Nonprofits to Get New Rules for Gifts in Kind Donations
On June 10, FASB voted to publish new rules later this year that would generate more transparency about gifts-in-kind donations—tangible and intangible goods and services contributed to not-for-profit organizations. The rules will take effect for annual reporting periods beginning after June 15, 2021. Board members affirmed that the standard’s scope would be limited to all contributed nonfinancial assets and to the not-for-profit sector. Under the provisions, not-for-profit entities will need to present contributions of nonfinancial assets separately from contributed cash or other financial assets in the statement of activities, the board affirmed. The distinction will enable donors to get a clearer picture of gifts-in-kind contributions a charity received, much of which are used to implement programs and services at lower cost. An accounting standards update will be published during the third quarter of the year.
Proposed Guidance on Reporting CARES Act Funds and Provisions
State and local governments can now weigh in on a GASB proposal that clarifies how to report funds and provisions received from the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), the $2 trillion economic stimulus package signed into law on March 27. The board published GASB Exposure Draft (ED) 2020-a, “Accounting and Financial Reporting Issues Related to the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) of 2020 and Coronavirus Diseases,” with a comment deadline of June 25, 2020. The proposal clarifies questions governmental entities have related to: resources received from the Coronavirus Relief Fund (CRF); reimbursements for loss of revenue; subsequent events; the Paycheck Protection Program (PPP); Operating or Nonoperating Revenue Presentation; and Special or Extraordinary Item Presentation.
Borrowers May Account for PPP Loans Under Debt Standard
The AICPA has updated a technical accounting guide that addresses how a borrower should account for a forgivable loan received under the Small Business Administration Paycheck Protection Program (PPP). The guide is in the form of Technical Questions and Answers (TQA), and it adds question 18 to TQA 3200, Long-Term Debt. TQA 3200.18 specifically deals with how a nongovernment entity should account for the PPP loan. Because of the unique nature of PPP loans, the AICPA has gotten inquiries about how a borrower should account for the arrangement. “Although the legal form of the PPP loan is debt, some believe that the loan is, in substance, a government grant,” TQA 3200.18 stated. “An entity would not impute additional interest at a market rate (even though the stated interest rate may be below market) because transactions where interest rates are prescribed by governmental agencies (for example, government guaranteed obligations) are excluded from the scope of the FASB ASC [Accounting Standards Codification] 835-30 guidance on imputing interest.”