By Allison M. Henry, CPA, CGMA, vice president- professional and technical standards
U.S. Generally Accepted Accounting Principles (GAAP) do not currently contain guidance addressing for-profit entities that receive government assistance. At its May meeting, the Financial Accounting Standards Board (FASB) addressed this issue and indicated that the AICPA would be releasing a Q&A to provide additional advice. The resulting guidance, Q&A 3200.18: Borrower Accounting for a Forgivable Loan Received Under the Small Business Administration Paycheck Protection Program, provides significant flexibility for for-profit entities that expect to meet the Paycheck Protection Program (PPP) eligibility criteria and have the loan forgiven. The advice includes applying FASB Accounting Standards Codification (ASC) 470, Debt; International Accounting Standard (IAS) 20, Accounting for Government Grants and Disclosure of Government Assistance; ASC 450, Gain Contingencies; or ASC 958 – 605, Not-for-Profit Entities. Not-for-profits, however, should follow ASC 958-605 as a conditional contribution if the PPP loan is expected to be forgiven. In all cases, ASC 470 applies if the loan is expected to be repaid.
Watch my video below for more details on the new guidance.
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