A company takes on 110M in debt on Jan 1 to finance the purchase of 100M in pp&e and 10M commission fee. How do you deal with the 10M commission fee on the three statements? I was told you capitalize it... but how?
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Simple, your asset is worth $110m on the balance sheet. It depends on the standards you're using, i.e. Canadian GAAP, US GAAP, IFRS. Under IFRS and Canadian GAAP (not sure about US), your equipment's true "cost" is all of the money that it took to bring that piece of equipment into working order. This could include commissions, installation fees, delivery fees, etc.
^This. Its the same for US GAAP as well, basically any fees/expenses incurred to get the asset in working order is added to asset price.
not too clear on these things these days but thought it would be $10mm capitalized financing fee on assets that gets amortized
You capitalize the entire $10M with the asset, so your balance sheet will show the asset at 110M. you would depreciate the asset as you would any other asset. depreciation expense would be recognized each period on the I/S. that same depreciation expense would be added back to the CF from operations (non-cash transaction) on the statement of cash flows.
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