The capitalization of costs incurred is different from increasing the net investment in a loan through accrual of interest income that is only contingently receivable.Įxcept as stated in the following sentence, the calculation of the constant effective yield necessary to apply the interest method shall use the payment terms required by the loan contract, and prepayments of principal shall not be anticipated to shorten the loan term. However, that limitation does not apply to the capitalization of costs incurred (such as direct loan origination costs and purchase premiums) that cause the investment in the loan to be in excess of the amount at which the borrower could settle the obligation. Accordingly, a limit is imposed on the amount of periodic amortization that can be recognized. Prepayment penalties shall be considered in determining the amount at which the borrower could settle the obligation only to the extent that such penalties are imposed throughout the loan term (See Section 310-20-55). If the loan's stated interest rate increases during the term of the loan (so that interest accrued under the interest method in early periods would exceed interest at the stated rate), interest income shall not be recognized to the extent that the net investment in the loan would increase to an amount greater than the amount at which the borrower could settle the obligation. Transfers and servicing of financial assets Revenue from contracts with customers (ASC 606) Loans and investments (post ASU 2016-13 and ASC 326) Investments in debt and equity securities (pre ASU 2016-13) Insurance contracts for insurance entities (pre ASU 2018-12) Insurance contracts for insurance entities (post ASU 2018-12)
IFRS and US GAAP: Similarities and differences
Business combinations and noncontrolling interestsĮquity method investments and joint ventures
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