Deferred Financing Costs

Overview

Deferred financing costs are costs that incurred when issuing a loan which are capitalized and amortized over the life of the loan (using the effective interest method). That is, even though the costs are incurred up front, a bank may amortize the costs over time in order to match the expense against the revenue (in this case interest) that is generated by the loan.

Deferred costs are set up as a contra laon account.