fasb issues asu to simplify presentation of debt issuance costs
Transcription
fasb issues asu to simplify presentation of debt issuance costs
APRIL 2015 BDO FLASH ALERT FASB 1 www.bdo.com SUBJECT FASB ISSUES ASU TO SIMPLIFY PRESENTATION OF DEBT ISSUANCE COSTS SUMMARY CONTACT: The FASB has issued an ASU intended to simplify U.S. GAAP by changing the presentation of debt issuance costs. Under the new standard, they will be presented as a reduction of the carrying amount of the related liability, rather than as an asset. The new treatment is consistent with debt discounts. It takes effect retroactively in 2016 and is available here. ADAM BROWN National Director of Accounting 214-665-0673 / [email protected] DETAILS: Main Provisions: ASU 2015-03 1 revises Subtopic 835-30 2 to require that debt issuance costs be reported in the balance sheet as a direct deduction from the face amount of the related liability, consistent with the presentation of debt discounts. Prior to the amendments, debt issuance costs were presented as a deferred charge (i.e., an asset) on the balance sheet. The ASU provides examples illustrating the balance sheet presentation of notes net of their related discounts and debt issuance costs. Further, the amendments require the amortization of debt issuance costs to be reported as interest expense, which we believe is largely consistent with current practice. Similarly, debt issuance costs and any discount or premium are considered in the aggregate when determining the effective interest rate on the debt. In the Basis for Conclusions, the FASB observed debt issuance costs that do not have an associated debt liability (for example, costs incurred before proceeds are received on a debt liability) generally are reported as deferred charges (i.e., assets) until the related debt liability is recorded and did not propose a change to this practice. The standard does not affect the recognition and measurement of debt issuance costs. As such, entities may need to track debt issuance costs separately in order to address other areas of U.S. GAAP such as third-party costs related to a debt restructuring accounted for under ASC 470-50 or the calculation of a beneficial conversion feature in accordance with ASC 470-20. 1 2 Simplifying the Presentation of Debt Issuance Costs Interest—Imputation of Interest GAUTAM GOSWAMI National Assurance Partner 312-616-4631 / [email protected] CHRIS SMITH Audit & Accounting Professional Practice Leader 310-557-8549 / [email protected] BDO FLASH ALERT FASB Effective Date and Transition: The amendments are effective for public business entities for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. The amendments are effective for all other entities for fiscal years beginning after December 15, 2015, and interim periods within fiscal years beginning after December 15, 2016. The amendments must be applied retrospectively. All entities have the option of adopting the new requirements as of an earlier date for financial statements that have not been previously issued. Applicable disclosures for a change in an accounting principle are required in the year of adoption, including interim periods. BDO is the brand name for BDO USA, LLP, a U.S. professional services firm providing assurance, tax, financial advisory and consulting services to a wide range of publicly traded and privately held companies. For more than 100 years, BDO has provided quality service through the active involvement of experienced and committed professionals. The firm serves clients through 58 offices and over 400 independent alliance firm locations nationwide. As an independent Member Firm of BDO International Limited, BDO serves multinational clients through a global network of 1,328 offices in 152 countries. BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms. For more information, please visit www.bdo.com. Material discussed in this tax alert is meant to provide general information and should not be acted on without professional advice tailored to your firm's individual needs. © 2015 BDO USA, LLP. All rights reserved. www.bdo.com 2