Debt issue costs will soon need to be classified as a reduction in long-term debt instead of a deferred charge on the asset side of the balance sheet.
This change will be required by FASB’s ASU 2015-03, Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.
In one sentence, this change is needed because debt issue costs are essentially an adjustment of interest yield and therefore should be presented along with the liability that generated the issue costs.
Effective date and transition
From the ASU:
For public business entities, the amendments in this Update are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years.
For all other entities, the amendments in this Update are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within fiscal years beginning after December 15, 2016.
Short translation: it is required for 12/31/16 year-end financials for public and private companies along with NPOs.
Early implementation is allowed.
The change will be applied retrospectively – any prior years presented in the financial statements will need to be restated.
- 4/9 – Charles B. Hall at CPA-Scribo – Debt Issuance Costs Get a New Parking Place
- 4/7 – Journal of Accountancy – FASB issues changes regarding presentation of debt issuance