Because of COVID 19, congress passed many programs to keep people employed when companies were dealing with the impacts of COVID. One of those programs is the Employee Retention Credit (ERC). The ERC was originally introduced under the CARES Act, but the Consolidated Appropriations Act signed on December 27, 2020 made some amendments to it, that expanded eligibility to more contractors.

The intent of this white paper is to assist contractors with how to account for the Employee Retention Credit (ERC) for financial statement purposes. Since contractors are for-profit entities there is not any specific guidance that can be looked at to determine how to account for the ERC. The following sections are included:

  • Employee Retention Credit Financial Accounting Considerations
  • OPTION 1: FASB ASC 958-065, Revenue Recognition under Not-for-Profit Guidance
  • OPTION 2: IAS 20, Accounting for Government Grants and Disclosures of Government Assistance
  • Disclosures