medium · Private Equity accounting-flow
In the context of a 'Holdco PIK' instrument, where is the interest expense recognized if the Holdco and Opco are not part of the same consolidated tax group?
- At the Holdco level, potentially creating an NOL if there is no offsetting income
- The interest is not recognized until the Holdco receives a dividend from the Opco
- At the Opco level, to maximize the tax deductibility against operating cash flow
- The interest is capitalized as an intangible asset on the consolidated balance sheet
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