Quarterly report pursuant to Section 13 or 15(d)

NOTE 9. OTHER DEBT

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NOTE 9. OTHER DEBT
9 Months Ended
Sep. 30, 2021
Note 9. Other Debt  
NOTE 9. OTHER DEBT

NOTE 9. OTHER DEBT

 

Paycheck Protection Program Loan

 

During the quarter ended June 30, 2020, the Company's wholly-owned subsidiary, H Smart Inc., received a $35,500 loan as part of the Paycheck Protection Program (“PPP”) offered by the Small Business Administration.

 

The Company has elected to account for the PPP loan pursuant to FASB ASC 470, Debt, or as a government grant by analogy to International Accounting Standard 20, Accounting for Government Grants and Disclosure of Government Assistance.

 

Following the guidance in ASC 470, the Company has recognized the entire loan amount as a liability on the balance sheet, with interest accrued and expensed over the term of the loan. The Company will not impute additional interest at a market rate because transactions where interest rates are prescribed by governmental agencies are excluded from the scope of ASC 835-30.

For purposes of derecognizing the liability, ASC 470 refers to the extinguishment guidance in ASC 405, Liabilities.

Based on that guidance, the loan would remain recorded as a liability until either of the following criteria are met:

  · The Company has been legally released from being the primary obligor under the liability.

 

  · The Company pays the lender and is relieved of its obligation for the liability.

 

Because the Company will not be legally released from being the primary obligor of the PPP loan until forgiveness is actually granted, income from the extinguishment of the loan would only be recognized once the Company's application for forgiveness is approved. If the forgiveness application is approved, any resulting amount forgiven would be recognized and separately disclosed in the income statement as a gain on extinguishment. As of September 30, 2021 the balance of the PPP loan was $0 as the loan was formally forgiven by the Small Business Administration.