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Accounting for CARES Act Governmental Assistance Programs Under GASB

The Governmental Accounting Standards Board (GASB) recently issued Technical Bulletin No. 2020-1 to clarify the following:

  1. The application of the recognition requirements of existing GASB Statements to resources received from certain programs established by the Coronavirus Aid, Relief, and Economic Security (CARES) Act
  2. The presentation of certain inflows of CARES Act resources as well as the additional unplanned outflows of resources incurred in response to a coronavirus disease

The bulletin applies to entities reporting under governmental accounting standards and addresses six specific questions, as summarized below.

Question 1 – Coronavirus Relief Fund (CRF) Resources: Are they restricted funds, and when should they be recognized?

CRF resources include eligibility requirements, as clarified by the U.S. Treasury. The U.S. Treasury determined that CRF resources are not grants and are considered other financial assistance; however, GASB Statement 33 requires that the focus should be on the substance of the transaction for accounting and financial reporting purposes. Therefore, CRF resources are considered voluntary nonexchange transactions, which are subject to eligibility requirements, rather than purpose restrictions. Therefore, the government should recognize resources received from CRF as liabilities until the applicable eligibility requirements are met, including the incurrence of eligible expenditures. Once the eligibility requirements are met, the government should recognize revenue for the CRF resources received.

Question 2 – Loss of Revenue Resources: Is it considered an eligibility requirement for revenue recognition?

In short, yes. Certain CARES Act programs, such as the Provider Relief Fund (PRF), provided resources to address a government’s loss of revenue attributable to the effects of COVID-19. Resources such as these are contingent upon an eligibility requirement; therefore, resources received from any CARES Act program that specifically includes an eligibility requirement for the loss of revenue should be recognized as revenue when the government meets the action-based eligibility requirement.

Question 3 – Subsequent Events: Should amendments to the CARES Act during the subsequent event period be considered as the basis for recognition in the financial statements for the prior period reported?

No. Amendments enacted after the statement of net position date should be considered non-recognized subsequent events pursuant to GASB Statement 56, as amended, even if enacted with retroactive provisions, as the amendments do not represent conditions that existed as of the period-end being reported.

Question 4 – Paycheck Protection Program (PPP): If the governmental entity determines the loan will be forgiven in a subsequent reporting period, should it be reported as a liability at the end of the current reporting period?

Yes. Loans provided through the PPP have been guaranteed through a nonexchange financial guarantee provided by the U.S. Small Business Administration. GASB Statement 70 requires that the governmental entity (which includes any not-for-profit entity that reports in accordance with GASB standards) continue to report the loan as a liability until that entity is legally released from the debt. The governmental entity should report an inflow of resources in the reporting period to the extent that the entity is legally released from the debt.

Question 5 – Presentation of Operating or Nonoperating Revenue: Should resources from the CARES Act provided to a business-type activity or enterprise fund be reported as nonoperating revenues?

Resources provided through the PRF, Higher Education Emergency Relief Fund, the CARES Act Airport Grants, and the Formula Grants for Rural Areas and Urbanized Area Formula Grants programs are considered subsidies (except as noted below) and should be reported as nonoperating revenues.

Resources provided through PRF Uninsured Program constitute payment for care or treatment of uninsured individuals and testing for COVID-19 and therefore should be treated as operating revenues, as they represent payment for services provided.

Question 6 – Special or Extraordinary Item Presentation: Should unplanned outflows of resources related to the pandemic be reported as extraordinary items or special items?

GASB Statement 34, as amended, provides that extraordinary items are transactions or events that are both unusual in nature and infrequent in occurrence. An item is considered infrequent in occurrence if the type of event is not reasonably expected to recur in the foreseeable future, taking into account the environment in which the government operates. Therefore, the type of event being considered – the appearance of a coronavirus disease – is not considered infrequent, which means the government would not present the outflow of resources as an extraordinary item.

Further, GASB Statement 34, as amended, states that special items are within the control of management and are either unusual in nature or infrequent in occurrence. Although actions to slow the spread of the coronavirus disease may be in management’s control, this type of event – the appearance of a coronavirus disease – is not. Therefore, the outflow of resources would not be presented as a special item.


If you have questions about CARES Act funding and accounting treatment under existing GASB standards, please contact your KSM advisor or complete this form.

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