Page tree
Skip to end of metadata
Go to start of metadata


The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial liability.

The effective interest method is basis for financial instruments measured at amortised cost. It s a method of allocating interest income or interest expense over the relevant period while calculating the amortised cost of a financial asset or a financial liability (or group of financial assets or financial liabilities).

Please refer to the section below for further details about:




  • No labels