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Bond issue costs are all expenses associated with preparing a bond issue for sale to investors. The range of expenses will include all aspects of the process, beginning with the creation of the value itself, preparation in terms of marketing, issuing securities to potential investors, and all costs associated with such tasks as underwriting the security, costs accountants involved in managing the issue, and even the registration fees that must be paid to offer the issue. Costs of this type can generally be amortized from the sale date associated with the securities.
There are various bond issue costs that are incurred before the issue is presented to the general public. This includes the costs of dealing with all legal matters related to the issuance of a security, including ensuring that the security is structured to comply with applicable business laws and regulations in the jurisdiction where the security will be issued. Securing adequate underwriting for the bond issue is another example of an expense that occurs before the bond is released for purchase. Defining the accounting process that will be used to track the sale of the bonds, as well as the disbursements made to investors, is another example of bond issuance costs incurred before the bond issuance. start generating some kind of income.
Even after a bond is released and sells well, additional bond issuance costs are incurred. Many of these have to do with maintaining the accounting process, including documenting the use of funds raised as part of the issue, tracking the actual dates of sales to investors, and calculating returns due to investors in function of the terms of the value itself. As the bond issue matures, the expenses associated with final settlement with all investors are also accounted for and amortized.
Throughout the process, the expenses associated with the sale of the bond issue are also considered part of the bond issue costs. This particular expense generally begins before the bond is issued and continues as long as the issue is still available to investors. Generally, issuers will project all of these expenses when establishing the bond issue, ensuring that the amount of the issue covers all costs of issuing the bond while allowing the issue to provide the income necessary to successfully complete the issue. project related to the issuance of the bond. .