15
recognized as a reduction in the yield of the loan" except for
certain cases involving "troubled debt restructuring". Paragraph
5 of SFAS 91 further provides that "Loan origination fees and
related direct loan origination costs for a given loan shall be
offset and only the net amount shall be deferred and amortized."
FNPC Costs at Issue
FNPC adopted SFAS 91 on a prospective basis effective for
transactions entered into after December 31, 1987. Prior to its
application of SFAS 91, FNPC, in accordance with its established
accounting practices, treated the costs described in SFAS 91 as
current expenses for financial accounting and reporting purposes.
In 1988, FNPC began to defer fees and costs described in SFAS 91
for financial accounting and reporting purposes. For each of the
years in issue and, to the best knowledge of management, for all
prior years, FNBP currently deducted the costs described in SFAS
91 for Federal income tax purposes. To apply SFAS 91, FNPC
established separate ledger accounts in order to record fees and
costs subject to deferral, as well as to reflect the portion of
net deferred fees and costs recognized as an adjustment to
interest yield in accordance with SFAS 91. To comply with SFAS
91, FNPC deferred the net amount of the costs and fees in each of
the ledger accounts and recognized these net amounts as
components of interest income over the estimated lives of the
loans.
Page: Previous 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 NextLast modified: May 25, 2011