We have updated our white papers, Coronavirus: Financial reporting considerations and Borrower’s accounting for Paycheck Protection Program loans, to expand the discussion on the loss contingency accounting and disclosure considerations related to PPP loans. As discussed in both white papers, whether a borrower truly qualified for a PPP loan and met the conditions necessary for forgiveness of the loan could be audited by the Small Business Administration (SBA) up to six years after it forgives the loan (depending on the amount of the loan and the requirements being audited). As such, even after a PPP loan has been forgiven by the SBA, consideration should be given to the loss contingency guidance in Topic 450, “Contingencies,” of the Financial Accounting Standards Board’s Accounting Standards Codification, both from a recognition and disclosure perspective, during the period of time the PPP loan is still subject to audit by the SBA.

In addition, we have updated our white paper, Coronavirus: Financial reporting considerations, to provide an overview of the Employee Retention Credit (ERC), which was introduced by the Coronavirus Aid, Relief, and Economic Security Act in March 2020 and revised and expanded by the Consolidated Appropriations Act, 2021 in December 2020. We also discuss the financial reporting implications when an entity expects to benefit from the ERC.