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optimistCPA
Major Contributor

Joined: 03 Mar 2009
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Posts: 360

Posted: 23 Aug 2009 at 23:16 \| IP Logged

What is the difference between direct out of pocket
expenses (which are debited) (as in case of investment in
sub.) and Bond issue costs (which are capitalized)?

I thought bond issue costs are also legal fees etc. Then if
that is true then which one is capitalized and which one is
expensed.

Thanks always.

__________________
BEC--80
REG--95
FAR--77
AUD--82

Jams
Major Contributor

Joined: 26 Apr 2007
Location: United States
Online Status: Offline
Posts: 547

Posted: 23 Aug 2009 at 23:39 \| IP Logged

i think direct issue costs are expensed now in new rule of 141R and not increase to investment account. direct cost have the same meaning only treatment is different for debt and equity. for debt they are capitalize and amortize over the life of bond, and for equity they are expensed (used to increase investment earlier). and of course the registration costs rules are not changed which is-they still reduce "APIC".

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jams

BEC-76
AUD-80
REG-84
FAR-81 !!!

optimistCPA
Major Contributor

Joined: 03 Mar 2009
Online Status: Offline
Posts: 360

Posted: 23 Aug 2009 at 23:51 \| IP Logged

So, direct expenses related to equity are expensed and
exps. related to debt are capitalized.

Thanks Jams.

__________________
BEC--80
REG--95
FAR--77
AUD--82

Jams
Major Contributor

Joined: 26 Apr 2007
Location: United States
Online Status: Offline
Posts: 547

Posted: 24 Aug 2009 at 09:06 \| IP Logged

yep. but only for the new rules, not for the old ones, old rule says "add to investment account". in case the exam has some old questions. good luck.

__________________
jams

BEC-76
AUD-80
REG-84
FAR-81 !!!

bird
Regular
Regular

Joined: 22 Aug 2009
Location: United States
Online Status: Offline
Posts: 208

Posted: 24 Aug 2009 at 10:52 \| IP Logged

bond issue costs will most likley be specifically identified in the question.

It seems like the examiners want to make sure you know the treatment of bic more than anything else.

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