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Can bank loan fees be deducted as interest expense?

Accounting For Business Loan Fees I think the answer is yes and that they should be amortized (straight-line) over the term of the loan.

Answers

Jack Ormberget
Title: CFO
Company: Color Star Growers of Texas, Inc.
(CFO, Color Star Growers of Texas, Inc.) |

Per an exchange from our audit firm, as it relates to a financing we just closed in November 2012:

Debt Costs (U.S. GAAP)

Summary

Underwriting, legal, and other direct costs incurred in connection with the issuance of debt measured under the fair value option should be recognized in earnings and not deferred.

Underwriting, legal, and other direct costs incurred in connection with the issuance of debt not measured under the fair value option should be presented as a deferred charge and not as a reduction in the carrying amount of the debt. When a classified balance sheet is presented, debt costs should be classified in a manner consistent with the classification of the related debt.

Payments for debt issue costs should be classified as cash outflows for financing activities on the statement of cash flows.

Hope this helps.

Topic Expert
Bob Stenz
Title: Controller
Company: Silicon Valley start-up
(Controller, Silicon Valley start-up) |

Thanks...perfect!

Topic Expert
Patrick Dunne
Title: Chief Financial Officer
Company: Milk Source
(Chief Financial Officer, Milk Source) |

Based on your characterization of these, fees, yes they can be deferred as you described. I have done multiple issuances of debt as an SEC filer.

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