Under what accounting standard does Black Bear Diner account for its PPP-SD loan?
Black_Bear_Diner Franchise · 2025 FDDAnswer from 2025 FDD Document
(22,819) | | Present value of lease liability | 557,925 | | Less: current portion of lease liability | (105,194) | | Lease liability, net of current portion | $ 452,731 | Litigation: The Company is subject to litigation and pending claims arising in the ordinary course of business. The Company records reserves for such matters when payment is probable, and the amount of a claim is reasonably estimable. The ultimate resolution of pending claims has not had and is not expected to have a material adverse effect on the Company's financial condition, position or cash flows at December 25, 2024 and December 27, 2023.
NOTE 6 - GOVERNMENT ASSISTANCE PROGRAMS
Paycheck Protection Forgivable Program Loans: As a result of the economic uncertainty stemming from the impact of the COVID-19 pandemic, on March 16, 2021, the Company received a Second-Draw Paycheck Protection Program (PPP-SD) loan in the principal amount of $1,124,900 from the SBA in accordance with the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act ("Economic Aid Act"). The PPP-SD loan has a stated interest rate of 1% per annum and has a contractual maturity date of March 1, 2026.
The Company has elected to account
Source: Item 23 — RECEIPT (FDD pages 56–243)
What This Means (2025 FDD)
According to the 2025 FDD, Black Bear Diner accounts for its Second-Draw Paycheck Protection Program (PPP-SD) loan as debt, following the guidelines of ASC 470 - Debt. This means that the $1,124,900 PPP-SD loan, obtained on March 16, 2021, is initially recorded as a long-term debt on the company's balance sheet. The loan carries an interest rate of 1% per annum and has a maturity date of March 1, 2026.
Under ASC 470, Black Bear Diner recognizes the PPP-SD loan proceeds as "other income" only when the SBA legally forgives the loan. In 2021, the company received partial forgiveness of $999,509. The remaining balance of the PPP-SD loan is recorded as long-term debt, with the current portion reflected in current liabilities on the balance sheet as of December 25, 2024, and December 27, 2023.
This accounting treatment is significant for prospective franchisees because it provides transparency into how Black Bear Diner manages and reports its debt. The conditional forgiveness of the PPP loan is contingent upon the company using the funds for admissible expenses, such as payroll, rent, and utilities, and maintaining employment and compensation levels. If Black Bear Diner fails to comply with the Paycheck Protection Program's provisions, it may be required to repay the loan in full and face additional penalties. Therefore, understanding the accounting standard and the status of the PPP-SD loan helps franchisees assess the financial stability and compliance practices of the franchisor.