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Suppose that an investor bought, at a discount, a fixed rate bond with the following terms:

1.3.1 Example of a Fixed Rate Bond at Amortised Cost

Let us assume that the bond was recognised at amortised cost, and that no impairments were recognised. The calculation of the effective interest rate was performed as follows (in EUR millions):

EIR was 5.7447 %.

The related accounting entries were as follows:

1.3.2 Example of a Fixed Rate Bond Recognised at FVOCI

Let us assume that the bond was recognised at FVOCI, and that no impairments were recognised. Let us assume further that the fair value of the bond on 31 December 20X0 and 31 December 20X1 was EUR 97 million and EUR 101 million, respectively. The change in the bond's clean fair at each reporting date was:

In order to account for the bond the investor had to keep track of both the bond's amortised cost and its fair value. The bond's amortised cost profile, which was identical to that in the previous example, determined the interest expense to be recognised at each period.

Any difference between the bond's clean fair value (i.e., excluding accrued interest) and its amortised cost was recognised in the FVOCI reserve in OCI.

The related accounting entries were as follows: