PPP Loans and Forgiveness - Accounting and Financial Reporting Issues (Course Id 1749)

The objective of this course is to inform the reader of  the accounting and financial reporting issues related to the receipt and forgiveness of loans received under the Paycheck Protection Program (PPP), including 2021 first- and second-draw loans.

Topics include: Understanding the basic rules for PPP loans;  a review of how PPP loans should be accounted for under GAAP; accounting for the treatment of PPP loans as debt; how to account for debt issuance costs; accounting for forgiveness of debt; presentation of eligible expenses; presentation of PPP loan transactions on the statement of cash flows;  disclosures required for PPP loans; accounting for advances received under the Economic Injury Disaster Loan (EIDL); accounting for PPP loans as grants; CPA independence issues when there is involvement in PPP loan transactions;  accountant and auditor reporting issues and use of an emphasis-of-matter paragraph in reports; and more.

NASBA QAS - Text - NASBA Registry - 1749

Course Learning Objectives

• Identify some of the eligible expenses related to use of PPP loan proceeds
• Recognize approaches to account for PPP loans under GAAP
• Recall how to present debt issuance costs in the financial statements
• Recognize how to account for PPP loan forgiveness
• Recognize how to present a gain on extinguishment in the statement of cash flows
• Identify how to treat the forgiveness of a PPP loan for tax purposes
• Recognize how the IAS 20 grant approach is used to account for its PPP loan
• Recognize actions that impact a CPA’s independence in a PPP loan assistance engagement
• Recall some of the rules pertaining to a CPA receiving an agent fee from a PPP loan lender
• Identify whether an emphasis-of-matter may be used in an accountant’s report when there is a forgiveness of a PPP loan

Chapter 1 - PPP Loans and Forgiveness - Accounting and Financial Reporting Issues

I.        Introduction

II.       Basic Rules for PPP Loans- SBA

A.   General rules- CARES Act, as amended by Consolidated Appropriations Act, 2021

III.      How Should PPP Loans be Accounted for Under GAAP?

A.   General

IV.      Accounting for the PPP Loan as Debt

A.   General

B.   Debt issuance costs- PPP loans

Review Questions

V.       Forgiveness of PPP Loan

A.   General

B.   Accounting for forgiveness of PPP loan

C.   PPP loan eligible expenses

D.   Presentation of PPP loan transactions on the statement of cash flows

VI.      Tax Effects of PPP Loans

A.   General

VII.    Disclosures Required- PPP Loan Treated as Debt

A.   General

VIII.   Bank Covenants and Impact of PPP Loan Treated as Debt

Review Questions

IX.      Accounting for an Economic Injury Disaster Loan (EIDL)

A.   General

X.       PPP Loans in Tax-Basis Financial Statements

XI.      Other GAAP Approaches for PPP Loans

A.   General

B.   Account for the PPP loan as a grant using ASC 958 guidance

C.   Account for the PPP loan as a governmental grant using IAS 20

D.   Account for the PPP loan as a gain contingency using ASC 450-30

XII.     CPA Involvement in a PPP Loan Application and Forgiveness

A.   General

B.   Impact on a CPA’s independence

C.   CPAs receiving agent fees from PPP loan lenders

XIII.    Accountant and Auditor Reporting Issues- PPP Loans

XIV.   Reporting and Disclosure Issues Peculiar to 2021 First and Second-Draw PPP Loans

Review Questions

Glossary