Accounting treatment of PPP loans

Accounting considerations for PPP loans have evolved from when they were first issued. The first part of this series covers the initial CPEA thoughts on accounting considerations related to PPP loans and introduces the four methods of accounting for the loans under US GAAP:

1. FASB ASC 958-605 government grant model

2. IAS 20 model on government assistance

3. FASB ASC 470 debt model

4. FASB ASC 450-30 gain contingency model

In addition to covering the accounting models this report also delves into when the criteria associated with derecognition of the loans would be met as well as other considerations that both recipients of loans and their auditors should be aware of.

The second part of the report shifts the focus from the accounting at inception and qualifications for PPP loans to the timing and manner in which the loans are derecognized from the balance sheet. The topic is evaluated through a combination of interpretation of recent guidance, illustrative examples, and common questions we’ve received from CPEA members through the technical inquiry service.