Amortised cost

Roles that need it

• General Accountant
• Loan Operations Analyst
• External Audit (Financial Services)
• Credit Risk Analyst

Skills it belongs to

• Bank product accounting (loans, deposits, EIR, IFRS 9 stages)
• International accounting standards (IFRS)

Related concepts

• Effective interest rate (EIR)The effective interest rate is the rate that exactly discounts the expected future cash flows of a financial instrument to its gross carrying amount. Fees and transaction costs that are integral to the instrument are spread over its life through the EIR.
• SPPI test (solely payments of principal and interest)The SPPI test checks whether the contractual cash flows of a financial asset are solely payments of principal and interest, consistent with a basic lending arrangement. Together with the business model test it decides whether IFRS 9 measures the asset at amortised cost or at fair value.
• IFRS 9 Financial InstrumentsIFRS 9 is the IFRS Accounting Standard for financial instruments, applied since 1 January 2018. It sets how financial assets are classified and measured, requires an expected credit loss allowance from day one through a three-stage model, and sets the rules for hedge accounting.
• Expected credit loss (ECL)Expected credit loss is the probability-weighted estimate of credit losses over a period, the basis of IFRS 9 loss allowances. It is usually computed as PD x LGD x EAD, discounted at the effective interest rate, over 12 months for Stage 1 and over the lifetime for Stages 2 and 3.

Sources

• IFRS 9 Financial Instruments, IFRS Foundation (external site) accessed 31 Oct 2026

Updated 31 Oct 2026.