Many manufacturing and distribution companies currently have reduced the amount of inventory being produced and held due to many factors, including supply chain issues or customer demand. Both the forgiveness and the eligible covered expenses will be M-1 adjustments for tax purposes. The suggested appropriate section is a component of other income, which is the section that includes transactions such as interest income and interest expense. Common practice absent the issuance of a specific rule would currently indicate the gain from the forgiveness would not be included in income from continuing operations. However, there is not any specific accounting guidance regarding loan forgiveness from a governmental entity. Current accounting standards indicate that the forgiven amount should not be netted against the related expenditures such as payroll, rent, and utilities (the expenditures for which the proceeds of the PPP loan were used). The loan should remain on the balance sheet until official notification is received from the lending institution of the forgiven amount. Loan Forgiveness from the PPP or Other Governmental Loan and Grant ProgramsĬurrently, companies should have the PPP proceeds on the balance sheet as a loan.Some of the common financial reporting considerations that many companies will have to consider include: The receipt of monetary assistance from governmental agencies through programs such as the Paycheck Protection Program (PPP), modifying existing debt or incurring additional expenses to retrofit to a “new normal” method of business operations will all need to be accounted for in 2020. Management and owners should be aware that their accounting and financial reporting might be impacted in several areas depending on how COVID-19 has impacted their business. The monitoring of the company’s financial reporting should be included on this to-do list. economy begins to reopen from the lockdown caused by the COVID-19 pandemic, management and business owners are currently faced with a lengthy to-do list ranging from issues such as supply chain management to new health and safety measures.
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