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Can you capitalise loan arrangement costs

Accounting treatment of loan arrangement fees and associated legal fees

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I would like clarifcation on the accounting treatment in the following scenario: 

Company takes out a loan of £1m. There is an arrangment fee of £20k deducted from the amount upfront, therefore £980k is reeived into the bank. 

Can the £20k arrangement fee be written off over the life of the loan? Also can legal fees associated with the loan also be written off over the life of the loan? 

Thanks in advance? 

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By paulwakefield1
03rd Apr 2019 18:18

It depends. Generally - Yes you must.

If you are accounting under FRS 102 and it is a basic* financial instrument then generally yes you must spread *A misnomer as the accounting starts getting quite complicated if there is a variable interest rate.

If it is not a basic financial instrument, it depends.

Then there are a whole load of exceptions and variations.

Chapters 11 and 12 of FRS 102 are your guide.

Other standards are available and may even be applicable.

Bon chance.

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By DP Walsh
05th Apr 2019 09:39

Hi Paul,

Many thanks for your advice.


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