1. Conceptual understanding
The amortized cost of a financial asset or financial liability refers to the result of the initial recognition amount of the financial asset or financial liability after the following adjustments:
(1) Deduct the repaid principal;
(2) Plus or minus the amortization of the difference between the initial recognition amount and the maturity amount using the actual interest rate. The accumulated amortization amount;
(3) Deduction of impairment losses that have occurred (only applicable to financial assets).
Amortized cost is the amount of investment minus interest, using the actual interest rate as the basis for calculating interest.
The amortized cost at the end of the period = the amortized cost at the beginning of the period, investment income - interest receivable - principal recovered - impairment losses that have occurred
The amortized cost is actually equivalent to Book value of held-to-maturity investments
*********Generally, the amortized cost is equal to its book value, but there are two special situations:
(1) Financial assets measured at fair value. For financial assets measured at fair value such as available-for-sale financial assets, if there is only a temporary decline in fair value, then when calculating the amortized cost of available-for-sale financial assets, the amount of the detailed account of changes in fair value does not need to be considered. In this case, Amortized cost is not equal to book value.
(2) Loan. For loans that have already made provision for losses, the amortized cost is not equal to the book value, because the amortized cost is added to the interest receivable and uncollected.
Reclassification of held-to-maturity investments into available-for-sale financial assets
Borrow: Available-for-sale financial assets (fair value on the day)
Capital reserve - other capital reserve (difference)
Loan: held-to-maturity investment - cost, interest adjustment, accrued interest
Capital reserve - other capital reserve (Difference)
The opening amortized cost of available-for-sale financial assets is to find the present value of principal receivable and interest receivable
Investment income = opening amortized cost × actual interest rate
According to Articles 32 and 33 of the "New Standards", for investments, loans and accounts receivable held to maturity, and financial liabilities that meet the provisions of Article 33, follow-up Measurement adopts the actual interest rate method and is measured at amortized cost. The formula of amortized cost is: amortized cost = initial recognition amount – principal repaid – accumulated amortization – impairment loss (or irrecoverable amount). The formula of the actual interest rate is: actual interest rate = the interest rate that discounts future contract cash flows into the initial recognition amount.
2. Analysis of classic examples
Example: Assume that Dahua Co., Ltd. purchased the five-year bonds issued by Huakai Company on January 1, 2005 on January 2, 2005 and Held to maturity, the coupon rate is 14 and the face value of the bond is 1,000 yuan. The company purchased 100 copies at a price of 105,359 yuan and paid the relevant transaction fee of 2,000 yuan. The bond pays interest on June 30 and December 31 of each year, and repays the principal and pays the last interest in the last year.
When calculating the actual interest rate, the number of interest payments and principal and interest cash flow discount should be used, that is, "bond face value + bond premium (or minus bond discount) = discounted value of principal receivable at maturity of the bond + The discounted value of bond interest received in each period” can be calculated using the “insertion method”.
Based on the above formula, tested at an interest rate of 12:
Principal: 100 000×0.55839 (n =10, i=6)
= 55 839
Interest: 7 000×7.36 (annuity: n =10, i=6)
=51 520
Total present value of principal and interest 107 359
The present value of principal and interest is exactly equal to the investment cost, indicating that the actual interest rate is 12.
Make the accounting entries as follows:
Debit: Held-to-maturity investment—Cost 100,000
Held-to-maturity investment—Interest adjustment 7,359
Credit: Bank deposits 107 359
Based on the actual interest rate, prepare a premium amortization table, as shown in Table 1.
The first interest was received on June 30, 2005, and the bond investment premium was amortized at the same time. According to Table 1, the accounting entries are as follows:
Debit: bank deposit 7,000
Credit: investment income 6,441.54
Held-to-maturity investment - Interest adjustment 558.46
On the balance sheet on June 30, the amortized cost of bond investment was 106,800.54 yuan.
From the above example, we can see that the initial amortized cost is the actual cost of obtaining the bond = purchase price + related expenses. The so-called actual interest rate is the yield to maturity, which is used to discount the cash flow of the bond during its validity period so that the total present value obtained from the discount is equal to the actual cost of acquiring the bond (i.e., the initial amortized cost). When receiving bond interest, the accounting treatment is that the recognized amount of investment income is equal to the initial amortized cost multiplied by the actual interest rate, and the difference between this recognized investment income and the actual interest received is the initial amortized cost. Adjustment amount. If the adjustment amount is positive, the amortized cost will increase, and if the adjustment amount is negative, the amortized cost will decrease.
If the bond is purchased only for trading and will not be held until maturity, the initial amortized cost is the purchase price, and other expenses are debited to investment income when preparing accounting entries.