What is AMORTISED COST according to IFRS?

Question

accounting terminology

Answer 1

Amortised cost is most often used with financial assets or financial liabilities under IAS 39. Amortised cost is the amount at which a financial asset or financial liability is measured at initial recognition, less principal repayments and plus or minus any unamortised original premium or discount. IAS 39 requires the amortised cost to be calculated using the effective interest method. The effective interest rate in a financial instrument is the rate that exactly discounts the cash flows associated with the financial instrument through maturity or the next repricing date to the net carrying amount at initial recognition i.e. a constant rate on the carrying amount. The effective interest rate is sometimes termed the level yield to maturity or the next repricing date, and is the internal rate of return of the financial asset or financial liability for that period.

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