Accounting for the Paycheck Protection Program Loans: What You Need to Know

accounting for paycheck protection loan
   

As companies start to receive notices that their banks have approved them for the Paycheck Protection Program (PPP) loans, MGA is beginning to get questions on how to account for these loans under accounting principles generally accepted in the United States of America (US GAAP).

While there hasn’t been any new accounting guidance issued by the accounting regulators, we believe that the following key points have a basis in existing US GAAP:

  • Once approved and funded, the loan should be recorded on the books of the company.
  • Interest should be accrued at 1% during the term of the loan. While interest payments can be deferred for six months, interest will still accrue. Any interest-only payments would reduce the company’s accrual.
  • The loan should remain on the company’s books until formally forgiven by the bank.
  • The amount of the loan forgiveness should be recorded as other income, while any loan amount that is not forgiven should remain a liability on the company’s books.

Should the accounting regulators provide any additional guidance, MGA will provide an update on this topic. In the meantime, please don’t hesitate to reach out to us with any further questions that you may have.

You may also want to check out our COVID-19 Resource Center, which is continually being updated with new guidance.

Or, if you've just been approved for your PPP loan, you might want to check out this blog, where we cover how to calculate your PPP loan forgiveness and maximize your benefits.

As always, we are here to make the complex simple.

April 17, 2020