A premium means investors paid more than contractual principal because the bond's cash flows and supplied yield support that price. It is not issuer revenue. Net carrying amount begins above face and declines as coupon cash exceeds effective interest expense.
An unamortized premium remains part of the liability's net carrying amount until amortized or included in a supplied derecognition event.
Measure and amortize the excess
ASC 835-30-25-9 identifies the face-to-present-value difference as discount or premium. A premium exists when present value exceeds face because the stated cash payments are attractive relative to the supplied market yield.
Suppose a $1,000,000 face bond is priced at $1,045,000 before issuance costs. The $45,000 premium is part of the opening liability basis. Coupon cash exceeds effective interest, so carrying amount declines toward face. ASC 835-30-45-3 reports premium amortization through interest expense for a liability. It is not revenue at issuance.
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- Bond issue price — Apply
To apply this concept: Required. Premium is defined by issue price above face amount.