GASB Accounting and Financial Reporting Issues Related to the CARES Act

InsightsClient Alert

On Thursday, June 11th the Governmental Accounting Standards Board (GASB) issued a proposed technical bulletin to clarify accounting and financial reporting issues related to the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) of 2020 and Coronavirus Disease.  There is a 15-day comment period with an immediate effective date upon final issuance.

The following questions are addressed in the proposed technical bulletin.

  1. Are resources from the Provider Relief Fund (HHS) used to address governmental healthcare entities’ loss of revenue considered an eligibility requirement for purposes of revenue recognition?   Because loss of revenue is not an expenditure, consideration should be given to whether the provision of resources for loss of revenue includes eligibility requirements (affects timing of revenue recognition) or purpose restrictions (doesn’t affect timing of revenue recognition).  The governmental healthcare entity’s primary actions were to comply with stay-at-home orders and to slow the spread of the virus by modifying services, including cancellations of elective procedures.  Those actions resulted in a loss of revenue and satisfies the contingency eligibility requirement of a voluntary nonexchange transaction.
  2. Should resources from the Provider Relief Fund (HHS) to a business-type activity or enterprise fund be reported as nonoperating revenues? Yes, except for “fee for service” payments (such as the Uninsured Program that constitute payments for care or treatment of uninsured individuals and testing for COVID-19).  Provider Relief Fund resources support specific activities and reimburse allowable costs, which result in subsidies rather than payment for services.  These subsidies should be reported as nonoperating revenues.
  3. If a governmental entity received a forgivable Paycheck Protection Program (PPP) loan and determines that the loan will be forgiven in a subsequent


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reporting period based on compliance with the program requirements, should the entity continue to report the loan as a liability at the end of the reporting period?  Yes.  The PPP loans have been identified as liabilities and should be reported as a liability until legally released from the debt.

  1. Should expenses (such as unplanned costs) incurred in response to the coronavirus disease be reported as extraordinary or special items?   It is reasonable to expect the coronavirus disease to recur in the foreseeable future and the disease is not within management’s control.

The proposed technical bulletin also clarifies that amendments to the CARES Act enacted after the balance sheet date do not represent conditions that existed as of the period-end date being reported, and therefore should be considered nonrecognized subsequent events.  For example, if legislation enacted after the balance sheet date retroactively removed eligibility requirements, the financial statements would not reflect those changes.  The amounts recognized in the financial statements should be consistent with the CARES Act as of the balance sheet date.

A complete copy of GASB’s Proposed Technical Bulletin can be accessed by clicking here.

Further insight and considerations for accounting and financial reporting related to the CARES Act for governmental entities can be accessed by clicking here.

At Draffin & Tucker, LLP we are committed to providing our clients with the latest information related to COVID-19.  Please do not hesitate to contact us with any questions or concerns.  Visit our COVID-19 webpage for more information and updates (

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