Capitalised expensesCapitalised expenses

Capitalised expenses

9. Intangible assets include capitalised expenses and capitalised transaction costs. These expenses must be deducted from Tier 1 capital at both Level 1 and Level 2, and include:

(a) loan/lease origination/broker fees and commissions that are capitalised as an asset are to be set off against the balance of upfront loan/lease fees associated with the lending portfolios that are treated as deferred income and recognised as a liability. The positive balance of the net loan/lease origination fees and commissions must be deducted from Tier 1 capital. A negative balance may be added to Tier 1 capital provided the net deferred income satisfy the criteria in this Prudential Standard. Otherwise, a negative balance must not be added to capital;

(b) costs associated with debt raisings and other similar transaction-related costs that are capitalised as an asset;

(c) costs associated with issuing capital instruments if not already charged to profit or loss;

(d) capitalised information technology software costs;

(e) start-up and other establishment costs of a securitisation that are capitalised as an asset, and are to be set-off against the balance of fee income relating to securitisation schemes recognised and deferred as a liability. Any positive net balance must be deducted from Tier 1 capital (refer to APS 120). Any up-front fee income received in excess of the capitalised securitisation establishment cost may be added to Tier 1 capital provided it meets the criteria in this Prudential Standard; and

(f) other capitalised expenses including capitalised expenses of a general nature such as strategic business development initiatives. These also include, in addition to the above listed items, other forms of transaction costs and like costs are required to be deferred/capitalised and amortised as part of the measurement of assets and liabilities under Australian accounting standards.

10. The balance of any transaction costs and like items that are capitalised and deferred as an asset must be netted off against the balance of any income deferred as a liability relating to the products giving rise to the capitalised transaction costs (i.e. only deferred costs and income in particular product portfolios may be netted). Any positive net balance of capitalised transaction costs must be deducted from Tier 1 capital in accordance with this Prudential Standard. Any surplus of up-front fee income received over deferred costs may be added to Tier 1 capital provided the up-front fee income received satisfies the criteria set in this Prudential Standard. Otherwise, up-front fee income received must not be added to capital.