Debt Issuance Costs No Longer Will Be Presented Separately

(The Impact of ASU 2015-03, Subtopic 835-30)
June 2015

Under previously issued guidance, debt issuance costs were required to be classified as an asset on an entity’s balance sheet. With the issuance of Accounting Standards Update (ASU) No. 2015-03, Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, debt issuance costs will be presented on the balance sheet as a direct deduction from the carrying amount of the related debt liability. This treatment will sound familiar, as this is how debt discounts are currently treated, which will not change with this ASU.

The intention of ASU 2015-03 is to simplify the presentation of debt issuance costs, as part of FASB’s ongoing initiative to eliminate complexity in accounting standards. The ASU recognizes that debt issuance costs are actually similar to discounts, effectively reducing the proceeds of the borrowing. Debt issuance costs also do not provide any future economic benefit, which is the nature of an asset. This ASU also will further align U.S GAAP with the International Financial Reporting Standards (IFRS), which require such costs to be reflected as a deduction from the carrying value of the related liability and not recorded separately.

The effective date for public companies will be for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. For all other entities, the effective date will be for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods beginning after December 15, 2016. This guidance is to be applied retrospectively for each period presented. Early adoption of this ASU is permitted.

For the full Accounting Standards Update, please visit FASB’s website.

If you would like to discuss further, please call your BNN audit advisor at 1.800.244.7444.

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