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Are you ready for the new disclosure requirements for government assistance?

Greencrest on February 25, 2022

Starting in fiscal year 2022, all entities — except nonprofit organizations in the scope of Topic 958, Not-for-Profit Entities, and employee benefit plans — must provide detailed disclosures about government assistance. Here are the details of the new rules.

Defining government assistance

The term “government assistance” may refer to perks and other incentives policymakers provide to lure large companies to establish a business in their states. The goal of these incentives is to drive economic growth by boosting jobs for residents. However, government assistance can take many forms because there are many types of governments, related entities and enterprises authorized by governments to administer assistance for them.

Examples of government assistance transactions include grants of assets, tax assistance, low-interest-rate loans, loan guarantees and forgiveness of liabilities. The COVID-19 pandemic significantly increased the number of entities receiving assistance and the level of government funding provided.

Following new rules

Accounting Standards Update (ASU) 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance, was finalized in November 2021. Previously, there were no explicit accounting rules for government incentives under U.S. Generally Accepted Accounting Principles (GAAP), leading to divergent practices.

The scope of ASU 2021-10 is limited to transactions accounted for by applying a grant or contribution accounting model by analogy. It specifically excludes transactions accounted for under other GAAP, such as:

Topic 450, Contingencies,
Topic 470, Debt,
Topic 740, Income Taxes,
and Topic 606, Revenue from Contracts with Customers (when the government is a customer).

For instance, the new rules don’t apply to Paycheck Protection Program loans provided under the CARES Act, if they’re accounted for under Topic 470, Debt.

Providing enhanced transparency

Under the new rules, the following details must be disclosed about government assistance transactions:

The nature of the transactions and accounting policies used. This includes a general description and whether the assistance was received in cash or other assets.

Financial statement effects. You must disclose all balance sheet and income statement line items where the transactions were recorded and the amount of each line item.

Significant terms and conditions of the transactions. Examples include 1) the agreement length, 2) amounts to be received each year and whether they are fixed or variable, 3) commitments made by the government and the entity, and 4) whether the government can recapture any of the amounts and under what conditions.

If any disclosures aren’t provided because of legal prohibitions on disclosing them, there should be a general description and indication of the legal restriction for the omitted disclosures.

We can help

The new rules are effective for annual periods beginning after December 15, 2021. But early application is permitted. Contact us for more information.

February Short Bits

Greencrest on February 23, 2022

MATH ERRORS

The IRS had a record-setting year in 2021 for sending notices to taxpayers who made math errors on their returns. From January 1 to July 15, about nine million notices were sent out, compared to just over 600,000 for the same period in 2020. Most of the math errors were related to the stimulus payments provided by the pandemic financial relief legislation.

TRAILBLAZING WOMEN

Starting this year and through 2025, the U.S. Mint will release five new quarter designs each year to recognize the accomplishments and contributions of trailblazing American women. The 2022 coins recognize the achievements of Maya Angelou, Dr. Sally Ride, Wilma Mankiller, Nina Otero-Warren, and Anna May Wong.

TEACHING PERSONAL FINANCE

Ohio became the latest state to pass legislation requiring high school students to take a personal finance class before graduation. Beginning in the 2024-2025 school year, Ohio joins other states like Mississippi, North Carolina and Rhode Island with similar education requirements. Topics kids will learn include basic budgeting, opening a bank account and managing student loans.

REMOTE WORK

According to a recent Gallup Poll, 91% of remote employees surveyed reported their desire to continue working from home, while over half support a hybrid at-home and at-office arrangement. And about 30% of workers said they would look for another job if their current employer eliminates remote work. Commute time coupled with wellbeing and flexibility were the top reasons workers mentioned for continuing remote working. And the majority of employees didn’t believe company culture would be harmed without a physical office location.

Pros and Cons of Filing Your Taxes Early

Greencrest on February 17, 2022

Taxes aren’t due until April, but there are some good reasons not to wait, and to file your tax return early.

AVOID LONG LINES

Getting your taxes ready early means you’ll have less competition for getting an appointment with your tax professional. That means less stress for you and your preparer.

PREVENT FRAUD

Filing your return early gives crooks less time to submit a fraudulent return using your identity. Untangling identity theft issues with the IRS is stressful and time-consuming.

MONEY MATTERS

If you need to pay additional taxes, your tax payment is due by April 15. Filing early means you have time to plan how to pay your bill and avoid any last-minute surprises. And if you’re expecting a refund, early filing generally means you’ll get your money sooner.

WAITING GAME

Occasionally, there can be stumbling blocks that prevent you from filing early. For example, although companies have deadlines for providing tax forms like W-2s and 1099s, sometimes they send them late. Or perhaps they send them on time, but there’s an error. So, if you receive a late or corrected form and you’ve already filed, you’ll be forced to amend your return. Luckily, this is not a common occurrence.

You’re Selling Your Business?

Greencrest on February 9, 2022

Selling your business can be a bittersweet experience. While you may be excited for the future, it’s the end of an era. Be sure you don’t overlook these considerations.

STAY INSURED

You’ll still need health insurance, which you’ll likely have to pay for on your own. Also, review your disability and life insurance needs. Policies that your company used to pay for will now have to come out of your pocket.

TAX SAVINGS

Work with your tax professional to create a plan to minimize the taxes you’ll owe from the sale. That could include making donations to your favorite charity, gifting money to children and grandchildren or setting up a donor-advised fund.

FREEDOM PLANNING

If you’re retiring, planning for your new free time is just as important as the financial decisions you’ll need to make. Without the routine of working, you may feel lost. Take ample time to prioritize how you want to fill your days to stave off boredom and loneliness. You may find that it takes a year or more to settle into a new routine.

Keep Your Business Safe From Fraud

Greencrest on February 2, 2022

Sadly, fraudsters are continually looking for ways to make a quick buck at your company’s expense, so make sure you’re taking steps to protect your business from all types of threats.

LOOK INSIDE

Preventing fraud from the inside involves ensuring employees’ duties are adequately segregated. Make sure that more than one person has responsibility for each process. And consider requiring vacations. That will give you a chance to complete an audit in an employee’s absence to ensure everything is working as intended.

ONLINE AWARENESS

Outsiders can take control of your entire network, knocking you offline and locking you out of your files until you pay them a fee. Protect your company from cyber fraud by using secure and private internet connections. When employees travel, provide them with data hotspots, so they don’t need to rely on public internet options. And keep all software, firewalls, and antivirus software updated to prevent hacks and ransom attacks.

ON-PREMISE

Protecting your office goes beyond the cybersphere. Having a secure entry system helps to keep unwanted visitors out. Consider limiting employees’ access to sensitive areas. For example, allowing only IT managers access to the server room.

Take a look at how your sensitive documents are stored. Human resources and accounting should have locking file cabinets to secure private information and, ideally, you should have locking offices for those employees.

INSURE IT

No precaution is foolproof, and that’s why having adequate insurance is a must. Business crime, identity theft, and cyber threat insurance may prove invaluable should your company become a victim.

You may be able to secure these policies as add-ons to your general liability policy, so speak with your insurance agent to ensure you have the right coverage for your company.

For more information and articles visit Whalen’s ClientLine Monthly – clientlinenewsletter

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