LBO Def financing fees/ new rule

Question

Hello,

Just read that defered financing fees are no langer on the asset side of the BS, but will be a contra account on the liabilities side. For a LBO modelling test, would you adapt to this new rule?

Is this rule only in the US or also in Europe / IFRS?

Thank you!!

wm241 · Accepted Answer

This is my understanding of it as a student and not a private equity professional

So the new GAAP accounting rules state that non-revolver financing fees are to be treated as a contra-liability, meaning that if you have Debt with Face Value of $100, and a 5% financing fee, you'll initially record the debt on the Balance Sheet at $95 (note that this is just the book value amount, not the $100 which you pay interest and principal on).

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LBO Def financing fees/ new rule