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FINANCIAL INSTRUMENTS
Definitions relating to recognition and
measurement
• The amortised cost of a financial asset or financial
liability is the amount at which the financial asset or
financial liability is measured at initial recognition minus
principal repayments, plus or minus the cumulative
amortisation using the effective interest method of any
difference between the initial amount and the maturity
amount, and for financial assets, adjusted for any loss
allowance.
• The effective interest method is a method of calculating
the amortised cost of a financial asset or a financial
liability and of allocating the interest income or interest
expense over the relevant period.
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