On April 28, 2020, the AICPA on issued recommendations it would like to see the U.S. Small Business Administration (SBA) adopt and issue as guidance for small businesses to use in calculating loan forgiveness under the Paycheck Protection Program (PPP).
Here is an excerpt from a Journal of Accountancy article, summarizing some of the key recommendations.
In the release, the AICPA urges that:
• The eight-week covered period under PPP should align with the beginning of a pay period, not the date loan proceeds are received.
• The eight-week period should commence once stay-at-home restrictions are lifted, not when loan proceeds are received.
• Full-time equivalents (FTEs) should be calculated using a simple wage-based proxy when hours worked are not tracked by the employer (e.g., for salaried workers or those paid by piece).
• Payroll reduction calculations should be based on an employee’s average payroll per week in the eight-week period compared to the prior quarter, rather than comparing total compensation in the periods. Loan forgiveness is reduced if an employee’s compensation decreases by more than 25% but an eight-week period will naturally have 33% less payroll than a 12-week quarter.
The full list of recommendations is available on the AICPA’s website.