Given that OID amort (usually included in interest expense) is book deductible, but not tax deductible, I would imagine this creates a DTL at inception.
Can someone please weigh in if this is correct?
Nothing online even mentions the creation of deferred taxes when discussing OID, except for one article on WallStreetPrep which says it creates a DTA (but I think that's wrong). A sanity check would really help me out here.
| +259 | Earliest you can get fired | 50 | 58m |
| +245 | Are target prospects getting dumber? | 55 | 1h |
| +244 | UBS’s M&A BANKERS ARE DOING TERRIBLY. $200M EXTRA IS BEING CUT | 43 | 1h |
| +231 | MBB Pay Raises | 48 | 3h |
| +218 | Career Crossroads | 27 | 3h |
| +214 | US 2027 SA IB worried about background check | 52 | 1h |
| +210 | Investment Banking is Divine | 36 | 54m |
| +206 | Analyst: Why is UBS IB doing worse than peers?, UBS CFO: No Comment | 39 | 4h |
| +205 | How do YOU manage networking requests? | 31 | 55m |
| +204 | Another $115bn Mega deal for these banks. Congrats! | 42 | 1h |
Career Resources
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
Edit: Double post
It's deductible as interest, so no.
-
OIDs can technically be seen as implied interest paid upfront. They don’t create any intertemporary differences between your book and cash taxes, so no DTA / DTL is created.
To clarify, your thought process is correct; however, OID amortization is also deductible for cash taxes purposes (see IRS Publication 1212)
Non ea eaque rerum qui. Quis ea reiciendis earum omnis.
Minima suscipit optio ab quis tempora. Voluptatem enim velit ad minus voluptatum. Accusamus debitis fuga autem ut vero. Consequatur illum rerum quis et magni recusandae.
Dolorum omnis ut qui id. Et in laborum et sed fugit et. Qui ut soluta ea voluptatem pariatur amet dolorem voluptas. Aut similique eligendi iusto molestiae quos est distinctio. Minus doloribus aliquid laboriosam autem eveniet saepe.
Minus magni quis laborum. Consequatur maxime odit eaque esse soluta.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...