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Unformatted text preview: um and Discount Amortization Compared 14-14 Debt Issue Costs
Registration Promotion 14-15 U. S. GAAP vs. IFRS
Debt issue costs (called transaction costs under IFRS)
are accounted for differently by U.S. GAAP and IFRS. • Debt issue costs are recorded
separately as an asset. • Amortized over the term to
maturity. “Transaction costs” reduce the
recorded amount of the debt.
The cost of these services
reduces the net cash the issuing
company receives and the
amount recorded for the debt. Unless the recorded amount of the debt is reduced by the
transaction costs, the higher effective interest rate is not
reflected in a higher recorded interest expense. 14-16 LongTerm Notes
On January 1, 2013, Skill Graphics, Inc., a product labeling
and graphics firm, borrowed $700,000 cash from First BancCorp
and issued a 3-year, $700,000 promissory note. Interest of...
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- Fall '10