I looking over examples and can’t find the difference here. The text reads that “IFRS and USG require that held-to-maturity securities are reported at amortized cost using the effective interest rate method.” Now blue box Example 1 shows the carry value on the balance sheet of the HTMs just as described, at amortized cost. However, 40 pages later in EOC #13 AND #14 say that the carry vale on the balance sheet of these HTM securities is just cost, with no mention of amortization.
Is this just because the question doesn’t provide info on the rate… so we just act like amortization doesn’t exist??? Or is the effective int rate method only used in some cases??? Any help is appreciated.
You have to distinguish initial and subsequent measure of financial asset according to IFRS 9 (prior IAS 39) and applicable USGAAP.
Initial measure of HTM securities is its recognizing in balance sheet by purchasing cost. Subsequent measure, on each further BS date (end of day, month, quarter, year, depending on particular firm and accounting policy) is by amortized cost for HTM securities.
Double check in the problem that the HTM securities weren’t purchased at par value. In the event they were, there is no premium or discount to amortize over its life.