Bank fee income under IFRS 15

Fee and commission income is the second biggest income line for most banks, after net interest income. The rules on when it is recognised, and whether it belongs in interest income instead, are a frequent source of error. This guide takes the main types of bank fee in turn and explains when each is recognised.

By Hamza Fida, Chartered Accountant. Reviewed by Mirza Fahad Baig, Chartered Accountant. 3 minute read.

Short answer

Bank fee income is recognised under IFRS 15 unless the fee is an integral part of a financial instrument's effective interest rate, in which case IFRS 9 applies. Account maintenance and annual card fees are recognised over the period the service is provided; transaction fees and interchange when the transaction occurs; asset management fees over time, with performance fees included only when it is highly probable they will not reverse. Banks also assess whether they are principal or agent, for example when distributing third-party insurance.

At a glance

Standard
IFRS 15, unless part of the EIR
Account and card fees
Over the service period
Transaction and interchange
When the transaction occurs
Performance fees
Only when highly probable
Insurance distribution
Often agent: commission only
Card rewards
Reduce fee income or a liability
Bank fee income under IFRS 15Standard: IFRS 15, unless part of the EIR; Account and card fees: Over the service period; Transaction and interchange: When the transaction occurs; Performance fees: Only when highly probable; Insurance distribution: Often agent: commission only; Card rewards: Reduce fee income or a liability.KEY FACTS AT A GLANCEBank fee income under IFRS 15StandardIFRS 15, unless part ofthe EIRAccount and card feesOver the service periodTransaction and interchangeWhen the transactionoccursPerformance feesOnly when highly probableInsurance distributionOften agent: commissiononlyCard rewardsReduce fee income or aliabilityTax BakersBank fee income under IFRS 15Standard: IFRS 15, unless part of the EIR; Account and card fees: Over the service period; Transaction and interchange: When the transaction occurs; Performance fees: Only when highly probable; Insurance distribution: Often agent: commission only; Card rewards: Reduce fee income or a liability.KEY FACTS AT A GLANCEBank fee income under IFRS 15StandardIFRS 15, unless part of the EIRAccount and card feesOver the service periodTransaction and interchangeWhen the transaction occursPerformance feesOnly when highly probableInsurance distributionOften agent: commission onlyCard rewardsReduce fee income or a liabilityTax Bakers
Key facts at a glance, as set out in this guide.

When is each type of bank fee income recognised?

Bank fee income: when it is recognisedBank fee income: when it is recognisedStandardTimingAccountmaintenanceIFRS 15Over the periodAnnual card feesIFRS 15Over 12 monthsInterchangeIFRS 15Per transactionLoan arrangementIFRS 9Through the EIRPerformance feesIFRS 15When highlyprobable
Most bank fees are IFRS 15; fees integral to a loan are not.

An example: a credit card

A bank charges an annual card fee of 120, receives interchange of 1% on card spending from merchants' banks, and gives customers reward points worth 0.5% of spending. A customer spends 10,000 in the year.

ItemTreatmentAmount
Annual feeOver 12 months: 10 a month120
Interchange incomeAs transactions settle100
Reward points earned by the customerReduce fee income, with a liability until redeemed(50)
Net card fee income170

Interest charged on revolving balances is interest income under the effective interest method, not fee income. Many banks account for card rewards as a cost of the interchange or card fee revenue; the analysis turns on whether the cardholder is a customer under IFRS 15 and whether the rewards give a material right, and practice varies.

Which fees belong in interest income instead?

Fees integral to a loan, such as arrangement fees and commitment fees on loans likely to be drawn, are part of the effective interest rate and recognised over the loan's life. Fees for separate services, such as account fees for maintenance or advisory work, are IFRS 15 fees. Getting the split wrong moves income between lines and between periods. See loan origination fees.

How are asset management and performance fees recognised?

Management fees based on assets under management are recognised over time as the service is provided, usually each month. Performance fees depend on future returns, so they are variable consideration, included only when it is highly probable that a significant reversal will not occur, often at the end of the measurement period when the performance is known.

How are trade finance and guarantee fees treated?

Fees for issuing letters of credit and guarantees are usually recognised over the period of the commitment, because the bank stands ready throughout. A financial guarantee issued by the bank is measured under IFRS 9 at its initial fair value, typically the fee, amortised over the guarantee's life unless the ECL allowance is higher.

What about fees that may be clawed back?

Commissions on insurance or investment products that must be repaid if the customer cancels early are variable consideration: the bank recognises only the amount it expects to keep, with a liability for expected clawbacks.

Is the bank a principal or an agent?

When a bank sells insurance, investment funds or foreign exchange services provided by others, it assesses whether it controls the service before it is transferred. Distributing a third party's insurance policy is usually agency: the bank recognises only its commission, when the policy is sold, subject to any clawback for early cancellation.

What do banks disclose about fee income?

Fee and commission income disaggregated by type, such as cards, accounts, asset management and trade finance, and by segment, with the related expenses. Under IFRS 18 from 2027, these remain in the operating category for banks. See bank accounting and the IFRS 15 five-step model.

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Questions people ask

Is bank fee income recognised under IFRS 15?

Yes, unless the fee is an integral part of a financial instrument's effective interest rate, in which case it is part of interest income under IFRS 9.

When are annual card fees recognised?

Over the 12 months of the service period, not when charged.

When is interchange income recognised?

When the card transactions occur and settle.

Are performance fees recognised immediately?

Only when it is highly probable that a significant reversal will not occur, often at the end of the performance period.

Sources

Every fee, date and rule on this page was taken from these official and primary sources.

  1. IFRS Foundation: IFRS 15 Revenue from Contracts with Customers

Rules and fees change. If you are reading this long after October 4, 2026, confirm the figures with the source before you rely on them.

BankingLoan fees and the effective interest rateBankingBank accounting: the key IFRS issuesIFRS 15The IFRS 15 five-step model with examples

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This guide is general information. It is not tax or legal advice for your situation.