As part of its move to simplify accounting where it can, the Financial Accounting Standards Board has approved a measure to revise the presentation of debt issuance costs.

In Accounting Standards Update No. 2015-03, FASB says companies should treat debt issuance costs as they do debt discounts in the balance sheet, simply deducting them from the carrying amount of the debt liability. The new accounting standard does not affect the recognition and measurement of debt issuance costs, only the presentation.

FASB said it heard from financial statement preparers and others that the existing rules establishing different balance sheet presentation requirements for debt issuance costs and debt discount and premium were unnecessarily complicated. Historical GAAP requires debt issuance costs to be recognized as a deferred charge, or an asset, in the balance sheet, while debt discounts are recognized with the carrying amount.

In studying the issue, FASB discovered historical GAAP in this area differed from International Financial Reporting Standards, where transaction costs are required to be deducted from the carrying value of the financial liability. It also conflicted with FASB’s own concepts, Concepts Statement No. 6, which says debt issuance costs are similar to debt discounts, in effect reducing the proceeds of borrowing, thereby increasing the effective interest rate.

The new presentation takes effect for public companies for fiscal years beginning after Dec. 15, 2015, including interim periods. Retrospective application, meaning applying the new guidance to earlier years in financial statements, is required upon adoption.

FASB launched its simplification initiative in 2014 to make some targeted changes to U.S. GAAP that are intended to make it easier to apply without sacrificing the relevance or quality of information for users of financial statements. The board has already completed a standard to do away with the concept of “extraordinary items” and has additional projects under way to address inventory measurement, defined benefit pension plan assets, income taxes, stock-based compensation and others.