Accounting for debt issuance costs

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What are Debt Issuance Costs?

An organization may incur a number of costs when it issues debt to investors. For example, when bonds are issued, the issuer will incur accounting, legal, and underwriting costs to do so. in essence, any expenses that can be directly attributed to a debt issuance are classified as debt issuance costs.

Accounting for Debt Issuance Costs

The ongoing amortization of debt issuance costs should be included in interest expense.

Presentation of Debt Issuance Costs

The debt issuance costs related to a note should be reported in the balance sheet as a direct deduction from the face amount of the note.