Discount amortization, a critical accounting technique, involves systematically reducing the difference between the face value of a bond and its purchase price over the bond’s life. This process reflects the gradual recognition of the interest expense associated with the bond.
Discount amortization plays a crucial role in accurately presenting the bond’s expense on the income statement. Understanding how to calculate discount amortization is essential for accountants, financial analysts, and investors seeking to analyze the financial performance of companies.