The amount at which a financial asset is measured at initial recognition, net of any principal repayment (recovery), adjusted for the accumulated amortization using the effective interest rate (EIR) of any difference between the initial recognition amount and the amount at maturity, with an adjustment for any loss allowance. In equation form, amortized cost (amortised cost) of a financial asset is:

Amortized cost = initial recognition amount + [subsequent recognition of interest income/ expense @EIR ]+ repayments + credit losses

In accounting practice, a financial asset is measured at amortized cost if:

• the asset is held within a business model that aims to collect contractual cash flows from such an asset; and
• the asset generates cash flows on specified dates, consisting of repayments (of principal) and payments of interest on the principal amount outstanding.