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Financial Reporting and Regulatory Update

Third Quarter 2020

From the AICPA

Resource sites for coronavirus, Paycheck Protection Program The AICPA coronavirus resource center webpage is designed to help the accounting profession stay up to date on matters affected by COVID-19.

The site offers information on:

  • Coronavirus Aid, Relief, and Economic Security Act (CARES Act) news and resources
  • COVID-19 resources addressing audit and assurance, accounting and reporting, technology, and tax, among other topics
  • Advocacy and tax relief matters
  • Virtual and other learning opportunities

In addition, the AICPA has a separate Small Business Association Paycheck Protection Program resources webpage, which brings together many different resources including loan forgiveness information and frequently asked questions.

New TQAs for healthcare entities on CARES Act and other payments received

The AICPA, on Sept. 2, 2020, issued a set of Technical Questions and Answers (TQAs) to help nongovernmental healthcare entities, including business entities and not-for-profit entities, account for payments received from the CARES Act, the Provider Relief Fund, and boosted Medicare and Medicaid payments. The nonauthoritative accounting guidance, which appears in Q&A Section 6400, Health Care Entities, questions .63 through .70, provides background information and answers to questions regarding CARES Act provisions and COVID-related Federal Emergency Management Agency (FEMA) funding. The guidance addresses effects on patient service revenue, factors to consider when evaluating income recognition for Provider Relief Fund general distribution payments, and considerations when selecting an appropriate accounting model to apply to a government grant. The three considerations identified include:

“a. U.S. GAAP guidance on selecting accounting principles for transactions or events for which no guidance exists (FASB ASC 105, Generally Accepted Accounting Principles);

“b. the specific characteristics and facts and circumstances associated with the grant; and

“c. any preexisting accounting policies the entity may have established for government grants.”

AICPA TQAs for healthcare entities

In August 2020, the AICPA issued new TQAs under Section 6400, Health Care Entities, to provide accounting guidance to continuing care retirement communities for lease components in Type A life care contracts. The new questions and answers (Sections 6400.55 to .62) address, among other topics, the background of accounting for lease components in Type A life care contracts by continuing care retirement communities, embedded lease components, lease terms when there is an embedded lease component, classification of an embedded lease component, nonlease components with the resident agreement of a Type A life care contract, measurement of lease components, and reassessment of lease terms.

Healthcare industry FAQs on COVID-19 and related issues

During August 2020, the AICPA published frequently asked questions (FAQs) and additional FAQs, “Health Care Industry COVID-19 Issues and FAQs” to help healthcare financial statement preparers and practitioners performing financial statement audit engagements.

The various questions and answers cover audit, accounting, and tax matters related to the pandemic and congressional and other actions taken to address the effects of the pandemic. The topics covered include:

  • Paycheck Protection Program loans
  • Taxability of forgiveness income and expenses
  • The single audit requirements under the Office of Management and Budget Uniform Guidance
  • CPA services to a client
  • FEMA funding
  • Payroll tax deferral under the CARES Act
  • Factors and conditions to consider for accounts receivable and estimate of transaction price
  • Carrying value of COVID-19 supply inventories

For more information contact Crowe.