New AICPA Accounting Guidance Helps PPP Lenders Make Appropriate Financial Reporting Decisions

June 30, 2020

NEW YORK, NY, (June 30, 2020) – The American Institute of CPAs (AICPA) and its Depository Institutions Expert Panel (DIEP) today released a Technical Questions and Answers (TQA) to help depository institutions, credit unions, credit card companies, broker-dealers, insurance companies and other lenders appropriately account for the loans they distribute under the Paycheck Protection Program (PPP).

The TQA also addresses how creditors may restructure loans made in response to COVID-19 that result in restructurings that are not troubled debt restructurings and include periods of reduced payments, including payment deferrals, fee waivers, extension of repayment terms or delays in payment.

“Given the unique nature of the PPP, lenders have had many questions about how to account for these types of loans and report on their arrangements. These TQAs provide answers to technical accounting questions that are important for the appropriate financial reporting of PPP program loans and any concessions granted in light of the recent pandemic,” said Jason Brodmerkel, CPA, AICPA Senior Manager, Accounting Standards —Depository and Lending Institutions.

The new TQA contains detailed answers on pressing questions including:

  • What is the accounting for the fee received or receivable from the SBA for originating the loan and the potential clawback of the fee?
  • Should the lending institution account for an advance under this program as a loan or as a facilitation of a government grant?
  • Is the guarantee from the SBA considered “embedded” as opposed to a “freestanding contract” and, thus, can it be considered in estimating credit losses on the loan?

For more AICPA PPP tools and information, including its PPP loan forgiveness calculator, view its resources page.