Accounting for Government Grants Under GAAP: A Practical Framework for Broadband Providers

A practical framework for broadband providers to account for government grants under evolving GAAP, including ASC 832 adoption, policy selection, and audit-ready implementation

Article 5 of 5, Theme 2: Technical Accounting and Audit Alignment for Broadband Providers

Federal and state funding continues to reshape the broadband industry, and with it comes complex accounting questions. How should government grants be recorded? When is income recognized? Where and how should grants appear in the financial statements?

For broadband CFOs and controllers, the accounting treatment affects reported results, EBITDA, cash flow forecasting, and investor messaging. Unlike nonprofits, where the framework is clearer, broadband providers organized as for-profit entities have historically faced a patchwork of GAAP options that required careful evaluation and consistency.

With the FASB’s new guidance now finalized, the landscape is shifting. This article provides a structured framework designed to help finance leaders navigate accounting for government grants under GAAP.

Step 1: Determine grant type – exchange vs. non-exchange

The first step is assessing whether the grant is an exchange transaction (direct commensurate benefit) or a non-exchange contribution (funds broadband expansion without a direct benefit to the government). This article focuses on non-exchange grants, which represent most broadband funding.

Exchange transactions

Rare in broadband infrastructure funding, where the government receives a direct, commensurate benefit.
Accounted for under Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers.

Non-exchange transactions

Most broadband grants fall into this category.
Historically accounted for using guidance applied by analogy:

• • ASC 958-605, Contributions—Not-for-Profit Guidance
  • International Accounting Standard (IAS) 20, Accounting for Government Grants and Disclosure of Government Assistance

Step 2: Select your framework until adoption of ASC 832 – ASC 958-605 vs. IAS 20

Before ASC 832 is adopted, companies must continue applying their elected framework consistently.  Companies often elected an accounting approach by analogy:

ASC 958-605 (Not-for-Profit guidance): Grant income recognized when conditions are met (e.g., eligible costs incurred, milestones completed), creating a conditional contribution model. This approach is conservative, familiar to auditors, and compliance oriented. It can, however, cause revenue lag and EBITDA volatility.
IAS 20 (International Standard, acceptable under GAAP by analogy): Income-related grants recognized systematically over the cost period. asset-related grants recorded as deferred income or as a reduction of the asset. Provides smoother recognition and aligns with cost recovery.

Practical tip: Some broadband providers apply ASC 958 for income grants and IAS 20 for asset-related grants. This dual approach is acceptable if applied consistently and disclosed; auditors will focus on the rationale for the election and consistency across reporting periods.

Note: With the issuance of ASU 2025-10, reliance on these analogies will phase out once ASC 832 becomes effective (or is early adopted); see Step 3 for details.

Step 3: Adopt ASC 832 (Government Grants) final guidance issued

On December 4, 2025, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities. This standard provides explicit GAAP rules for for-profit entities receiving government grants and replaces the prior practice of applying IAS 20 or ASC 958 by analogy.

Key elements of the issued standard:

Scope: Applies to non-exchange government grants. Excludes ASC 606 contracts, tax abatements, government guarantees, and certain transferable credits.
Recognition threshold: A grant is not recognized until it is probable that (1) the entity will comply with the grant conditions and (2) the grant will be received.
Grant types:

• • Income-related grants – recognized in earnings on a systematic and rational basis over the periods in which related costs are expensed (after meeting the recognition threshold).
  • Asset-related grants – follow either the cost accumulation approach (reduce the asset’s carrying value) or the deferred income approach (record as deferred income and amortize).

Presentation: Grant proceeds may be shown separately (e.g., in a general heading such as “other income”) or as a reduction of the related expense.
Effective dates: Public business entities must adopt for annual periods beginning after December 15, 2028. Private companies follow one year later (December 15, 2029), with Early adoption permitted.

Finance teams should begin assessing how adoption of ASU 2025-10 could affect existing grant accounting policies.

For background on the original exposure draft and its implications for for-profit entities, see our November 2024 analysis: For-Profit Businesses: FASB Proposes Accounting Changes for Government Grants.

Step 4: Map grant terms to the framework

Once the policy election is made, map the grant’s terms to the chosen framework:

Allowable vs. unallowable costs – Only reimbursable costs support recognition, creating a grant receivable and related income. Non-reimbursable costs remain ordinary expenses. Clear segregation is essential to avoid misstating results and to support audit review.
Timing conditions – Identify the recognition trigger: costs incurred, milestones, or approvals.
Clawback provisions – Consider both unspent funds that must be returned and the possibility of clawbacks on previously spent amounts if compliance obligations are not met.
Asset linkage – Assess whether proceeds fund long-lived network assets (e.g., fiber optic cables, outside plant equipment) versus operating expenditures (e.g., workforce training, affordability programs).

Broadband Equity, Access, and Deployment (BEAD) Program Nuance

Federal interest period: Assets acquired with BEAD funding are subject to a 10-year federal use restriction starting after the subgrant is closed (see Uniform Guidance Policy Notice Primer, Oct. 2024). For accounting purposes, these restrictions mean the grant proceeds are linked to specific assets, which affects timing of recognition and the potential classification of deferred income.
Program income flexibility: Subgrantees may retain revenues from BEAD-funded networks, including subscriptions and wholesale access. Retained income is not part of reimbursable costs, so it does not trigger a receivable under the grant. Only eligible, reimbursable project expenditures drive grant recognition.
Fixed amount subawards: States and territories can issue subawards over $250,000 for broadband infrastructure projects without additional National Telecommunications and Information Administration (NTIA) approval. Since these awards are based on milestones or results rather than cost reimbursement, accounting recognition may differ from traditional reimbursable grants. The same BEAD match and reporting requirements still apply, so tracking eligible costs remains critical.

