IAS 20 vs US GAAP: government grants

Grants for new factories, research, training and green investment are a large part of many governments' industrial policy, and for years US GAAP had nothing to say about how a business should account for them. That is changing. This guide compares IAS 20 with US GAAP and ASU 2025-10 side by side, works through a below-market government loan under both, and covers asset grants, nonmonetary grants, repayment, transition and what US companies do until the new guidance applies.

By Mirza Fahad Baig, Chartered Accountant (ICAP). Reviewed by Hamza Fida, Chartered Accountant (ICAP). Updated . 7 minute read.

Short answer

IAS 20 vs US GAAP used to be a comparison with one side missing: US GAAP had no recognition guidance for government grants to business entities, so many companies applied IAS 20 by analogy. ASU 2025-10, issued in December 2025, fills the gap with guidance in Topic 832 that is closely modelled on IAS 20. Both recognize a grant when the company is expected to comply with its conditions and receive it, with IAS 20 using reasonable assurance and US GAAP using probable. Both spread grants over the periods in which the related costs are recognized, and both let companies either show asset grants as deferred income or deduct them from the asset's cost, which US GAAP calls the deferred income approach and the cost accumulation approach. The main differences are in scope: US GAAP excludes the benefit of a below-market loan, grants of intangible assets and grants to not-for-profit entities, which stay under ASC 958. ASU 2025-10 applies to public business entities for annual periods beginning after December 15, 2028, and to others a year later. In this guide's example, a CU 1,000 thousand government loan at 1% carries a grant of CU 134 thousand under IFRS and none under US GAAP.

At a glance

Principle
Same, near-twins
Threshold
Assurance vs probable
Asset grants
Both allow netting
Low-rate loans
Grant under IFRS only
US rules apply
2029 for public
Not-for-profits
Stay on ASC 958
IAS 20 vs US GAAP: government grantsPrinciple: Same, near-twins; Threshold: Assurance vs probable; Asset grants: Both allow netting; Low-rate loans: Grant under IFRS only; US rules apply: 2029 for public; Not-for-profits: Stay on ASC 958.KEY FACTS AT A GLANCEIAS 20 vs US GAAP: government grantsPrincipleSame, near-twinsThresholdAssurance vs probableAsset grantsBoth allow nettingLow-rate loansGrant under IFRS onlyUS rules apply2029 for publicNot-for-profitsStay on ASC 958Tax BakersIAS 20 vs US GAAP: government grantsPrinciple: Same, near-twins; Threshold: Assurance vs probable; Asset grants: Both allow netting; Low-rate loans: Grant under IFRS only; US rules apply: 2029 for public; Not-for-profits: Stay on ASC 958.KEY FACTS AT A GLANCEIAS 20 vs US GAAP: governmentgrantsPrincipleSame, near-twinsThresholdAssurance vs probableAsset grantsBoth allow nettingLow-rate loansGrant under IFRS onlyUS rules apply2029 for publicNot-for-profitsStay on ASC 958Tax Bakers
Key facts at a glance, as set out in this guide.

What do IAS 20 and US GAAP have in common?

ASU 2025-10 was drafted with IAS 20 in mind, so the core model is the same. A grant is recognized only when the company expects to meet the conditions attached to it and to receive it, receipt alone does not prove the conditions are met, and the grant is recognized in profit systematically over the periods in which the company recognizes the costs the grant is meant to compensate. A grant for costs already incurred is recognized when it becomes receivable. Grants related to income can be shown as other income or deducted from the related expense under both. See IAS 20 government grants.

IAS 20 vs US GAAP: what are the differences?

IAS 20 vs US GAAP at a glanceIAS 20 vs US GAAP at a glanceTOPICIFRSUS GAAPRecognition thresholdReasonable assuranceProbableReduce asset cost by the grantAllowedAllowedRecognize below-market loan benefitRequiredOut of scopeGrants of intangible assetsIn scopeOut of scopeGrant recognition rules in forceRequiredFrom 2029
ASU 2025-10 follows IAS 20 closely; the scope is narrower.
AreaIAS 20US GAAP: ASU 2025-10, Topic 832
Who applies itAll entities applying IFRSBusiness entities; not-for-profit entities keep applying ASC 958-605
Recognition thresholdReasonable assurance of complying with the conditions and receiving the grantProbable that the conditions will be met and the grant received
Grants related to assetsDeferred income, or deducted from the carrying amount of the assetDeferred income approach, or cost accumulation approach that reduces the asset's cost basis, as a policy for similar grants
Nonmonetary grants, such as landFair value, or a nominal amountFair value under the deferred income approach; the company's cost, if any, under the cost accumulation approach
Below-market government loansThe benefit, the difference between the cash received and the loan's IFRS 9 fair value, is a grantOutside the scope of Topic 832; the loan is generally recorded at the cash received
Grants of intangible assets or servicesIn scope, such as licenses, at fair value or a nominal amountOutside the scope, as are tax credits, guarantees and tax abatements
Repayment of a grantA change in estimate: against deferred income first, the rest in profit or loss, with catch-up depreciation for asset grantsThe same pattern, followed by a review of the asset for impairment and depreciation
In forceSince the 1980sAnnual periods beginning after December 15, 2028 for public business entities, a year later for others

