As of December 31, 2022, was a liability for the PPP loan reflected on Itan's balance sheet?
Itan Franchise · 2025 FDDAnswer from 2025 FDD Document
e of 1.000% per annum, with the first six months of interest deferred. Principal and interest are payable monthly commencing six months after the disbursement date and may be prepaid by the Company at any time prior to maturity with no prepayment penalties. Under the terms of the CARES Act, PPP loan recipients can apply for and be granted forgiveness for all or a portion of loans granted under the PPP. The note is subject to forgiveness to the extent proceeds are used for payroll costs, including payments required to continue group health care benefits, and certain rent, utility, and mortgage interest expenses (qualifying expenses), pursuant to the terms and limitations of the PPP.
On February 7, 2022, the Company received forgiveness for the full portion of the PPP loan above. The Company has decided to account for it as a government grant. While GAAP does not contain guidance on the accounting for government grant
Source: Item 23 — RECEIPT (FDD pages 44–190)
What This Means (2025 FDD)
According to Itan's 2025 Franchise Disclosure Document, a liability for the PPP loan was not reflected on the balance sheet as of December 31, 2022. In February 2021, Itan entered into a note payable agreement with Northeast Bank for $74,517 under the Paycheck Protection Program (PPP). This loan had a 1.000% interest rate per annum and was subject to forgiveness if the proceeds were used for specific qualifying expenses.
In February 2022, Itan received forgiveness for the full $74,517 PPP loan and decided to account for it as a government grant, following the guidance in International Accounting Standards (IAS) 20. Under IAS 20, a forgivable loan is treated as a government grant when there is reasonable assurance that the entity will meet the terms for forgiveness. Government grants are recognized in income as required activities are undertaken.
For the year ended December 31, 2022, the full amount of the PPP loan, $74,517, was included in other income on the statement of earnings. Because the loan was forgiven and accounted for as a government grant, no liability for the PPP loan was reflected on Itan's balance sheet as of December 31, 2022. This means that Itan did not have to report the loan as a debt on its financial statements at the end of 2022.