United States

FASB simplifies the presentation of debt issuance costs

FINANCIAL REPORTING INSIGHTS  | 

The Financial Accounting Standards Board (FASB) has received feedback that having different balance sheet presentation requirements for debt issuance cost and debt discount or premium creates unnecessary complexity. As part of its initiative to reduce complexity in accounting standards, the FASB recently issued Accounting Standards Update (ASU) 2015-03, Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Cost. This ASU requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs is not affected by the new guidance.

Public companies must apply the new requirements in fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. All other entities must apply the new requirements in fiscal years beginning after December 15, 2015, and interim periods within fiscal years beginning after December 15, 2016. All entities have the option of adopting the new requirements as of an earlier date for financial statements that have not been previously issued. The guidance should be adopted on a retrospective basis, wherein the balance sheet of each individual period presented is adjusted to reflect the period-specific effects of applying the new guidance.