Date: Sat, 9 Dec 2023 21:37:39 +0100 (CET) Message-ID: <1842328223.2681.1702154259966@vm-confjab> Subject: Exported From Confluence MIME-Version: 1.0 Content-Type: multipart/related; boundary="----=_Part_2680_1164055707.1702154259965" ------=_Part_2680_1164055707.1702154259965 Content-Type: text/html; charset=UTF-8 Content-Transfer-Encoding: quoted-printable Content-Location: file:///C:/exported.html Amortised Cost

# Amortised Cost

The amortised cost of a financial asset or financial liability i= s the amount

• at which the financial asset or financial liability is measured at init= ial recognition,
• minus principal repayments,
• plus or minus the cumulative amortisation using the effective interest method of any= difference between that initial amount and the maturity amount, and
• minus any reduction (directly or through the use of an allowance accoun= t) for impairment or un-collectability. Amortised Cost calculation

In view of the definition of the amo= rtised cost, the following formula is used for its calculation: • At further payment dates, the amortised cost equals the amortised cost = of the previous payment date, plus the difference of the current cumulative= total amortisation TA(tn) = ;and the one from the previous payment date TA= (tn-1), plus possible principal repayments PR(tn): The cumulative total amortisation TA(tn= ) of payment date tn is defined by =

• The effective capital EC(tn)&nbs= p;of payment date tn is defined as the negative of the sum of all future cash flows discounted = by the effective interest rate: In order to check the calculation of the effective capital in = Excel exports of the calculation analyser, the following = equivalent recursive formula for the effective capital is useful:

• The smoothing effective interest rate EIRs=  is calculated exaxctl= y like the EIR =E2=80=93 only = all cash flows of premiums/discounts/charges/transaction costs are ignored = in the calculation.
• Analogously, the smoothing effective= capital ECs is calculated exactly like the<= span> EC =E2=80=93 only the&nbs= p;EIRs are used instead of the EIR<= /em>.
Example of calculating amorti= sed cost

The following annuity loan is considered: Initially, there is also a charge of 5000 USD. Hence, the first cash flo= ws for the deal are as follows: Applying the calculation method described, the ca= lculation of the amortised cost of the deal starts as follows:

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