- CFA Exams
- CFA Level I Exam
- Topic 3. Financial Statement Analysis
- Learning Module 25. Non-Current (Long-term) Liabilities
- Subject 1. Accounting for Bond Issuance, Bond Amortization, Interest Expense, and Interest Payments

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**CFA Practice Question**

The amount of bond discount amortized each semi-annual period under the effective interest method continues to increase over the life of the bond. True or False?

Correct Answer: True

The effective interest (interest expense) is higher than the interest paid on the bonds when a discount applies. The discount amortization is the difference between these two values. Since the expense calculation is based on the carrying value of the bonds (face amount - discount balance), which continually increases over the life of the bonds, the amortization of the discount also increases each period.

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**User Contributed Comments**
3

User |
Comment |
---|---|

kalps |
Discount amortisation = Effective interest - Actual interest (per face value) |

farhan92 |
"Pull to Par baby!" as stated by some legend in one of the earlier q's |

kingirm |
It means The cumulative total amount increases? |