Amortised cost is a concept in financial reporting that represents the value of a financial instrument based on its original cost, adjusted over time for the repayments of principal, the amortisation of premiums or discounts, and the accrual of interest. For example, in the case of a loan, the amortised cost would adjust the original loan amount for the repayments made over time and the interest earned or paid as per the effective interest method.\n\nAccounting standards such as IFRS use the term 'amortised cost' as part of the requirements for the valuation of financial assets and liabilities. A key feature of amortised cost is its reliance on the effective interest method, which considers the time value of money and the effective interest rate agreed upon at the financial instrument's inception. This ensures that the valuation reflects the true economic value and progress of the financial instrument over its lifespan.