Summary of Statement No. 91
Accounting for Nonrefundable Fees and Costs Associated with
Originating or Acquiring Loans and Initial Direct Costs of
Leasesan amendment of FASB Statements No. 13, 60, and 65 and a
rescission of FASB Statement No. 17 (Issued 12/86)
Summary
This Statement establishes the accounting for nonrefundable fees
and costs associated with lending, committing to lend, or
purchasing a loan or group of loans. This project was undertaken in
response to an AICPA Issues Paper that indicated a diversity in
practice in the accounting for nonrefundable fees and costs
associated with lending activities.
The provisions of this Statement apply to all types
of loans (including debt securities) as well as to all types of
lenders (including banks, thrift institutions, insurance companies,
mortgage bankers, and other financial and nonfinancial
institutions). This Statement also specifies the accounting for
fees and initial direct costs associated with leasing.
The Statement specifies that:
Loan origination fees shall be recognized over the
life of the related loan as an adjustment of yield.
Certain direct loan origination costs shall be
recognized over the life of the related loan as a reduction of the
loan's yield.
All loan commitment fees shall be deferred except for
certain retrospectively determined fees; commitment fees meeting
specified criteria shall be recognized over the loan commitment
period; all other commitment fees shall be recognized as an
adjustment of yield over the related loan's life or, if the
commitment expires unexercised, recognized in income upon
expiration of the commitment.
Loan fees, certain direct loan origination costs, and
purchase premiums and discounts on loans shall be recognized as an
adjustment of yield generally by the interest method based on the
contractual terms of the loan. However, prepayments may be
anticipated in certain specified circumstances.
This Statement changes the practice of recognizing
loan origination and commitment fees at or prior to inception of
the loan. It rescinds FASB Statement No. 17, Accounting for
Leases-Initial Direct Costs, and amends FASB Statements No. 13,
Accounting for Leases; No. 60, Accounting and Reporting
by Insurance Enterprises; and No. 65, Accounting for Certain
Mortgage Banking Activities.
This Statement shall be applied prospectively to all
lending and leasing transactions entered into and commitments
granted in fiscal years beginning after December 15, 1987 with
earlier application encouraged in fiscal years for which annual
financial statements have not previously been issued. Retroactive
application with restatement of the financial statements for all
prior years presented is encouraged but not required.
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