Earlier this week the Governmental Accounting Standards Board released new questions and answers designed to clarify how subsidies should be treated relative to revenue types.
"The recently released implementation guide helps stakeholders better understand how to determine what qualifies as a subsidy and how subsidies should be presented, answering some common questions we have received," said a GASB spokesman.
GASB is an independent, private-sector organization that establishes accounting standards for state and local governments that follow Generally Accepted Accounting Principles.
The clarification comes as part of the Subsidies, Implementation Guide No. 2026-1 Financial Reporting Model Improvements.
The guide is designed to pilot practitioners through the provisions of Statement
The improvements are built on the foundation of Statement No. 34 which is now 25 years old. The fine tuning is ongoing and has been in process for over 10 years.
The improvements address priorities that include management's discussion and analysis, unusual or infrequent items, presentation of proprietary funds statements, major component unit information, and budgetary comparison information.
Defining subsidies and figuring out how to account for them comes into play in the presentation of proprietary funds and addresses whether subsidies should be counted as operating or non-operating revenues and expenses. GASB determines that subsidies are non -operating.
The
Higher education entities receiving donations from parties who do not receive goods or services in return are covered in the first question. Other questions cover changes to tuition rates, derived tax revenues and research grants.
Treating research grants correctly depends on the facts and circumstances of the transaction.
"In many cases, research grants would not meet the definition of subsidies because the grantor is receiving a good or service from the higher education institution as a result of the research grant," said GASB.
"If goods or services are not provided to the grantor as a result of the research grant, the grant may meet the definition of subsidies if the grant proceeds received would allow the higher education institution to directly or indirectly keep the tuition or other charges lower than they would be otherwise."
Passenger Facility Charges collected by airports should be considered as subsidies.
Updating the standards relies on feedback from those working in the field. "We look forward to continued engagement with stakeholders as they implement these and other topics covered in Statement 103 in the months ahead," said GASB.
The requirements of the guide are effective for fiscal years beginning after June 15, 2026, and all reporting periods thereafter.
