What are phantom profits?
- Laura
Choose from timely legislation and compliance alerts to monthly perspectives on the tax topics important to you. If the value of your products (inventory) goes up but you haven’t sold them, your balance sheet will show a profit. If you run a small business, especially in India, knowing about phantom profits is crucial. Since the people who hold shares also read the same paper, they are reluctant to sell. It has nothing to do with the fundamentals of the company or its profitability.
The OID must be amortized over the debt term and treated as non-cash interest, just like accounting for financing fees. If interest rates were to decline later, the high-interest rate bonds – i.e. priced above market – could soon burden the issuer. When it comes to business, there are a lot of different ways to calculate profit. However, when it comes to phantom profit, there are a…
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