Interest Rate Risk Meaning | Accounting Share

Accounting glossary · Understand, connect, apply

Interest rate risk is exposure to movements in market interest rates that affect an instrument’s value or future cash flows.

Example

When market rates rise, a fixed-rate bond usually loses value, while payments on a floating-rate borrowing may rise when its rate resets.

Remember the difference

Fixed rates can create fair value exposure. Floating rates can create cash-flow exposure. An instrument’s terms determine which effects matter.

Browse the accounting glossary · Read the IFRS Foundation reference

Prepared with AI assistance. Examples are fictional and simplified for learning.

Examples are simplified for learning. Where a term depends on US law, IFRS, US GAAP or a historical rule, check the context explained above and the requirements relevant to your course.

Study references: OpenStax financial accounting and managerial accounting. For reporting requirements, consult the applicable IFRS Standards or FASB guidance. US tax terms should be checked against the relevant tax-year IRS instructions.

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