Effective interest rate
BCZ5.65 In developing the revised IAS 39, the IASB considered whether the effective interest rate for all financial instruments should be calculated on the basis of estimated cash flows (consistently with the original IAS 39) or whether the use of estimated cash flows should be restricted to groups of financial instruments with contractual cash flows being used for individual financial instruments. The IASB agreed to reconfirm the position in the original IAS 39 because it achieves consistent application of the effective interest method throughout the Standard.
BCZ5.66 The IASB noted that future cash flows and the expected life can be reliably estimated for most financial assets and financial liabilities, in particular for a group of similar financial assets or similar financial liabilities. However, the IASB acknowledged that in some rare cases it might not be possible to estimate the timing or amount of future cash flows reliably. It therefore decided to requi
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