Grant income and government assistance

US GAAP has no comprehensive standard for grants received by business entities. Companies account for them by analogy, most commonly to IAS 20 or to the contribution guidance in ASC 958-605, and disclose the policy. Under ASC 832, adopted in 2022, they must also disclose the nature of the assistance, the accounting policy, and the amounts recorded.

The presentation decision is whether grant funding is other income, a reduction of the related R&D expense, or revenue. Grants with no commercial substance from a government or foundation are typically other income or contra-expense. Contracts where the funder receives something in return, such as a BARDA development contract with deliverables, may be customer contracts under ASC 606.

Cost-reimbursement grants are recognized as the qualifying costs are incurred, which creates a receivable and an accrual mechanism that mirrors clinical trial accruals. Grants also carry compliance obligations and audit requirements of their own, particularly federal awards above the single-audit threshold.