Withum COVID-19 Bill Update – 6/11/2020

June 12, 2020

Accounting for the PPP Loan: A question that Withum has consistently received is: When do we “write off” the PPP loan? This is an important question for borrowers who may have audited financial statements, where the presence of debt can have an impact on the company’s ability to borrow or meet financial covenants. Withum’s view thus far has been that the loan should remain on the balance sheet until such time that the bank has officially forgiven it. The technical accounting guidance would be to view forgiveness as a “gain contingency”, an event that is not fully within the control of the company and not certain to occur, therefore the gain (write off of the loan and related interest) should not be recognized until such time that forgiveness has actually been confirmed.   

The AICPA recently released a  Technical Question and Answer (TQA) on the matter,  while the TQA does indicate that gain contingency guidance is acceptable, it also opens the door to an alternate conclusion (see the link above and excerpt below). This is meaningful because the AICPA and the SEC indicates here that a borrower “may” be permitted to view the loan as a government grant, and therefore you would write it off (into other income on the income statement) as you use the proceeds from the loan based on your best estimate of what will be forgiven. This creates a very different result than the gain contingency guidance above. There is not yet authoritative guidance on this issue,  however this TQA is a clear indication that borrowers may have multiple options available to account for this loan. 

TQA 3200.18“How should a nongovernmental entity account for a forgivable loan received under the Small Business Administration Paycheck Protection Program (PPP)?” 

Answer: “Given the unique nature of the PPP, questions have arisen relating to how a borrower under the program should account for the arrangement. Although the legal form of the PPP loan is debt, some believe that the loan is, in substance, a government grant.” In addition, the Staff of the SEC’s Office of the Chief Accountant has indicated that they “would not object to an SEC registrant accounting for a PPP loan under FASB Accounting Standards Codification (ASC) 470, Debt, or as a government grant by analogy to International Accounting Standard (IAS) 20, Accounting for Government Grants and Disclosure of Government Assistance.”

Reminder Section:  (what should I be doing):

  • Call your payroll company about claiming the payroll tax deferrals and employee retention credits that were made available in the CARES Act.
  • Talk to your payroll company about the qualified sick/family leave legislation (FFCRA, passed prior to the CAREs Act).
  • Consider speaking with your bank to discuss changes to terms of existing debt facilities. The banking system remains strong.
  • If you have already applied for the PPP, start forecasting how you intend to spend the funds and how to qualify for the highest amount of forgiveness possible.
Related Articles
If OSHA's new Emergency Temporary Standard (ETS) on COVID-19 applies to your company, it may be helpful to understand what the agency's compliance officers are looking for when they are inspecting affected workplaces, and how they are directed to issue citations for violations of the standard. …
Pandemic legislation has created significant opportunities for small and medium sized businesses. Rules ever changing, the programs have been shaped time and time again. Spend one hour with Withum experts as they detail some of the programs which have been most beneficial to businesses. The free webinar takes place June 28, 2021 from 2:00 pm - 3:00 pm EDT.…
OSHA recently released an Emergency Temporary Standard (ETS) on COVID-19 covering settings where employees provide healthcare services or healthcare support services. Contractors providing healthcare support services, such as equipment and facility maintenance, may have to comply with several provisions in the ETS. However, the standard does not apply to "well-defined hospital ambulatory care settings" where all employees are fully vaccinated, all non-employees are screened prior to entry, and people with suspected or confirmed COVID-19 are not permitted to enter those settings. Contractors whose employees are not providing healthcare support services are exempt from the ETS. However, OSHA has updated its guidelines for employers based on the most current guidance from the CDC. Employers are urged to comply with the updated guidelines.…
OSHA's recently presented Emergency Temporary Standard on COVID-19 (ETS) describes specific requirements for healthcare facility ventilation systems. The requirements apply to employers who own or control buildings or structures with an existing heating, ventilation, and air conditioning system(s) where employees provide healthcare services or healthcare support services. If your company provides HVAC services for an affected employer, the contents of the ETS ventilation provision may be helpful to you. …

MCAA’s GreatFutures Virtual Fall Program kicks off tomorrow, September 15. Each of the 17 presentations is meant to help guide students through the proposal and bid process for the annual MCAA Student Chapter Competition project. Don't forget to register! http://ow.ly/w63v50BqCSg

MCAA is excited to announce REGISTRATION IS OPEN for the PCA Virtual Education Series! This year, attendees will virtually walk through seven workstations at JPG Plumbing & Mechanical Service, Inc. as representatives speak about the various aspects. http://ow.ly/DHGK50Bgm0C

Register today for MCAA’s GreatFutures Virtual Fall Program starting September 15 through November 17! Each presentation is meant to help students navigate the proposal and bid process for the annual Student Chapter Competition project. https://t.co/7aHJmLEgKE

Registration is open for MCAA’s GreatFutures Fall Virtual Program! From September 15 through November 17, MCAA will host 17 presentations aimed at guiding our student chapters through creating a bid for the annual MCAA Student Chapter Competition project. http://ow.ly/mfbe50B7SZd

Load More...