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..
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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.
Deferred financing fees amortization ? (Originally Posted: 03/04/2016)
Hi gents could someone explain to me what they are exactly and how they are usually amortized in the context of an lbo model. thanks
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