American Institute off Certified Public Accountants
1211 Avenue of the Americas, New York, New York 10036-8775 (212) 575-6200
September 21, 1983
J. T. Ball, CPA Financial Accounting
Standards Board High Ridge Park Box 3821
Stamford, CT 06905 Dear J.T.:
Enclosed for the FASB's consideration is an issues paper, "Account-ing for Nonrefundable Fees of Originating or Acquiring Loans and Acquisition Costs of Loan and Insurance Activities," prepared by the Task Force on Accounting for Loan Origination Fees and Initial Direct Costs and approved by the Accounting Standards Executive Committee (AcSEC). Also, enclosed for your information is a let-ter from Thomas Asson, Chairman of the AICPA Banking Committee, that expresses that committee's views on certain issues.
The advisory conclusions of the task force are presented in para-graphs 106 to 114 of the issues paper. These are AcSEC's votes:
• AcSEC agreed (13 yes, 0 no, 2 absent) that accounting for loan origination fees should be based on the view that originating loans is integral to lending money and recognized as a yield adjustment over the loan period.
• AcSEC agreed (13 yes, 0 no, 2 absent) that if loan origination fees are required to be recognized as revenue when loans are origi-nated, such fees should be recognized imme-diately only to the extent they equal loan acquisition costs that are charged as ex-pense, with the excess, if any, recognized as a yield adjustment,
• Contrary to the views of the majority of the task force, AcSEC agreed (7 yes, 6 no, 2 absent) that making a loan commitment is integral to lending money. Based on that view, AcSEC agreed (7 yes, 6 no, 2 absent)