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Accounting for capital raise through Reg A

Nell Ma's Profile

My company just wrapped up fund raise through Reg A; since there is no par value, means there is no add'l paid-in-capital. Question is for the expense that was occured related to Reg A fund raise (such as legal fee, payment process fee and etc.), what is correct to book these expenses? (one of accountant I talked to told me to capitalize them, but my research shows it should deduction of add'l paid-in-capital). 

Answers

Ted Monohon
Title: VP -Finance / Controller
Company: Fantex
(VP -Finance / Controller, Fantex) |

Although most texts make reference to deducting the direct expenses from a capital stock offering from additional paid in capital, the SEC only mentioned the costs should be deducted from the gross proceeds of the offering. I would assume this is either the capital stock account or APIC. If there is no APIC, then it would net against the capital stock account.

http://www.sec.gov/interps/account/sabcodet5.htm#A

Topic Expert
Joseph Ori
Title: CEO
Company: Paramount Capital Corporation
(CEO, Paramount Capital Corporation) |

Ted is correct but you can also capitalize them as syndicatilon costs (no amort) and organization costs (60 month amort).

Ted Monohon
Title: VP -Finance / Controller
Company: Fantex
(VP -Finance / Controller, Fantex) |

My understanding is that syndication costs relate to partnership structures and not corporations. Since we are talking about capital stock, I don't think the treatment as syndication or organizational costs would be appropriate under GAAP or under IRC 709(b)

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