Since these payments do not generate future benefits, they are treated as a contra debt account.
The costs are capitalized, reflected in the balance sheet as a contra long-term liability, and amortized using the effective interest method or over the finite life of the underlying debt instrument, if below de minimus.
[2][3] Early debt repayment results in expensing these costs.
Under U.S. GAAP, when issuing securities without specific maturity, such as perpetual preferred stock, financing costs reduce the amount of paid in capital associated with that security.
[4] For U.S. federal income tax purposes, DFC are generally amortized over the life of the debt using the straight-line method.