Amortised Cost
Accounting glossary · Understand, connect, apply
Amortised cost measures a financial instrument from its initial amount, adjusting for principal repayments and the effective-interest allocation of differences from the maturity amount. For a financial asset it also reflects the loss allowance.
Example
An instrument bought below its redemption amount can grow in carrying amount as its discount is recognised through interest over time.
Remember the difference
Amortised cost follows the instrument’s effective yield and relevant adjustments. Current market prices can move independently of that calculation.
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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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