If there are changes to the most recent PPP arrangement and the changes (individually or in aggregate) are expected to significantly affect the amount of the receivable for installment payments since the previous measurement, the agency (transferor) must remeasure the receivable for installment payments made in subsequent financial reporting periods if any of the following changes occurred at or before that financial reporting period:

• Change(s) to the PPP term
• Residual value guarantee payment likelihood has changed from reasonably certain to not certain, or vice versa
• Change(s) in the interest rate the transferor charges the operator
• A resolution to a contingency for variable payments to be received over the remaining PPP term

Note: The resolved contingency is such that those payments now meet the criteria for measuring the receivable for installment payments as a fixed payment. For example, an event occurs that results in variable payments that were contingent on the performance or use of the underlying PPP asset becoming fixed payments for the remainder of the PPP term.

If a receivable for installment payments is remeasured due to any of the four reasons above, the receivable must also be adjusted for any change in an index or a rate used to determine variable payments since the previous measurement.

However, a receivable for installment payments is not required to be remeasured solely for a change in an index or a rate used to determine variable payments or a discount rate (such as the state’s incremental borrowing rate).

As part of the remeasurement, the agency (transferor) must also update the discount rate if there is an expected significant affect (individually or in aggregate) on the amount of the receivable for installment payments based on either (or both) of the following changes:

• PPP term
• Interest rate charged to the operator

If the discount rate is updated, the receivable for installment payments must be remeasured using the revised discount rate.

Generally, the deferred inflow of resources must be adjusted by the same amount as any change resulting from them remeasurement of the:

• Receivable for installment payments (if applicable)
• Underlying PPP asset (if applicable)

Exercising an existing option (such as an option to extend or terminate the PPP arrangement) is subject to the guidance for remeasurement.

An amendment must be considered a PPP modification unless the operator’s right to use the underlying PPP asset decreases, in which case the amendment must be considered to be a partial or full PPP termination.

The agency (transferor) must account for an amendment during the reporting period resulting in a modification to a PPP arrangement as a separate PPP (i.e., separate from the most recent PPP arrangement before the modification) if both of the following conditions are present:

• The PPP modification gives the operator an additional underlying PPP asset by adding one or more underlying PPP assets that were not included in the original PPP arrangement.
• The increase in PPP payments for the additional underlying PPP asset does not appear to be unreasonable based on the terms of the amended PPP arrangement and professional judgment.

GASB 99, Omnibus 2022, provides guidance for a change in the PPP term that did not result from a modification. An example of this is a change in the assumption about whether the right to extend or terminate the PPP will be exercised by an operator or a transferor. Remeasurement of the receivable for the underlying PPP asset is required if there is a change in the PPP term but only if the change is expected to significantly affect the asset receivable amount.

Considering the London Interbank Offered Rate (LIBOR) sunset, a reference rate update or change would not be considered a PPP modification.

Unless a modification is reported as a separate PPP, the agency (transferor) must adjust the:

• PPP by modifying the receivable for installment payments (if any)
• Receivable for the underlying PPP asset (if applicable)
• Deferred inflow of resources (adjusted by the difference between the modified receivables and the receivables immediately before the PPP modification)

However, to the extent that the change relates to payments for the current reporting period, the change must be recognized as an inflow of resources (for example, revenue) or an outflow of resources (for example, expense) for the current reporting period.

Adjustments must be made if a change to the provisions of a PPP (made prior to the expiration of the PPP term) results from a debt refunding by either the:

• Agency (transferor) — in which case the perceived economic advantages of the refunding are passed through to the operator
• Operator — in which case the perceived economic advantages of the refunding are retained by the operator

For either of those resulting debt funding (above), the agency (transferor) must adjust the:

• Receivable for installment payments to the present value of the future PPP payments (if any) based on the interest rate applicable to the revised PPP arrangement.
  — AND —
• Deferred inflow of resources, which must be recognized as an inflow of resources or an outflow of resources. For example, gain or loss, over the remaining life of the old debt or the life of the new debt, whichever is shorter.

Modifications Resulting in Terminations

The agency (transferor) must account for an amendment during the current reporting period resulting in a decrease in the operator’s right to use the underlying PPP asset as a partial or full PPP termination. For example, if the PPP term is shortened or the number of the underlying assets is reduced.

The agency (transferor) must generally account for the partial or full PPP termination by recognizing a gain or loss for the sum (if applicable) of all reductions in the carrying value of any deferred inflow of resources related to the:

• Receivables payments for the sum of:
  • Installment payments
  • Termination penalties paid to the operator
  • Amounts paid to the operator to purchase the underlying PPP asset
• PPP payments received from the operator at or before the commencement of the PPP term —but not to less than zero for the sum of the amounts paid to the operator for:
  • Termination penalties
  • Purchasing the underlying PPP asset
• Initial measurement of the underlying PPP asset or improvements to the underlying PPP asset — but not to less than zero for the sum of:
  • Termination penalties paid to the operator
  • Amounts paid to the operator to purchase the underlying PPP asset
• Receivables for the underlying PPP asset — but not to less than zero for the sum of:
  • Receivable for the underlying PPP asset
  • Termination penalties paid to the operator
  • Amounts paid to the operator to purchase the underlying PPP asset