Per the Governmental Accounting Standards Board’s (“GASB”) June 11, 2020, media advisory, GASB has issued a proposed technical bulletin titled Accounting and Financial Reporting Issues Related to the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) of 2020 and Coronavirus Diseases with the intention of clarifying “the application of the recognition requirements of Statements 33, 56, and 70 to resources received from certain programs established by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).”
This bulletin’s question and answer format, when officially issued, will provide real life guidance and examples of how to account and report for activities brought forth by the CARES Act.
Some of the specific areas GASB is seeking input on address:
Do Section 5001 funds carry eligibility or purpose restrictions and when are they revenues to the recipient?
Funds are voluntary nonexchange transaction so eligibility, and not purpose, restrictions are in place and they are not revenues until applicable eligibility requirements are met. Therefore, the Coronavirus Relief Funding (CRF) funds are identified as voluntary nonexchange transactions, subject to eligibility requirements rather than purpose restrictions.
When should those resources be recognized as revenue?
A recipient government should recognize resources received from the CRF as liabilities until the applicable eligibility requirements are met, including the incurrence of eligible expenditures. When the recipient government has met the eligibility requirements established by the CARES Act, the government should recognize revenue for CRF resources received.
Is a government’s loss of revenue an eligibility requirement as it relates to revenue recognition?
COVID-19 funds provided specifically to address a government’s loss of revenue are contingent on an eligibility requirement and revenues are not recorded until that eligibility requirement has been met.
In what period would funds received by a government related to post fiscal year end CARES Act amendments be reported?
If received after the fiscal year end, but before issuance of the financial statements, even is all applicable eligibility requirements have been met, the funds would relate to nonrecognized subsequent events and would be reported in the subsequent fiscal year for which the amendment was enacted.
Does a government report a liability for a Paycheck Protection Program forgivable loan if it expects to meet all compliance requirements before its financial statements for the fiscal year needed are issued?
Yes, if it has not been legally released from its debt.
Comments are due back to GASB by June 25. After you have read the proposed technical bulletin, we would be interested in any input you would like to provide the GASB and any additional questions/areas you feel GASB should consider adding to the final product, which GASB hopes to issue at June 30, 2020, or soon thereafter.
