The amortised cost of a financial asset or financial liability is the amount at which the asset or liability is measured at initial recognition:
A) minus principal repayments.
B) plus or minus the cumulative amortisation using the effective interest method of any difference between that initial amount and the maturity amount.
C) minus any reduction for impairment.
D) All of the given answers are correct.

Question

Quizplus · Accepted Answer

The amortised cost of a financial asset or financial liability is indeed calculated by taking the initial measurement amount, subtracting any principal repayments, adjusting for cumulative amortisation using the effective interest method (which accounts for any difference between the initial amount and the maturity amount), and subtracting any reduction for impairment. Therefore, all the given answers contribute to the correct definition of amortised cost.

The Amortised Cost of a Financial Asset or Financial Liability