Route 102 – One man’s year-long journey……Day 28

  • By Mercia Group
  • 25 February 2015 00:00

To mark this momentous year for UK GAAP, I'm embarking on a mission to work my way through FRS 102, reading a portion on each working day of 2015 and writing a short blog entry on my thoughts and musings (be they few or many).

Day 28 (25 Feb)

I'm out on the road in lovely Billericay today, so just a brief post. We're on to the amortised cost method - what is it?

It's essentially a discounted cash flow (DCF) technique which uses the effective interest rate to wind down a loan. And it's applied to most basic financial instruments. Interestingly it will be used henceforth where we would previously have used a simpler approach, such as straight line or sum-of-digits, provided of course that it makes a material difference to the figures being recorded. It's time to sharpen those Excel skills!

Tomorrow we'll look at some examples of using amortised cost in practice.

P.S. If you missed the last instalment please click here

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