Insurance Insights
What do I need to include in my annual statement about my PPP loan?
Article reading time: 2 minutes
Hot Take:
If you are an insurance entity that qualified for and received a PPP loan under the CARES Act, you may be wondering how to fit PPP loan receipts and eventual forgiveness disclosures into your quarterly and annual regulatory reporting statements. Fear not, JLKR provides the advance answer to that question in this post.
Full Article
A PPP loan is accounted for as a liability in accordance with Statements on Statutory Accounting Principles (SSAP) No. 15. On the quarterly and annual statements, Note 11 is the appropriate place to disclose a PPP loan. Disclosures should include issue date, face amount, carrying amount, description of borrowing, interest rate, interest paid, and maturities. Below is a sample of a PPP loan disclosure:
The Company received a loan from {Lending Institution} in the amount of ${Amount of Loan} under the Paycheck Protection Program established by the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The loan is subject to a note dated {Date of Note} and may be forgiven to the extent proceeds of the loan are used for eligible expenditures such as payroll and other expenses described in the CARES Act. No determination has been made as to whether the Company will be eligible for forgiveness, in whole or in part. The loan bears interest at a rate of 1% and is payable in monthly installments of principal and interest over 24 months beginning 6 months from the date of the note. The loan may be repaid at any time with no prepayment penalty.
When an insurer applies for and receives forgiveness for all or a portion of a PPP loan, the insurer will derecognize the liability and recognize a gain. In which case, the insurer should disclose the amount of debt forgiven. In such instances, the following disclosure is appropriate:
The Company received a loan from {Lending Institution} in the amount of ${Amount of Loan} under the Paycheck Protection Program established by the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The loan is subject to a note dated {Date of Note}. The Company applied for and has been notified that ${Amount of Forgiveness} in eligible expenditures for payroll and other expenses described in the CARES Act has been forgiven. Loan forgiveness is reflected in capital gains in the accompanying statement of income. The remaining loan balance of ${Amount of Loan after Forgiveness} bears interest at a rate of 1% and is payable in monthly installments of principal and interest over 24 months beginning 6 months from the date of the note as follows:
202x ${Amount}
202x ${Amount}
The remaining loan may be repaid at any time with no prepayment penalty.
For more guidance on the recognition of loan proceeds under the Payroll Protection Program (PPP), including a table with a tabular view of three key aspects of accounting for the loan program by Statutory, GAAP and non-profit reporting, see our post by clicking here. For a video explanation, click here.
