![]() The inputs in this tab include the face amount of the term loan, the total debt issuance costs, the stated interest rate at the time of issuance, and the payment schedule (column E). The first tab has a bit more going on than the second tab due to the effective interest method being used. A good check is to ensure that the ending balance of the debt issuance costs, net (column G) is $0 in the last period of amortization. Note that if the months of amortization vary from this standard template, which uses 60 months, additional months can be added or months can be taken away. The key inputs include the total amount of debt issuance costs and the months of amortization. The second tab is more simplified than the first as only a few inputs are necessary. The first tab of the file is used for term loans using the effective interest method, while the second tab is used for term loans and / or revolvers using the straight-line method. The attached file is a standard amortization template that may be used for term loans and revolvers. For both term loans and revolvers, the amortization period of the debt issuance costs is generally the contractual length of the debt. ![]() Also, the above guidance is generally applicable for term debt issued at a discount (also known as an original issue discount (OID)).įor revolvers, amortization of debt issuance costs is straight-line in nature. Note that this guidance does not apply to debt recorded at fair value, but only debt recorded at cost. The alternative method is typically the straight-line method. However, if another method does not result in a material difference from the effective interest method, it may be used. ![]() The above guidance indicates that the interest method, also known as the effective interest method, must be used to amortize the debt issuance costs. This is the interest method.ĪSC 835-30-35-4: Other methods of amortization may be used if the results obtained are not materially different from those that would result from the interest method. While we won’t cover the particular capitalizable costs in this blog posting or cover classification of these costs (we’ll highlight these items in a subsequent blog post), we’ll cover how these costs should be amortized for term loans and revolvers.įirst, let’s take a look at the relevant guidance within the Accounting Standards Codification (ASC) for term loans:ĪSC 835-30-35-2: With respect to a note for which the imputation of interest is required, the difference between the present value and the face amount shall be treated as discount or premium and amortized as interest expense or income over the life of the note in such a way as to result in a constant rate of interest when applied to the amount outstanding at the beginning of any given period. In most instances when debt is issued, there are costs associated with the issuance that may be capitalizable under US GAAP.
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