Under which 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 loan proceeds are initially recorded as a long-term debt on the company's balance sheet.
The FDD specifies that under ASC 470, the PPP-SD loan is recognized as "other income" only when the Small Business Administration (SBA) legally forgives the loan balance. In Black Bear Diner's case, they received a PPP-SD loan of $1,124,900 on March 16, 2021, with a 1% interest rate and a maturity date of March 1, 2026.
During the year ending December 29, 2021, Black Bear Diner applied for forgiveness of this loan and received partial forgiveness of $999,509. As of December 25, 2024, and December 27, 2023, the remaining balance of the PPP-SD loan is still recorded as long-term debt, with the current portion reflected in current liabilities on the balance sheet. This accounting treatment provides transparency into how Black Bear Diner manages and reports its government assistance loans, which is useful information for prospective franchisees assessing the company's financial health.