This helpsheet has been issued by ICAEW's Technical Advisory Service to assist ICAEW members in determing the effective rate of interest to be applied and the interest charges to be recognised when holding a financial instrument under the amortised cost model from the borrower's perspective.

Members may also wish to refer to the following related helpsheets:

• Leases under FRS 102
• Preference Shares - Equity or liability under FRS 102?
• Loans at non-market rates under FRS 102

This amortised cost calculator assumes that the interest on the loan is a market rate, that repayments are made on an annual basis and that the loan term is no longer than 25 years. This calculator works from the borrower's perspective although similar principles apply from a lender's perspective.

In order to use this calculator, please input the required information into the orange boxes in the tool. Once you have done this, follow the instructions below the orange boxes to determine the effective interest rate. The result will be a table showing the interest to be charged for each year in line with the effective interest method.

A worked example is also presented towards the end of this helpsheet which indicates the accounting entries required.        

• Open the calculator tool

ICAEW members, affiliates, ICAEW students and staff in eligible firms with member firm access can discuss their specific situation with the Technical Advisory Service on +44 (0)1908 248 250 or via webchat.