Committee
VSCPA Accounting & Auditing Advisory Committee 2024-2025
Michael Phillips, CPA —Chair
Daniel Martin, CPA — Vice Chair
Zach Borgerding, CPA
Joshua Keene, CPA
Nick Kinsler, CPA
Brian Minor, CPA
Elisa Obillo, CPA
Krisia Raya, CPA
Charles Valadez, CPA
Natalya Yashina, CPA