The AICPA released a Technical Question & Answer (TQA) on August 10th addressing how a recipient should account for a Shuttered Venue Operators Grant (SVOG) or a Restaurant Revitalization Fund (RRF) grant received under the U.S. Small Business Administration (SBA) COVID-19 relief programs.
Nonauthoritative guidance for both not-for-profits and private businesses is provided in Q&A Section 5270.01. Not-for-profits are only eligible for SVOG, for-profit businesses are eligible for both SVOG and RRF grants, and publicly traded entities are NOT eligible for either.
SVOG and RRF grants provide federal funds to entities affected heavily by government-mandated shutdowns during the COVID-19 pandemic. Under the terms of both the SVOG and RRF, the recipients are not required to repay these funds if they are used for eligible uses by the specified dates stated in each grants’ respective programs.
Since there is no explicit guidance within U.S. GAAP on accounting for government grants to business entities, the TQA suggests that for-profit business entities consider accounting for these grants by applying the guidance described in one of three models:
- International Accounting Standard (IAS) 20, Accounting for Government Grants and Disclosure of Government Assistance;
- FASB Accounting Standards Codification (ASC) 958-605, Not-for-Profit Entities — Revenue Recognition; or
- FASB ASC 450-30, Contingencies — Gain Contingencies.
The TQA itself gives more detail on each model and provides guidance on how to select the correct model to apply to a for-profit business.
Not-for-profit entities should account for government grants in accordance with the “contributions received” subsections of FASB ASC 958-605. That model requires entities to determine if a contribution is conditional or unconditional. Payments received under these grants would be considered conditional contributions. So, contribution revenue would be recognized only to the extent that eligible expenses have been incurred at that date.
Not-for-profits will need to evaluate their circumstances to determine the extent to which grant conditions have been met at a given reporting date.
AICPA members can learn more about the SVOG on the webpage “Understanding the Shuttered Venue Operators Grant Program.” AICPA members also can access a detailed summary of the RRF.
