The Coronavirus Aid, Relief, and Economic Security (CARES) Act created the Paycheck Protection Program (PPP) to provide small businesses with liquidity during the coronavirus pandemic. The program allows for loan forgiveness if the funds are spent on payroll expenses, rent, utilities and certain interest payments.

Questions have arisen as to the proper accounting for the loan proceeds under US GAAP, especially as it relates to the fact that while the legal form of a PPP loan is debt, in substance the program works as a government grant. Multiple accounting models may be available depending upon whether the entity expects to comply with the PPP eligibility and loan forgiveness criteria. Click here to see the potential accounting models.