4.2 Recognition Date
In practice, debt liabilities are initially recognized on the settlement date (i.e.,
the date on which the debtor receives the related proceeds such as cash or other
financial or nonfinancial assets) as opposed to the date on which the debt is priced
or the parties enter into a binding agreement to issue it.
If an entity enters into an agreement that requires or permits it to
issue debt in the future, it should consider whether it must recognize that
agreement as a derivative under ASC 815-10 until the debt is funded. Usually, such
contracts are not within the scope of the accounting requirements for derivatives
because ASC 815 contains a scope exception for loan commitments (see Section 2.3.3), and the
contract might not have the net settlement characteristic specified in the
definition of a derivative (see Section 8.3.4.4). If an entity incurs costs and fees associated with
a future debt issuance or a commitment that requires or permits it to issue debt in
the future, it may need to capitalize such costs and fees as an asset (see Chapter 5).