In November 2021, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) 2021-10, Government Assistance, Disclosures by Business Entities about Government Assistance, with the goal of improving financial statement transparency regarding certain types of government assistance by increasing the disclosure of such information.
Under the new ASU, “government assistance” captures most types of assistance and includes examples of tax credits, cash grants, or grants of other assets. However, ASU clarifies that the new disclosure requirements do not apply to government transactions that are accounted for in accordance with other codification topics, such as classifying the transactions as debt in ASC 470, income taxes in ASC 740, or as revenue from contracts with customers in ASC 606.
The NAIC followed a similar approach in making revisions to SSAP No. 24—Discontinued Operations and Unusual or Infrequent Items. The Working Group concluded these additional disclosures will not be applicable for transactions in the scope of other SSAPs (e.g., as debt per SSAP No. 15—Debt and Holding Company Obligations); instead, SAPWG determined to supplement existing disclosures to require that if a reporting entity experiences unusual or infrequent items, and those items are a result of government assistance, the transaction will require identification and a description of the terms and provisions of the assistance received, and do so within the existing SSAP disclosures.
This change is not expected to affect transactions related to Paycheck Protection Program (PPP) loans. PPP transactions are in scope of SSAP No. 15, with loans recorded as liabilities and, once forgiven, recorded as a capital gain.