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Virus Relief Loans Can Be Accounted for as Debt, CPA Group Says

June 10, 2020, 7:03 PM

Companies that receive forgivable loans from the massive government Paycheck Protection Program can account for the funds as debts, the American Institute of CPAs said.

If a business meets the criteria to have the loans forgiven, it can follow the derecognition guidance in U.S. generally accepted accounting principles, or GAAP, the group said in the guidance Wednesday.

“If you follow loan accounting then you’re fine,” said Dan Noll, AICPA senior director of accounting standards. “And the substance behind it is because the government is still structuring this as a loan even though there’s a forgiveness side to it. Nobody’s going to bat an eye if you treat it as a loan and deal with it on the back end.”

  • No section of GAAP covers how to account for the forgivable government loans offered in the third coronavirus relief law (Public Law 116-136). The Paycheck Protection Program has extended billions of dollars to businesses to retain workers or make mortgage, lease, or utility payments.
  • As businesses received the loans, questions swirled about how to report them on their books. The AICPA consulted with the Securities and Exchange Commission and the Financial Accounting Standards Board to issue the guidance. The guidance directs businesses to the debt accounting rules in FASB ASC 470, Debt.

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; Sony Kassam at skassam1@bloombergtax.com