Is a bank fee a financing expense

Accounting for a â € œprocessing feeâ € for a loan

BFH judgment of June 22, 2011, I R 7/10


For a "processing fee" to be paid by the borrower upon conclusion of the loan agreement (here: publicly funded loan), no active deferred income is to be formed if the fee is not (proportionately) reimbursed in the event of early termination of the contract. Something different applies, however, if the loan relationship can only be terminated for an important reason and if the said premature termination of the contract is very unlikely.


Practice info!



In addition to the actual interest costs, additional processing fees are often incurred when procuring outside capital, especially when taking out new loans. So far, it has been disputed whether these processing fees should be recognized immediately in full as an expense in the balance sheet or whether they should be distributed over the entire term of the loan using an active prepaid expenses item (ARAP).



In the opinion of the BFH, two factors are decisive for the question of whether an ARAP has to be formed:

  • Does the processing fee depend on the duration, i.e. if the loan is repaid prematurely, does it have to be reimbursed proportionally?
  • Is it likely that the loan will be terminated early?

The above-mentioned BFH ruling results in the following test scheme for the accounting entry of a processing fee for a loan:





















Fig .:Checking scheme for the accounting entry of a processing fee for a loan



At a term-dependent Processing fee, the payment of the fee clearly has the character of an advance payment. An ARAP must be formed accordingly.

The situation is different with one not time-dependent Processing fee. Since there is no partial repayment of the processing fee in the event of a premature termination of the loan, the consideration is not related to the period. Accordingly, the processing fee is immediately recognized in full as an expense. An exception to this is when the loan relationship can only be terminated for good cause and if a termination for an important reason is not seriously to be expected. In this case, the processing fee is again to be accrued with an ARAP over the duration of the loan relationship.


Christian Thurow, Dipl.-Betriebsw. (BA), Operational Risk Manager Corporate Finance, London (E-Mail: [email protected])



BC 10/2011