Financial Liability - Fee recognition

All topics related to IFRS Standards.
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Nhale1985
Posts: 2
Joined: 28 Nov 2022, 15:21

Financial Liability - Fee recognition

Post by Nhale1985 »

Hi, I am looking to confirm how "EMTN programme" fees should be treated. This is best described as a Master agreement required by a business to issue debt. there are fees to re-new the programme each year.

As these fees relate to the issuance of multiple liability's i assume this is not a transaction cost and therefore would not be recognised against any of the liabilites on the balance sheet? Also Can i check if you think it would be correct to recognise in P&L as an interest expense?

Please let me know if you need more detail to answer this query.
Many thanks,
Nick
DJP
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Posts: 216
Joined: 26 Jun 2020, 15:57

Re: Financial Liability - Fee recognition

Post by DJP »

Judgment is required here. Some of the fees are only incurred to issue the liabilities. I have successfully defended in the past the position of allocating those fees to the first known issued note(s). Fees incurred to renew or maintain the EMTN programme are not transaction costs because you would have incurred them regardless of whether or not you issue new notes in the future (similar to a credit facility commitment fee). Those you should expense in P&L immediately.
Nhale1985
Posts: 2
Joined: 28 Nov 2022, 15:21

Re: Financial Liability - Fee recognition

Post by Nhale1985 »

Hi,

Thanks very much for your fast response, I understand your point that renewal fees are not transaction costs and therefore should no be held against the liability.

Can I also confirm the treatment in P&L, i assume if the fees are related to an annual renewal they should be recognised over the year that they relate to. And similar to commitment fees can these fees be recognised in the interest income / expense line ?

Many thanks,
DJP
Trusted Expert
Posts: 216
Joined: 26 Jun 2020, 15:57

Re: Financial Liability - Fee recognition

Post by DJP »

I would not include them in the interest expense line, but rather in the finance expense line as they are not interest.
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