Accounting of commitment fees

In this article we will explain realised and unrealised accounting for commitment fees.

Realized Commitment fees

The commitment fee has its own 'Amount type', meaning that it is possible to have a separate account for the commitment fee that differs from the account used for the interest expenses on the loans/draw-downs.

Unrealized Commitment fees

For commitment fee paid in arrears 

Accounting is accomplished in the same way as for Accrued interest.

For commitment fees paid in advance

Prerequisite: The total fee amount is booked as an expense on a profit/loss account when it is paid (event maturity).

Month end: The prepaid remaining fee is booked to deduct the prepaid amount. The most common choice is to reverse the remaining expenses first day in coming month and book new remaining fees the following month end.