Loan Origination Fees


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Company has entered into a 60 month revolving credit facility with origination fees in excess of $1MM. Fees were recorded as an asset and amortized over the term of the facility straight line. Suppose after 36 months, the facility is restated to increase limits, add new lenders, and extend term an additional 60 months. Additional origination fees, $1MM are due at time of signing and will be treated as before. Question is are the remaining fees from the original facility expensed at date the restated agreement takes effect, or continue until the end of the original 60 month ends. Thank you in advance.
 

Fidget

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How to account for it depends upon the agreement. Accounting standards tell you how to account for things, but they don't dictate the terms of contracts/agreements between parties.
 
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kirby

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Had you fully paid off the facility at month 36 then the unamortized fees would have also been written off. This is not what happened. The term was extended and a new fee applies to the extended term. The unamortized amount of the original fees should continue to be amortized over the original term.
 

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