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A Debt Is Owed, No Matter How You Want to Account for It

Tammy Whitehouse | June 30, 2015

Even the simplest accounting issues, it seems, can be anything but simple.

Regulators and rulemakers got a taste of that recently when they tried to simplify the way companies show the cost of securing debt in financial statements. Questions and confusion ensued, and only a recent signal from the Securities and Exchange Commission could calm the rising tide around what ostensibly was an effort at simplification.

Under current U.S. Generally Accepted Accounting Principles, costs associated with issuing debt might be reflected on the asset side of the balance sheet, or they might be presented as an offset or reduction of the debt liability; the decision depends primarily on the nature of the cost. Those costs associated with issuing debt (fees paid to lenders or other outside service providers in securing the debt, for example), are presented under current rules on the asset side of the balance sheet, where they are capitalized or written down over time. Debt discounts... To get the full story, subscribe now.