Amortization of Financing Fees

Shouldn't the financing fees in an LBO produce a deferred tax liability because you recognize it immediately for tax purposes, but amortize it for book purposes? A model i'm looking at says deferred tax asset in the pro-forma, and I wanted to double check to see if I'm missing something.

Also, does anyone know why the M&A fee isn't capitalized? It looks like only the financing fees are..

 

I haven't heard about capitalization of financing fees generating DTA... so I can't help on this one (although I tend to find this very weird...) But yes, you are right... financing fees are capitalized (I'm just not sure if it has different tretament for book/tax purposes).

In relation to M&A fees not being capitalized, it is due to FASB 141(R)that says you cannot capitalize transaction fees anymore. Prior to FASB 141(R), we used to consider the transaction fees (or M&A fees, if you will) as part of the pruchase price and consequently as part of goodwill (being capitalized as an asset). With FASB 141(R), transaction fees should be expensed immediately.

 

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