Amortized Bond


DEFINITION of 'Amortized Bond'

A financial certificate that has been reduced in value for records on accounting statements. An amortized bond is one that is treated as an asset, with the discount amount being amortized to interest expense over the life of the bond. If a bond is issued at a discount - that is, offered for sale below its par (face value) - the discount must be treated either as an expense or it can be amortized as an asset.

BREAKING DOWN 'Amortized Bond'

Amortization is an accounting method that gradually and systematically reduces the cost value of a limited life, intangible asset. Treating a bond as an amortized asset is an accounting method in the handling of bonds. Amortizing allows bond issuers to treat the bond discount as an asset over the life of the bond (until the bond's maturity).

  1. Maturity

    The period of time for which a financial instrument remains outstanding. ...
  2. Bond

    A debt investment in which an investor loans money to an entity ...
  3. Amortization

    1. The paying off of debt in regular installments over a period ...
  4. Par

    1. The face value of a bond. Generally $1,000 for corporate issues, ...
  5. Average Life

    The length of time the principal of a debt issue is expected ...
  6. Municipal Bond

    A debt security issued by a state, municipality or county to ...
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