GAAP Accounting for Forgivable PPP Loans

The AICPA has released Technical Question and Answer (TQA) 3200.18, Borrower Accounting for a Forgivable Loan Received Under the Small Business Administration Paycheck Protection Program.

Not-for-profit entities follow the guidance for conditional contribution recognition:

  • initially record the cash inflow from the PPP loan as a refundable advance (liability)

  • reduce the refundable advance and recognize grant revenue once forgiveness criteria have been substantially met or explicitly waived

Business entities follow the guidance for gain contingency recognition:

  • initially record the cash inflow from the PPP loan as a liability

  • loan proceeds reported as a liability until conditions of release are realized or realizable, at which time revenue would be recognized and liability would be reduced