USA Prepayment fee (PPF)


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Hello - In a typical scenario when a lender receives PPF due to partial payoff of a loan, the accounting entry would be:
Dr. Cash
Cr. Prepayment fee income

My company received a similar PPF, but instead of recording it in the income statement, held it in suspense account because there was an agreement with the borrower that the Co. would refund the said PPF if the borrower is able to replace the original loan with a current loan with terms equal to or better than the current loan during the same year (or within 5 months, whichever is less).

My question: Is this accounting treatment accurate to hold in suspense if the prepayment income is material?

Much appreciate some help and guidance.

Thank you --Shena
 
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Stephen Gsell

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Yes it would because of this contingency. Once the period lapses, then reclass as revenue.
 
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