---
title: "Granting Clarity: What You Need to Know About ASU 2025-10, FASB's New Government Grant Guidance"
description: What you need to know about ASU 2015-10 and FASB's new government grant guidance.
image: https://blog.sweeneyconrad.com/hubfs/AdobeStock_498661850.jpeg
---
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# Granting Clarity: What You Need to Know About ASU 2025-10, FASB's New Government Grant Guidance
By Kori Okamoto | Apr 22, 2026
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INSIGHTS/BLOG
In December 2025, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2025-10, *Accounting for Government Grants Received by Business Entities.* This update modifies and provides more guidance surrounding Topic 832, *Government Grants,* for entities that receive government assistance. This update is intended to reduce diversity in practice and improve consistency and transparency in financial reporting.
#### Who Is Affected by This Update?
The guidance in the Update applies to all business entities, other than not-for-profit entities and employee benefit plans, that receive a government grant.
#### Key Provisions of ASU 2025-10
The Update applies to two common types of government grants:
(1) Grants related to assets, such as for property, plant, and equipment, or inventory; and
(2) Grants related to income, including grants that reimburse operating expenses or subsidies for ongoing business activities.
A business entity should only recognize a government grant when **all** of the following conditions are met:
(1) It is **probable** that the entity will be in compliance with the conditions attached to the grant and the grant will be received; and
(2) The entity meets the applicable recognition guidance for a grant related to an asset or to income.
#### Accounting for Asset-Related Grants
The update permits two accounting approaches for asset-related grants, for which entities may select the approach that best reflects the economics of the grant agreement. Under the deferred income approach, the grant is recorded as deferred income on the balance sheet and recognized in earnings on a **systematic and rational basis** over the periods in which the related costs covered by the grant are incurred. The expenses recognized for the asset-related grant would be for depreciation, gain or loss on sale, or impairment.
Under the cost accumulation approach, the carrying amount of the asset is adjusted to include the grant proceeds. Therefore, there is no subsequent recognition of grant proceeds in earnings, as it’s included in the carrying value of the asset that will then be depreciated over time.
#### Accounting for Income-Related Grants
Government grants related to income are recognized in earnings over the same periods as the related expenses, provided the recognition threshold is met. This approach enhances matching of grant income with the associated expenses.
For public business entities, the ASU is effective for annual reporting periods beginning after December 15, 2028. For entities other than public business entities, the ASU is effective for annual reporting periods beginning after December 15, 2029. Early adoption is permitted. The amendments in the Update can be applied in a modified prospective approach, a modified retrospective approach, or a retrospective approach.
#### How Can Companies Prepare?
Companies that currently receive, or are expecting to receive, government grants can begin inventorying existing grant arrangements, evaluating accounting policy elections under the new and improved guidance, and consider early adoption and transition strategy.
If you have questions about how ASU 2025-10 may affect your business or would like assistance in evaluating your government grant accounting, please reach out to your Sweeney Conrad contact.
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