The American Institute of Certified Public Accountants has issued the following Technical Question and Answers (TQAs) regarding certain COVID-19-related lender accounting issues:
- TQA 2130.41 addresses the determination of the effective interest rate when a creditor restructures a loan due to COVID-19 to include a period of reduced payments, and the restructuring is neither a troubled debt restructuring nor required to be accounted for as a new loan
- TQAs 2130.42 - 44 discuss the following issues related to advances under the Small Business Administration (SBA) Paycheck Protection Program (PPP):
- The classification of such advances as a loan (as opposed to a facilitation of a government grant)
- Consideration of the SBA guarantee under the PPP as “embedded” guarantees (as opposed to a “freestanding contract”) that are considered in estimating credit losses
- Accounting for the loan origination fee received or receivable from the SBA and the potential clawback of the fee
Further information regarding various COVID-19-related lender accounting issues is available in RSM’s white paper, Coronavirus: Financial reporting considerations.