Define: Amortised Cost

UK Accounting Glossary

Definition: Amortised Cost

Quick Summary

What is the dictionary definition of Amortised Cost?

Dictionary Definition

The amortised cost is the value of an asset that has been written off; It represents the accumulated depeciation amount to date.

Full Definition

Amortised Cost FAQ's

What is the amortised cost method?

Amortised cost is that accumulated portion of the recorded cost of a fixed asset that has been charged to expense through either depreciation or amortisation.

Depreciation is used to ratably reduce the cost of a tangible fixed asset, and amortisation is used to ratably reduce the cost of an intangible fixed asset.

How do you calculate the amortised cost of a bond?

Divide the premium or discount by the number of months left outstanding on the bond to arrive at bond amortisation.

Multiply the bond’s face value by the stated interest rate on the bond, and then subtract the premium amortisation, or add the discount amortisation to arrive at interest expense.

What is the difference between amortisation and capitalisation?

Capitalisation is a broader term, while amortisation is a special case.