Amortised Cost

IFRS 9 Definition of amortised cost: The amount at which the financial asset or financial liability is measured at initial recognition minus the principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount and, for financial assets, adjusted for any loss allowance.


Subsequent measurement – Financial asset

This is part of the classification of financial assets. A financial asset is classified as subsequently measured at amortised cost if (IFRS 9 4.1.1):

Something else -   Interest-free demand loan No bank debt

The asset is measured at the amount recognized at initial recognition minus principal repayments, plus or minus the cumulative amortization of any difference between that initial amount and Amortised Costthe maturity amount, and any loss allowance (impairment). Interest income is calculated using the effective interest method and is recognized in profit and loss. Changes in fair value are only recognized in profit and loss when the asset is derecognized or reclassified.

But do not forget the fair value option.

Subsequent measurement – Financial liability

A financial liability is classified as subsequently measured at amortised cost, except for the following financial liabilities that are measured at (IFRS 9 4.2.1):

  • Financial liabilities designated at initial recognition as a financial liability at fair value through profit or loss (fair value option) (IFRS 9 4.2.2)
  • Financial liabilities held for trading and derivatives that are measured at fair value through profit or loss,
  • Financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition or when the continuing involvement approach applies, measurement is explained in the linked transfer options,
  • Financial guarantee contracts (guarantees).  Unless the guarantee is measured as held for trading, derivative or financial liability that did not qualify for derecognition or for which the continued involvement applied, guarantees are measured at the higher of:
    • the provision recorded as the amount of the loss allowance determined based on the expected credit losses approach (IFRS 9 Section 5.5)
    • the amount initially recognised as a financial liability (provision) at fair value less the cumulative financial guarantee income (if any) recognised in line with IFRS 15 Revenue from contracts with customers. Financial guarantee income results from the amortisation of this initial provision as income to profit or loss over the period of the guarantee, representing the revenue earned as the performance obligation (this is the act of providing the guarantee) is satisfied, thereby reducing the liability to zero, if no compensation payments are actually made.
  • Commitments to provide a loan at a below-market interest rate (commitment). Unless the commitment is measured as held for trading, derivative or financial liability that did not qualify for derecognition or for which the continued involvement applied, commitments are measured at the higher of:
    • the provision recorded as the amount of the loss allowance determined based on the expected credit losses approach (IFRS 9 Section 5.5)
    • the amount initially recognised as a financial liability (provision) at fair value less the cumulative commitment fee income (if any) recognised in line with IFRS 15 Revenue from contracts with customers. Commitment fee income results from the amortisation of this initial provision as income to profit or loss over the period of the commitment, representing the revenue earned as the performance obligation (this is the act of providing the commitment) is satisfied, thereby reducing the liability to zero, if no compensation payments are actually made.
  • Contingent consideration recognised in a business combination (as defined in IFRS 3 Business combination). The acquirer measures the contingent consideration at fair value through profit or loss.
Something else -   Financial asset valued at amortised costs

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Amortised Cost Amortised Cost Amortised Cost Amortised Cost

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