It seems if you only include interest expense and do not include the required payment on the principal, the Income Statement would seem misleading.
In: Other
This is because it’s not a loss. It’s a balance sheet and cash flow item in the same way as when the loan is taken out it doesn’t appear as a profit either.
The interest counts as a loss as it is a permanent reduction in shareholders funds – likewise investment income is included as profits. the purchase and sale of equity investments (including acquisitions) only are accounted for in respect of the gain or loss made, not the total capital spent or recouped.
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