In order to increase business assistance on government transparency, an update of the proposed accounting standards has been issued by the Financial Accounting Standards Board. The aim of the proposed update is in creating more transparency in government financial reporting, business arrangement and assistance and other profit making organizations the government enters its arrangements with. Presently, there is no explicit guidance on the GAAP government assistance that is received by the business entities such as loan guarantees, grants, low interest loan rates, tax incentives, loan guarantees, tax abatements or assets transfer from governments to businesses. FASB noted that this led to practice diversity and lack of relevant information in financial reporting regarding such arrangements.
The government assistance not directly recognized in line of the financial statements. The anticipated guidance normally applies to an organization entering into an agreement that is legally enforceable for purposes of receiving value. This guidance does not apply to transactions where the government is expected legally to offer nondiscretionary level of assistance to an organization just because the entity meets the applicable requirements of eligibility that are widely available without any particular agreement between the government and the entity or a customer.