Step 5: Build the accounting flow

CFOs should work with controllers to map journal entries aligned with the selected framework:

The journal entries below are illustrative; actual accounts may vary depending on the company’s chart of accounts.

ASC 958-605 (conditional contribution)

Debit: Grant Receivable
Credit: Grant Revenue (when conditions are met), or
Deferred revenue if cash is received before conditions are satisfied.

IAS 20 income grant model

Debit: Cash / Receivable
Credit: Deferred Grant Income
Amortized into income as related costs are recognized.

IAS 20 asset grant model

Debit: Cash / Receivable
Credit: Deferred Grant Income (liability) or reduction of asset’s carrying amount
Amortize over the asset’s useful life.

Checklist: Ensure the chart of accounts allows clear segregation of grant-related activity.

Step 6: Prepare for disclosures

Entities must disclose information that helps users understand the nature and effects of government grants.

Nature of Assistance – Grant type, purpose, and form (cash, asset, project-specific).
Accounting Policies – Recognition model chosen (e.g., ASC 958, IAS 20, deferred income).
Financial Statement Effects – Affected line items and amounts recognized.
Significant Terms and Conditions – Award duration, obligations, and clawback risks.
Restrictions on Disclosure – Note if certain details cannot be disclosed due to legal/contractual limits.

Step 7: Strengthen audit-readiness and internal controls

Common audit and reporting challenges include:

Mixing reimbursable and non-reimbursable costs – Segregation must be clear.
Lack of documentation on policy election – Auditors need to understand the rationale.
Inconsistent application – Switching models mid-project or across grants creates control risk.
Insufficient disclosure – GAAP requires transparency on policy election, grant balances, and recognition approach.

Robust internal controls are key to audit readiness and financial clarity:

Segregate and track all grant-related accounts, deferred income, milestones, and clawback obligations.
Maintain documentation of policy elections and rationale.
Automate recognition schedules to reduce manual error.

Step 8: Consider tax implications

While GAAP may allow deferral of grant income, tax treatment may differ:

Broadband grants from governmental entities are generally taxable in the year received under Section 118, following the 2017 Tax Cuts and Jobs Act, which clarified that contributions from governmental entities are not excluded as capital contributions.
Large grants may create immediate cash tax obligations before revenues ramp up (e.g., a $50M grant could trigger a $10.5M tax bill at a 21% federal rate).
Coordinate with tax advisors and consider legislative changes—do not assume GAAP deferral reduces taxable income. (For example, the Broadband Grant Tax Treatment Act, reintroduced in 2025, would exempt qualifying grants from federal taxation if passed.)
Grant-funded assets may also have local property tax implications; see our article on grant-funded capitalized infrastructure projects for guidance.

Tax Trap Alert
Do not assume GAAP deferral means tax deferral. Grants are generally taxable when received. CFOs should model tax obligations early to avoid surprises.

The bottom line

Accurate accounting for government grants strengthens compliance, cash flow forecasting, and credibility with funders, investors, and regulators.

The practical framework for CFOs and controllers includes:

Determine exchange vs. non-exchange classification. Document your existing accounting policy election until ASC 832 is adopted.
Assess the impact of ASU 2025-10.
Map grant terms to the selected framework.
Build and automate accounting flows.
Prepare for disclosures.
Strengthen audit-readiness and internal controls.
Coordinate with tax advisors on timing and asset reporting.

Supporting broadband providers

Our team works closely with broadband providers navigating the complexities of government grant accounting. We help finance teams:

Evaluate grant structures and determine the appropriate accounting framework under current GAAP.
Prepare for adoption of ASC 832 and assess its impact on existing policies.
Align accounting treatment with grant terms, including timing, allowable costs, and asset classification.
Design and implement internal controls and documentation to support audit readiness.
Coordinate accounting and tax considerations to avoid unexpected outcomes.

To learn how Keiter can support your team, contact your Keiter Opportunity Advisor | Email | Call 804.747.0000.

Looking ahead

In upcoming articles, we will focus on internal controls and scaling considerations for broadband providers, including strengthening segregation of duties, improving system and procurement controls, and addressing common audit pain points. We will also explore tax implications of broadband expansion, investor-driven considerations, and how to build reporting and cybersecurity frameworks that support growth, compliance, and transaction readiness.

• Article 1: Pre-Award and Pursuit Costs
• Article 2: Are You Categorizing Your Network Costs Correctly?
• Article 3: Tracking Construction-in-Progress and Capital Costs
• Article 4: Broadband Revenue Recognition: ASC 606 Blindspots

Resources and Further Reading

• FASB Standards and Guidance – U.S. GAAP authoritative literature:

  Key topics relevant to broadband grant accounting include:

  • ASC 606, Revenue from Contracts with Customers

  • ASC 958-605, Contributions—Not-for-Profit Guidance

  • ASC 832, Government Assistance

  • FASB Past meetings: June 25, 2025. Financial Accounting Foundation.

  • FASB Accounting Standards Update 2021-10—Government Assistance (Topic 832): Disclosures By Business Entities About Government Assistance

  • FASB Exposure Draft, Government Grants (Topic 832)—Accounting For Government Grants By Business Entities

  • FASB 2025-10

• IAS 20, Accounting for Government Grants and Disclosure of Government Assistance [IFRS]

• Section 118, Internal Revenue Code [Cornell Law]

• National Telecommunications and Information Administration (NTIA)

  • BEAD Policy Notice of Uniform Guidance Part 200 Exceptions and Related Issues. (December 2023)

  • BEAD Initial Proposal Funding Request General Terms and Conditions (April 2024)

  • Uniform Guidance Policy Notice Primer. (May 2025).

• Broadband Grant Tax Treatment Act, H.R. 1873, 119th Cong. (2025).