Should you record interest income on your ESOP?  The answer is no.  Nothing really happened.  The company makes a contribution of $XX, which is paid to the ESOP.  The ESOP turns around pays the Company $XX for principal and interest.  The checking account did not change.  The expense the company needs to record is the actual value of the shares released to participants.

The release of shares should be straight-lined over the amortization period, not the actual amortization table.  The share release should match that of the participant accounting.

Adjust the released shares for the fair market value change (average over year) and that is your ESOP compensation expense.  Pretty simple, don’t make it more complicated.  Using a clearing account to debit the payment and then credit it when you receive the cash back.  Zero net effect.

Need assistance with your ESOP?  Contact Charlie Metzig at cmetzig@myboyum.com.