Thursday, April 9, 2015

FASB Issues Update-April 7th, 2015


Anthony S. LaNasa, CPA, CFE
Principal
 
 
 
On April 7th, 2015 the FASB (Board) issued Accounting Standards Update (ASU) No. 2015-03, Interest: Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.  It was part of the accounting board initiative to simplify U.S. GAAP.

 

So what will this new accounting update mean?

 

It means that the costs for issuing debt should appear on a balance sheet as a direct deduction from the debt’s value. The Board stated that these amendments won’t affect the recognition and measurement of the costs for issuing debt.

 

This update is effective for all companies for reporting periods beginning after December 15, 2015.  Adopting these amendments early is also being allowed by the Board, including any financial statements that have not been previously issued.

 

As companies adopt the amendments, they should revise balance sheets for periods being presented prior to the effective date. Once a company adopts the changes, it is required to disclose the applicable information for a change in an accounting principle.

 

The FASB Board is really focusing on simplifying and making U.S. GAAP more readable and understandable.  Lastly, does this change make sense because are debt issuance costs really assets that provide a future economic benefit?  My opinion to that answer is no.







This update is published periodically by HW&Co. as an information service to our clients, business associates and friends. It is general information and professional advice should be obtained before acting on any comments contained in this document.