AHACPA continues to receive numerous questions regarding REAC’s position on the implementation of ASU 2015-03 on debt issuance costs. Since the original REAC notice, the guidance has been somewhat neglected. To remind auditors and clients of the guidance, AHACPA wishes to reiterate the following:
- HUD has indicated the debt issuance costs should be removed from the asset side of the balance sheet and moved to liabilities. Owners have a choice to record the amount directly in account 2320 – First Mortgage Long-term, or in a new account (2340 – Debt Issuance Costs). Usage of that account is voluntary and not required.
- The amortization will be included in interest expense.
- Then a new account has been added to the cash flow (S1200-486) to account for the non-cash portion of interest expense.
- Footnotes should indicate the project has adopted a new accounting pronouncement and the other related footnotes are changed to account of the changes overall.