1. Accounting, Auditing, Actuarial
  2. IFRS Foundation & IASB
  3. International Financial Reporting Standards (IFRSs)
  4. 2017
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  1. IFRS 9: Financial Instruments
  2. Chapter 5 Measurement
  3. 5.4 Amortised cost measurement (paras. 5.4.1-5.4.9)
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Version date: 27 August 2020 - onwards
  Version 2 of 2    

5.4 Amortised cost measurement (paras. 5.4.1-5.4.9)

Financial assets

Effective interest method

5.4.1 Interest revenue shall be calculated by using the effective interest method (see Appendix A and paragraphs B5.4.1-B5.4.7). This shall be calculated by applying the effective interest rate to the gross carrying amount of a financial asset except for:

(a) purchased or originated credit-impaired financial assets. For those financial assets, the entity shall apply the credit-adjusted effective interest rate to the amortised cost of the financial asset from initial recognition.

(b) financial assets that are not purchased or originated credit-impaired financial assets but subsequently have become credit-impaired financial assets. For those financial assets, the entity shall apply the effective interest rate to the amortised cost of the financial asset in subsequent reporting periods.

5.4.2 An entity that, in a reporting period, calculates interest revenue by applying the effective interest method to the amortised cost of a financial asset in a

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