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Regulatory Update: New Guidance on Accounting for PPP Funds

By Net Assets posted 06-16-2020 08:53 AM


(From Journal of Accountancy) The American Institute of CPAs has released some guidance on how to account for forgivable loans under the Small Business Administration’s Paycheck Protection Program. The guidance explains that while the legal form of the PPP loan is debt, some believe that the loan is, in substance, a government grant. If a nongovernmental entity that isn’t a nonprofit expects to meet the PPP’s eligibility criteria and concludes that the PPP loan represents, in substance, a grant that is expected to be forgiven, it may analogize to the International Accounting Standards Board’s IAS 20 standard to account for the PPP loan as a form of government assistance.

If there is reasonable assurance that the conditions will be met, the earnings impact of the government grants would be recorded on a systematic basis over the periods in which the entity recognizes as expenses the related costs for which the grants are intended to compensate. Otherwise, there is an argument to be made to say the grant is conditional until formally forgiven. NBOA’s Jennifer Hillen, vice president for professional development and business affairs, recommends that schools work with their auditors, attorney and bank on this now to avoid any surprises later.


More from Journal of Accountancy and The AICPA Technical Question and Answer

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