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ARTICLE · 17 MAY 2019

Loan Origination Fees: To Recognize Immediately Or Amortize?

K.Coe Isom LLP
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If your bank immediately recognizes loan origination fees and costs directly to your income statement, you are not alone. This is a common practice among many community banks.

United StatesFinance and Banking
Sandy Sporleder
Sandy Sporleder

If your bank immediately recognizes loan origination fees and costs directly to your income statement, you are not alone. This is a common practice among many community banks. However, this practice is not in accordance with Generally Accepted Accounting Principles (GAAP).

According to Accounting Standards Codification (ASC) 310-20-25-2, loan origination fees and direct costs are to be deferred and amortized over the life of the loan to which they relate.

What constitutes loan origination fees and costs?

The fees and costs include but are not limited to:

  • Prepaid interest
  • Fees to reimburse the lender for origination activities
  • Other fees charged to the borrower directly related to the loan origination

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