Finance
Fact-checked

At SmartCapitalMind, we're committed to delivering accurate, trustworthy information. Our expert-authored content is rigorously fact-checked and sourced from credible authorities. Discover how we uphold the highest standards in providing you with reliable knowledge.

Learn more...

What Are Bond Issue Costs?

Malcolm Tatum
Malcolm Tatum
Malcolm Tatum
Malcolm Tatum

Bond issue costs are any type of expenses that have to do with the preparation of a bond issue for sale to investors. The range of expenses will include every aspect of the process, beginning with the creation of the bond itself, the preparation in terms of marketing the bond issue to potential investors, and all the costs associated with such tasks as the underwriting of the bond, the accounting costs involved in managing the issue, and even the registration fees that must be settled in order to offer the issue. Costs of this type may be amortized, often from the sale date associated with the bonds.

There are a number of bond issue costs that are generated before the issue is ever presented to the general public. This includes the expense of managing all legal matters related to a bond issue, including making sure the bond is structured to comply with trade laws and regulations that apply in the jurisdiction where the bond will be issued. Securing the proper underwriting for the bond issue is another example of an expense that occurs before the bond is released for purchase. Setting up 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 issue costs that are incurred before the bond issue begins to generate any type of income.

Man climbing a rope
Man climbing a rope

Even after a bond is released and is selling well, additional bond issue costs are incurred. Many of these have to do with maintaining the accounting process, including documenting the use of the funds collected as part of the issue, tracking the actual dates of sales to investors, and calculating the returns due investors based on the terms of the bond itself. As the bond issue reaches maturity, the expenses associated with the final settlement with all investors are also accounted for and amortized.

Throughout the process, the expenses associated with marketing the bond issue are also considered part of bond issue costs. This particular expense often begins before the bond is actually issued and continues as long as the issue is still available to investors. Typically, issuers will project all these expenses when putting together the bond issue, making sure that the amount of the issue will cover all the bond issue costs and still allow the issue to provide the revenue necessary to successfully complete the project connected with the issue of the bond.

Malcolm Tatum
Malcolm Tatum

After many years in the teleconferencing industry, Michael decided to embrace his passion for trivia, research, and writing by becoming a full-time freelance writer. Since then, he has contributed articles to a variety of print and online publications, including SmartCapitalMind, and his work has also appeared in poetry collections, devotional anthologies, and several newspapers. Malcolm’s other interests include collecting vinyl records, minor league baseball, and cycling.

Learn more...
Malcolm Tatum
Malcolm Tatum

After many years in the teleconferencing industry, Michael decided to embrace his passion for trivia, research, and writing by becoming a full-time freelance writer. Since then, he has contributed articles to a variety of print and online publications, including SmartCapitalMind, and his work has also appeared in poetry collections, devotional anthologies, and several newspapers. Malcolm’s other interests include collecting vinyl records, minor league baseball, and cycling.

Learn more...

You might also Like

Discuss this Article

Post your comments
Login:
Forgot password?
Register:
    • Man climbing a rope
      Man climbing a rope