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R. Klein, EA
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On the subject of loan origination fees from the borrowers

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On the subject of loan origination fees from the borrower's perspective. How do you account for fees charged on a letter of credit that has not been used. Do you capitalize and expense on a straight line basis? if you do, what is the classification on the balance sheet? I read that loan origination fees are reported as part of the loan they originate (contra-account), but what happens when there is no loan, as it is the case with a standby letter of credit?
Thanks

fastfile :

Fees on a standby letter of credit is a current period expense.

fastfile :

Origination fees when a loan is approved do go to increase the basis of the item purchased with the loan proceeds.

fastfile :

The origination fees are usually not booked separately or depreciated separately from the asset

fastfile :

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Customer:

Great, can you direct me to the authoritative guidance? an auditor referred me to fas91, but everywhere I read that they need to be capitalized.

Customer:

thanks

fastfile :

No, I cannot. I do not have source books.

fastfile :

If there is a GAAP precedent, then I am wrong. It would seem illogical to no expense a standby letter of credit's expense, since the expense is effective whether the loan proceeds are used or not.

fastfile :

It would be difficult to amortize the fees on a SLC since it is a continuing expense, not a fixed cost at a specific point in time.

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