bank charges recorded as Expense vs Interest

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spideyocd
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Joined: 27 Jan 2022, 13:14

bank charges recorded as Expense vs Interest

Post by spideyocd »

In case of bank charges I have read amongst Big 4 summaries

That the customer should account for the amount charged as Interest If the banks would usually usually account for it under IFRS 9

and they should account for it as bank charges/financial charges (non interest) if the banks account for it under IFRS 15

For eg
  • Origination fees
    Commitment fees(c)
    Early redemption fees
as Interest
and
  • Interchange fees
    Account and transaction fees
    Advisory fees
as bank charges/financial charges

This seems logical but under which IAS and IFRS is such such a comparison required?

or do we do it this way just because it makes sense?
JRSB
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Re: bank charges recorded as Expense vs Interest

Post by JRSB »

Guess you'd look at it in the definition of incidental costs when thinking about what goes into amortised cost accounting, if not then bank charges perhaps - keep it simple
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Marek Muc
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Re: bank charges recorded as Expense vs Interest

Post by Marek Muc »

interest expense is not defined in IFRS, I would follow JRSB's thinking. If it's part of the amortised cost, it's interest expense. If not, treat it as other charges. However, nothing stops you to recognise those charges as finance costs (interestingly: finance costs are required to be presented separately by IAS 1.82(b), but are not currently defined in IFRS).
JRSB
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Re: bank charges recorded as Expense vs Interest

Post by JRSB »

Interesting point!
spideyocd
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Joined: 27 Jan 2022, 13:14

Re: bank charges recorded as Expense vs Interest

Post by spideyocd »

Thanks for the replies!
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