Discussion on the Correct Recognition Method of Deferred Fees and Costs under FASB 91
A practitioner named Tommy raised a question about the accounting treatment of loan origination fees and costs under FASB 91: given that revenue recognition at origination is prohibited, how should costs such as employee compensation incurred in originating loans be recognized? Should fees and costs be recorded separately or on a net basis? This article is a professional rewrite based on the original post, aiming to clarify the relevant recognition principles.
Good day, colleagues.
According to FASB Statement No. 91 (FASB 91), as lenders, we should recognize loan origination fees and related costs over the life of the loan. However, within our office, there are differing views on how to specifically implement this accounting treatment. Can someone explain the correct way to record these fees?
Since we are not allowed to recognize revenue at loan origination, how should we recognize costs incurred to establish the loan (such as employee compensation and benefits, and other expenses directly related to loan origination)? Additionally, should we record fees and costs separately, or present them on a net basis?
Thank you all for your answers.
Tommy