Guidance from the AICPA on Accounting for Forgivable PPP Loans
June 15, 2020
Businesses, including nonprofits, that qualified for a forgivable loan from the Small Business Administration through the Paycheck Protection Program (PPP) have been given accounting guidance by the American Institute of Certified Public Accountants (AICPA). The guidance addresses how a borrower under the program should account for the loan.
The guidance states that the legal form of the PPP loan is debt and may be accounted for in accordance with existing financial liability guidance. A business should:
If a commercial business entity expects to meet the PPP’s criteria for forgiveness of the loan amount and concludes the PPP funds represent, in substance, a government grant, the commercial business entity may:
If a nonprofit expects to meet the PPP’s eligibility criteria and views it as a grant that will be forgiven, to account for the loan, the nonprofit may account for the PPP loan as a conditional contribution rather than a financial liability by:
If you have questions on the accounting guidance issued by the AICPA, please contact your Smith and Howard advisor by completing the contact form below.
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