An example: a below-market government loan

A company receives a 3-year government loan of CU 1,000 thousand at 1% interest, repayable at maturity, to fund training costs, when its market borrowing rate is 6%. Under IFRS, the loan is recognized at its fair value of CU 866 thousand, the present value of the payments at 6%, and the CU 134 thousand difference is a government grant, held as deferred income and recognized as the training costs are incurred. Under US GAAP, the benefit is outside Topic 832 and US GAAP does not usually impute interest on loans whose rates are set by a government, so the loan is recorded at CU 1,000 thousand with interest at 1%. All figures are in CU thousand.

Year 1IFRSUS GAAP
Loan recognized on day one8661,000
Deferred grant income on day one134None
Interest expense in year 152 at 6%10 at 1%
Grant income, if the training is completed in year 1134None

Over the life of the loan the total cost is the same, CU 30 thousand of interest actually paid, but IFRS shows a higher interest expense and a matching grant, which is income in the year the training happens, while US GAAP shows only the 1% coupon. For the equipment grant in the IAS 20 guide, a CU 600 thousand grant towards a CU 2,400 thousand machine with a 4-year life, the two frameworks give the same answer: CU 150 thousand of income a year under deferred income, or depreciation of CU 450 thousand a year if the grant reduces the cost.

What do US companies do until ASU 2025-10 applies?

Without specific guidance, business entities have chosen a policy by analogy, most often IAS 20, the contribution model for not-for-profit entities in ASC 958-605, or the gain contingency guidance in ASC 450-30, which delays recognition until all conditions are met. Whatever the analogy, the government assistance disclosures added to Topic 832 by ASU 2021-10 already apply to business entities that account for a grant by analogy to a grant or contribution model. Early adoption of ASU 2025-10 is permitted, with a choice of modified prospective, modified retrospective or full retrospective transition. See IAS 37 vs ASC 450 for the gain contingency model.

Where do grants matter most?

Manufacturing incentives, research funding and farm subsidies are the common cases. See government grants in manufacturing, government funding for pharma research and agricultural grants, which IAS 41 treats differently for biological assets measured at fair value.

Where to go next

See IFRS vs US GAAP key differences and the IFRS vs US GAAP cheat sheet.

Keep going

Our free Excel models work through the examples in these guides, and the comparisons show where IFRS and US GAAP part ways. Every guide names the Chartered Accountant who wrote it and the one who reviewed it.

All IFRS vs US GAAP guides Free Excel models

Questions people ask

What is the difference between IAS 20 and US GAAP for government grants?

The model is now very similar, because ASU 2025-10 is based on IAS 20; the main differences are scope, such as below-market loans and intangible assets, which US GAAP excludes, and the recognition threshold, reasonable assurance under IFRS and probable under US GAAP.

What is ASU 2025-10?

An update issued in December 2025 that adds recognition, measurement and presentation guidance to Topic 832 for government grants received by business entities, effective for public business entities for annual periods beginning after December 15, 2028.

What are the deferred income approach and the cost accumulation approach?

The two US GAAP options for grants related to assets: recognize the grant as deferred income released over the asset's life, or deduct it from the asset's cost so it reduces depreciation.

Is a below-market government loan a grant under US GAAP?

No. The benefit of a below-market loan is outside the scope of Topic 832, while IAS 20 treats it as a grant measured against the loan's fair value.

Sources

The standards, updates and other documents this guide draws on.

  1. IFRS Foundation: IAS 20 Accounting for Government Grants and Disclosure of Government Assistance
  2. FASB Accounting Standards Codification: Topic 832, Government Grants
  3. Crowe: FASB issues final ASU on government grants for businesses (ASU 2025-10)
  4. Journal of Accountancy: FASB publishes guidance on accounting for government grants, December 2025

Rules and fees change. If you are reading this long after October 26, 2026, confirm the figures with the source before you rely on them.

IAS 20IAS 20 government grantsManufacturingGovernment grants for manufacturersAccounting standardsIFRS vs US GAAP: the key differences in one guide

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