Investment amortized cost

Investment amortized cost is the holder's acquisition basis after changes such as principal collections and effective-interest amortization of a discount or premium. It is a measurement baseline. It is not always the amount shown on the balance sheet.

Build the effective-interest row

For each period, calculate cash interest from the bond's face amount and stated rate. Calculate interest revenue from opening amortized cost and the effective rate. The difference adjusts amortized cost. A discount increases the carrying amount as it is amortized; a premium reduces it.

Assume opening amortized cost is $486,457.02 and the six-month effective rate is 3 percent. Interest revenue is $14,593.71. If cash interest is $12,500, the $2,093.71 difference is discount amortization. Ending amortized cost is $488,550.73. Retain full precision in the schedule and round only the displayed amounts.

ASC 320-10-35-4 places interest income and discount or premium amortization in earnings for all three debt-security categories. Classification affects the later reporting layers. An HTM security may be reported net of a credit allowance. AFS and trading securities are reported at fair value, yet they still need amortized cost to measure interest and explain the fair-value bridge. A fair-value entry must not overwrite the effective-interest record.