PPP loan accounting: FAQs related to not-for-profits

Since the start of the pandemic the CPEA has received numerous questions from practitioners on how to account for the loans received from the Small Business Administration as part of the Paycheck Protection Program. While there are some similarities between the accounting for not-for-profit and for-profit entities, there are also key differences that NFPs and practitioners who serve those clients need to be aware of. Among the frequently asked questions that we address in this report are:

• Can NFPs apply the accounting guidance in FASB Accounting Standards Codification (FASB ASC) 470, Debt, (debt model), instead of the guidance in FASB ASC 958-605, Not-for-Profit Entities—Revenue Recognition, (conditional contribution model), to account for PPP loans?

• Can NFPs apply the guidance in International Accounting Standards (IAS) 20, Accounting for Government Grants and Disclosure of Government Assistance, (government assistance model), or the guidance in FASB ASC 450-30, Contingencies: Gain Contingencies (gain contingencies model) when accounting for PPP loans?

• Can NFPs change their accounting policy from using the debt model to the conditional contribution model (or vice versa) in a new reporting period?

• If NFPs apply the debt model, when would they be legally released and able to remove the debt liability from their financial statements?

• When applying the conditional contribution model, would NFPs typically recognize the contribution revenue evenly over the “covered” period1 after receipt of the loan?