Technical Question and Answer (TQA) guidance issued Tuesday by the AICPA addresses how a recipient should account for a Shuttered Venue Operators Grant (SVOG) or a Restaurant Revitalization Fund (RRF) grant issued under COVID-19 relief programs administered by the U.S. Small Business Administration (SBA).
Q&A Section 5270.01 provides nonauthoritative guidance that applies to not-for-profits, which are eligible only for SVOG; and private business (for-profit) entities, which are eligible for both SVOG and RRF grants. Publicly traded entities are not eligible for either of these grants.
SVOG and RRF grants provide federal funds to entities that were hard-hit by government shutdowns resulting from the coronavirus pandemic. Grant recipients are not required to repay the funding if funds are used for eligible uses by the dates specified by each respective grant program.
The TQA suggests that for-profit business entities consider accounting for these grants by applying by analogy the guidance described in one of three models:
- International Accounting Standard (IAS) 20, Accounting for Government Grants and Disclosure of Government Assistance;
- FASB Accounting Standards Codification (ASC) 958-605, Not-for-Profit Entities — Revenue Recognition; or
- FASB ASC 450-30, Contingencies — Gain Contingencies.
The TQA describes each of these accounting models in further detail and provides guidance on how to select the appropriate model.
Not-for-profit entities should account for government grants in accordance with the “contributions received” subsections of FASB ASC 958-605, according to the TQA. That model requires entities to first determine if a contribution is conditional or unconditional.
According to the TQA, the payments received under these grants would be considered conditional contributions. Thus, contribution revenue would be recognized only to the extent that eligible expenses have been incurred at that date.
Not-for-profits will need to evaluate their individual facts and circumstances to determine the extent to which conditions have been substantially met at a given reporting date.
The AICPA issued the guidance because it was anticipating questions from practitioners.
“There is no explicit guidance within U.S. GAAP on the accounting for government grants to business entities,” Yelena Mishkevich, CPA, CGMA, senior manager–Accounting Standards for the AICPA, said in a news release. “Based on our experience with the SBA’s Paycheck Protection Program, we anticipate that some audit and accounting professionals — especially those who have limited experience with government grants — will have questions. As such, we are trying to get out front and answer their questions via this TQA.”
AICPA experts discuss the latest on the SVOG, RRF, and other small business aid programs during a virtual town hall held every other week. The webcasts, which provide CPE credit, are free to AICPA members and $39 for nonmembers. Go to the AICPA Town Hall Series webpage for more information and to register. Recordings of Town Hall events are available to view for free on AICPA TV.
The AICPA’s Paycheck Protection Program Resources page houses resources and tools produced by the AICPA to help address the economic impact of the coronavirus.
AICPA members can learn more about the SVOG on the webpage “Understanding the Shuttered Venue Operators Grant Program.” AICPA members also can access a detailed summary of the RRF.
For more news and reporting on the coronavirus and how CPAs can handle challenges related to the outbreak, visit the JofA’s coronavirus resources page or subscribe to our email alerts for breaking news.
— Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is the JofA’s editorial director.