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CPAs Give Lenders More Virus Relief Loan Accounting Guidance

Aug. 28, 2020, 2:19 PM

Banks, credit unions, and other lenders offering government-backed forgivable loans to businesses should account for Small Business Administration payoffs similar to how they would treat customer prepayments, the American Institute of CPAs said.

When the government agency makes payments prior to the loan’s maturity, the money received should be accounted for as a prepayment, and unamortized loan origination fees should be accounted for in accordance with Financial Accounting Standards Board rules on receivables, as outlined in ASC 310- 20, Receivables—Nonrefundable Fees and Other Costs, the AICPA said in guidance released Friday.

The same guidance applies when a customer sends in extra payments or pays off the loan in its entirety prior to the maturity of the loan, the AICPA said.

  • The CARES Act (Public Law 116-136) called for billions of dollars of forgivable loans to businesses to retain workers or make mortgage, lease, or utility payments. The massive program helped keep businesses afloat during widespread stay-at-home orders but it also unleashed a torrent of financial reporting questions.
  • The AICPA has issued several pieces of nonauthoritative guidance for businesses receiving the Paycheck Protection Program loans, as well as for lenders.
  • The SBA starting to accept forgiveness applications on Aug. 10.

To contact the reporter on this story: Nicola M. White in Washington at nwhite@bloombergtax.com

To contact the editors responsible for this story: Jeff Harrington at jharrington@bloombergtax.com; Colleen Murphy at cmurphy@bloombergtax.com

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