We are a residential developer that sells developed lots to residential builders. We have about 60 active subdivisions at any given time and take out A&D loans to cover development costs.A question has been raised by our new auditors about how we should account for loan costs associated with the A&D bank financing. Based on the general understanding that GAAP requires interest (and property taxes) to be capitalized during the production period, and given the close relationship between loan costs and interest expense, we have been capitalizing such loan costs into the projects and including them in lot charge-offs to cost of sales for completed lots.Our new auditors are referencing "Accounting Standards Update No. 2015-03," effective for 2016 and thereafter. It states that such loan costs should be deferred on the balance sheet and amortized over the life of the loan. It also states that the unamortized costs should be offset against the loan liability rather than reflected on the asset side of the balance sheet. We would like to find out how other developers are dealing with this issue before we acquiesce to making such a significant accounting change.Thanks in advance!Megan
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