Amortised Cost Tool
Financial instruments in the “loans & receivables”, “held to maturity” and “originated liabilities” categories are to be valued at amortised cost according to IAS 39. Differences between amounts paid and amounts repayable, as well as transaction costs, are to be allocated using the effective interest method. This item frequently occurs for companies in the context of external financing.
To simplify the complex calculations for determining book values, amortisation amounts and adjustment amounts, FAS AG has developed a flexible valuation tool which displays the following items cumulatively and can ascertain the required values:
- Determination of the effective interest rate for fixed-rate instruments;
- Determination and recalculation of the effective interest rate for variable rate instruments according to IAS 39.AG 7 & 8;
- Distribution of premiums, discounts and transaction costs over the term of the instrument;
- Distribution of differences from embedded derivatives that must be separated over the term of the instrument;
- Determination of an impairment requirement for active financial instruments measured at amortised cost;
- Determination of the amortisation amount for each period;
- Determination of the clean and dirty book value and separate presentation of accrued interest;
- Determination of the contribution made by changes to cash flow expectations;
- Calculation of fair values for information for the notes to the annual financial statement;
- Adjustment entries based on local GAAP and IFRS carrying amounts for pure IFRS entries and IFRS adjustment entries.
For embedded derivatives, the Amortised Cost Tool can be combined with other FAS valuation tools or additional valuation models for financial instruments without problems, in order to ensure consistent valuation for the whole product.
Only the conditions of the relevant instrument are required for valuation using the Amortised Cost Tool. Market data only need to be determined if additional embedded derivatives have to be valued or a fair value has to be calculated.
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