Relative to the big changes that are supposed to be coming from the FASB (leases, revenue recognition, loan impairment), ASU No. 2015-03 on debt issuance costs is very small potatoes. But, if you are looking for an exemplar of the verbal gymnastics the FASB is wont to fob off as its “basis for conclusions” one would be hard pressed to find lower hanging fruit.
ASU 2015-03 made two changes to GAAP:Deferred debt issuance costs would, instead of being reported as an asset, be deducted from the gross carrying amount of the debt to which it relates. Amortization of debt issuance costs would be reported as interest expense.
Question #1: Will the amendments, as claimed by the FASB, simplify GAAP?
No. Moving an item from the left side of the balance sheet to the right side as a so-called “valuation account” (which it is not) and reclassifying an operating expense as interest expense (which it [Read More...]