Paycheck Protection Program Loans – Accounting for Dealerships

More About | Dealerships | COVID-19

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) introduced the Paycheck Protection Program (PPP) as a way to help businesses, including dealerships, secure loans to help the liquidity and survival of their businesses. According to Automotive News, approximately 93 percent of privately-owned U.S. dealerships obtained a PPP loan, which means accounting for PPP loans will become a priority for dealerships as the economy begins the process of recovery.

In consultation with the U.S. Securities and Exchange Commission (SEC) and the Financial Accounting Standards Board (FASB), the American Institute of Certified Public Accountants (AICPA) issued Question .18 to Technical Q&A Section 3200, Long-Term Debt (TQA) to address PPP loan accounting guidance. While there are four appropriate models when accounting for PPP loans, the two most common methods we expect to see dealerships utilize are found under Accounting Standards Codification (ASC) 470, Debt, and International Accounting Standards (IAS) 20, Accounting for Government Grants and Disclosure of Government Assistance.

Debt (ASC 470)
  • Appropriate for entities who received PPP loans but do not expect to meet the eligibility requirements to receive those funds or do not expect to meet conditions for loan forgiveness.
  • Recognize funds received as a legal form of debt.
  • Accrue interest at one percent rate.

Balance Sheet: Debt would be allocated between current and non-current based on loan repayment terms.

Income Statement: The debt would be derecognized when either of the conditions in ASC 405-20-40-1 are met.

» The loan has been paid back, and the debtor is relieved of their obligation for the liability.

» The loan is forgiven, and the debtor is legally released from being the primary obligor under the liability.

Grant (IAS 20)
  • Appropriate for entities who expect to meet eligibility requirements and expect to receive
  • The TQA notes this is an appropriate method since S. Generally Accepted Accounting Principles (GAAP) does not provide an authoritative source to account for government grants for business entities.

Balance Sheet: Recognize funds received as a deferred income liability.

Income Statement: Recognize income once there is reasonable assurance conditions will be met. Income is then recognized on a systematic basis as the related expenses are incurred.


DHG Dealerships can help you determine which accounting approach is the most appropriate based on the circumstances of your business and the nature of your PPP loan. For more information or for questions regarding your business, reach out to us at

For a deeper dive into the accounting methods for PPP loans, you can also visit our article “Accounting for PPP Loans Under the CARES Act.

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