Why do you subtract the amortized discount when calculating unrealized gain via fair value through profit or loss classification?
Because that’s already included on the income statement.
Thank you for your response s2000magician. Can you expand on that (it still hasn’t clicked for me yet)?
When you have a bond designated as held to maturity, you amortize any premium / discount and the amortized amount goes into the interest income you show on the income statement.
The same thing happens when you amortize a premium / discount on a bond designated as FVPL. The amortized amount goes into the interest income on the income statement, and the remainder of the price change is the unrealized gain/loss.
S2000magician, thank you so much.
My pleasure.
I am confused about this. If we are carrying a debt instrument at FVOCI or FVPL do we also do the amortization calculations simultaneously? Isn’t the unrealized gain simply Ending Fair Value minus Opening Fair Value?
How is the interest income calculated for debt instruments at FVPL and FVOCI? Is it the same method as for amortized cost (coupon plus amortization of premium/Amortization of discount).
You can do the amortization separately.
I believe that it’s not required.
I believe that interest income is calculated the same way as in amortized cost.