Interest—Imputation of Interest (Subtopic 835-30)

No. 2015-03 April 2015

Interest--Imputation of Interest (Subtopic 835-30)

Simplifying the Presentation of Debt Issuance Costs

An Amendment of the FASB Accounting Standards Codification?

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Accounting Standards Update

No. 2015-03 April 2015

Interest--Imputation of Interest (Subtopic 835-30)

Simplifying the Presentation of Debt Issuance Costs

An Amendment of the FASB Accounting Standards Codification?

Financial Accounting Standards Board

Accounting Standards Update 2015-03

Interest--Imputation of Interest (Subtopic 835-30)

Simplifying the Presentation of Debt Issuance Costs

April 2015

CONTENTS

Page Numbers

Summary ...........................................................................................................1?2 Amendments to the FASB Accounting Standards Codification? .......................3?7 Background Information and Basis for Conclusions ........................................8?11 Amendments to the XBRL Taxonomy .................................................................12

Summary

Why Is the FASB Issuing This Accounting Standards Update (Update) and What Are the Main Provisions?

The Board is issuing this Update as part of its initiative to reduce complexity in accounting standards (the Simplification Initiative). The objective of the Simplification Initiative is to identify, evaluate, and improve areas of generally accepted accounting principles (GAAP) for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to users of financial statements.

The Board received feedback that having different balance sheet presentation requirements for debt issuance costs and debt discount and premium creates unnecessary complexity. Recognizing debt issuance costs as a deferred charge (that is, an asset) also is different from the guidance in International Financial Reporting Standards (IFRS), which requires that transaction costs be deducted from the carrying value of the financial liability and not recorded as separate assets. Additionally, the requirement to recognize debt issuance costs as deferred charges conflicts with the guidance in FASB Concepts Statement No. 6, Elements of Financial Statements, which states that debt issuance costs are similar to debt discounts and in effect reduce the proceeds of borrowing, thereby increasing the effective interest rate. Concepts Statement 6 further states that debt issuance costs cannot be an asset because they provide no future economic benefit.

To simplify presentation of debt issuance costs, the amendments in this Update require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this Update.

What Are the Transition Requirements and When Will the Amendments Be Effective?

For public business entities, the amendments in this Update are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years.

For all other entities, the amendments in this Update are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within fiscal years beginning after December 15, 2016.

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Early adoption of the amendments in this Update is permitted for financial statements that have not been previously issued. An entity should apply the new guidance on a retrospective basis, wherein the balance sheet of each individual period presented should be adjusted to reflect the period-specific effects of applying the new guidance. Upon transition, an entity is required to comply with the applicable disclosures for a change in an accounting principle. These disclosures include the nature of and reason for the change in accounting principle, the transition method, a description of the prior-period information that has been retrospectively adjusted, and the effect of the change on the financial statement line items (that is, debt issuance cost asset and the debt liability).

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