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Financial Reporting and Regulatory Update

Second Quarter 2020

From the AICPA

Resource sites for coronavirus, Paycheck Protection Program

The AICPA has created a coronavirus resource center webpage to help the accounting profession stay up to date on matters affected by COVID-19. The site offers information on:

  • CARES Act news and resources
  • COVID-19 resources addressing audit and assurance, accounting and reporting, technology, and tax, among other topics
  • Advocacy and tax relief matters
  • Virtual and other learning opportunities

In addition, the AICPA has created a separate Small Business Association Paycheck Protection Program resources webpage, which brings together many different resources including loan forgiveness information and frequently asked questions.

New TQA on accounting for loans under the PPP

On June 10, 2020, the AICPA issued a new Technical Question and Answer (TQA) 3200.18, “Borrower Accounting for a Forgivable Loan Received Under the Small Business Administration Paycheck Protection Program,” that addresses the question “How should a nongovernmental entity account for a forgivable loan received under the Small Business Administration Paycheck Protection Program (PPP)?”

The answer notes at the outset that, “Given the unique nature of the PPP, questions have arisen relating to how a borrower under the program should account for the arrangement. Although the legal form of the PPP loan is debt, some believe that the loan is, in substance, a government grant.” In addition, the staff of the SEC’s Office of the Chief Accountant has indicated that it “would not object to an SEC registrant accounting for a PPP loan under FASB Accounting Standards Codification (ASC) 470, ‘Debt,’ or as a government grant by analogy to International Accounting Standard (IAS) 20, ‘Accounting for Government Grants and Disclosure of Government Assistance.’”

In answer to the question, TQA 3200.18 offers guidance tailored to entities that are business entities or not-for-profits and provides a table with an overview of the accounting for the loan as debt or as a grant that is expected to be forgiven.

FinRec’s working drafts on issues for insurance entities

The AICPA’s Financial Reporting Executive Committee (FinREC) issued, on May 15, 2020, two working drafts of accounting issues for insurance entities. These working drafts provide guidance on implementing ASU 2018-12, “Targeted Improvements to the Accounting for Long-Duration Contracts.”

The new working drafts addressing implementation of ASU 2018-12 include these issues:

Comments on the working drafts were due July 17, 2020.

FAQ document on COVID-19 auditing and financial reporting issues

On April 3, 2020, the AICPA released “FAQs – Audit Matters and Auditor Reporting Issues Related to COVID-19,” which is intended to help both auditors of financial statements and preparers by providing answers to frequently asked questions and guidance on several financial reporting topics. The report answers questions on various auditing areas and provides information addressing the financial reporting considerations for risks and uncertainties, subsequent events and going concern, fair value measurements, asset impairments, unusual or frequent events, and deferred tax assets.

For more information contact Crowe.