You Have Received Your PPP Loan, Now What?

You Have Received Your PPP Loan, Now What?

Orange County Business Journal

More than 4 million small businesses have applied for and received their Paycheck Protection Program (PPP) loan. The next logical question is: How do you account for it?

There has been some discussion that PPP loans are not really debt, but in substance, are government grants. For SEC registrants, the Chief Accountant has released guidance that they would not object to a registrant accounting for the loan as debt (ASC 470), or as a government grant, as long as, certain conditions are met. Thus, you have two options:

    1. It can be accounted for as a liability under ASC 470. Under this method, you would accrue interest costs in accordance with ASC 835-30 (interest method). You would not impute additional market rate interest, even though PPP loan interest is clearly below market rates. Because the interest rate is controlled by a governmental agency, it is out of the scope of the ASC 835-30 guidance.To account for total or partial forgiveness, you look to ASC 470-50-15-4, extinguishment of liabilities. When a loan has been forgiven (i.e., the debtor has been legally released from the liability), it is reduced by the forgiven portion and a gain on extinguishment is recorded.


  1. Account for the PPP loan as a government grant. There are two ways to use this option:
    1. (1) International Accounting Standards (IAS) 20, Accounting for Government Grants and Disclosure of Government Assistance, or
    2. (2) the guidance under ASC 450-30, Contingencies: Gain Contingencies.

Using the IAS 20 model, the accounting is as follows:

  • No recognition of government assistance until it is reasonably assured that any conditions attached to the assistance will be met, and the assistance will be received.
  • Once the reasonable assurance condition is met, you would record the earnings impact of the grant on a systematic basis over the period(s) in which your business recognizes the expenses. For example, if you received a PPP loan to cover your payroll, leases, and utilities, you would recognize the earnings impact as those costs are recognized. You then record the forgiveness as other income or as an offset to related qualifying expenses.

If you choose the gain contingency model, the accounting is as follows:

  • Forgiveness of the PPP loan would not be recognized until all uncertainties are resolved. Once the uncertainties are resolved, a gain contingency can be recorded.
  • Using this model provides less specificity on measurement and recognition requirements related to PPP loans in comparison to other models.

If you need any assistance with your PPP loans and maximizing the amount of forgiveness, contact the experts at RJI.

Ian Lawson, CPA

Ian is an Audit & Assurance Director for RJI with over 25 years of experience providing audit, review, compilation, and consulting services to privately held and publicly traded companies. Ian can be reached at (949) 852-1600 or

Erik Tischofer, MAc

Erik is a Manager of Audit Services at RJI. He specializes in audits of publicly traded and privately held businesses in the hospitality, distribution, manufacturing and not-for-profit industries, including single audits. Erik can be reached at (949) 852-1600 or at

About RJI CPAs
Established in 1980, RJI specializes in audit, accounting, corporate and international tax issues for publicly traded and privately held companies. RJI is PCAOB registered and the Southern California member firm of DFK International, the 8th largest global accounting network.

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