In short
Debt issuance costs, such as underwriting, legal and registration fees for issuing bonds, are presented as a direct deduction from the carrying amount of the debt, like a discount, and amortized into interest expense over the term.
Key takeaways
- They are not recorded as an asset or expensed immediately.
- Amortizing them raises the effective interest rate on the debt.
- Costs of issuing equity reduce the proceeds recorded in additional paid-in capital instead.
Where it's tested
FAR: Long-Term Debt (Bonds & Notes) — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
Under current US GAAP, debt issuance costs are: