Treatment of debt issuance costs

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Achin
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Joined: 16 Sep 2022, 09:20

Treatment of debt issuance costs

Post by Achin »

In 2022, company A issued public debt and incurred £2k transaction cost. The transaction cost of £2k was recognized on the balance sheet, and then expense over the life of the debt.

How do you treat ongoing transaction costs (eg. A yearly debt listing fee)? My gut feeling is that we expense ongoing transaction cost.. is this right? Thanks
JRSB
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Re: Treatment of debt issuance costs

Post by JRSB »

Given it's a yearly fee, yes those costs will naturally 'amortise' over the correct life so yes as incurred.
Achin
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Joined: 16 Sep 2022, 09:20

Re: Treatment of debt issuance costs

Post by Achin »

So, I don't capitalise it and amortized over the life of the debt given it's a yearly fee? But instead expense as incurred
JRSB
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Re: Treatment of debt issuance costs

Post by JRSB »

If you did that you'd have higher P&L in the earlier years than the later, which is the opposite of what the standards are trying to do.
Achin
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Joined: 16 Sep 2022, 09:20

Re: Treatment of debt issuance costs

Post by Achin »

So, every year after the debt issuance, we still capitalise the yearly debt listing fee and amortized this over the life of the debt?
JRSB
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Re: Treatment of debt issuance costs

Post by JRSB »

No expense it
JRSB
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Joined: 01 Mar 2020, 01:10
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Re: Treatment of debt issuance costs

Post by JRSB »

this is debt?
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