How are loan fees amortized?

The loan fees are amortized through Interest expense in a Company’s income statement over the period of the related debt agreement. Illustration: A Borrower enters into a new term note with its bank. The agreement requires a loan origination fee of $15,000, which is paid by the Borrower to the Lender at the date of the loan’s closing.

How are origination fees amortized?

Instead, origination fees are netted with origination costs, and in most cases the resulting net fee is amortized over the life of the loan. This amortization is usually done under the effective-interest method (see Exhibit 2). Although straightforward in principle, application of Statement no. 91 can be difficult and error-prone.

Should financing fees be capitalized or amortized?

In a previous step, we assumed that most financing fees were capitalized as an asset on the company’s balance sheet and amortized over the lives (i.e. terms) of their corresponding debt instruments. In the last step, we made assumptions regarding when each debt instrument must be repaid in full.