Record the SVOG as a Liability and Don’t Restrict the Revenue

The American Institute of Certified Public Accountants (AICPA) recently issued guidance regarding the Shuttered Venue Operators Grant (SVOG) from which many entertainment operators are benefiting. (We posted an article about the SVOG in May.)

This recent guidance stated that an SVOG is considered a conditional contribution under the Financial Accounting Standards Board’s Accounting Standards Codifications (FASB ASC) 958-603 because:

  • Entitlement to the payments is conditioned upon having incurred eligible expenses, and
  • Non-compliance with the terms and conditions is grounds for recoupment by the Small Business Administration (that is, a right of return).

If you are a not-for-profit organization receiving grant funds, the initial payment from the SBA should be recorded as a liability. The liability can be converted to grant revenue only to the extent that eligible expenses have been incurred at that date.

A not-for-profit organization would not be required to restrict the revenue because the SBA imposed restrictions (only certain expenses are qualified in an SVOG) are met within the same reporting period that the revenue is recognized (see paragraph 4A–B of FASB ASC 958-605-45).

PBO Advisory Group has been working with many shuttered venues – including live venue operators, theatrical producers, live performing arts operators, museum operators, motion picture theater operators, and talent reps – to obtain SVOGs. We can guide you through all phases of the application and accounting processes.

As the lights come back on, PBO Advisory is here to help. For more information, contact PBO Advisory Consulting CFO Rick Dahlseid.

Rick Dahlseid

Consulting CFO