With many S-Corp owners using tax basis for capital accounts, I like the simple approach of decreasing loan balance by the forgiveness amount which I treat as a contribution of capital in the year forgiveness became reasonably assured.  Crediting retained earnings achieves a similar result, but unlike ERC refunds of previously deducted expenses, the non-taxable gain has the effect of increasing owner basis in existing assets without affecting prior year taxable income.  With the many advantages of tax-basis capital accounts, treating the forgiveness as a capital contribution preserves the tax basis of retained earnings/accumulated deficits.