Straight-Line Amortization
Simplified Premium and Discount Allocation
The straight-line method allocates bond premiums or discounts equally over each interest period. While U.S. GAAP generally prefers the effective interest method, straight-line amortization may be acceptable when results are not materially different.
- Equal amortization each period.
- Simple calculations.
- Less theoretically precise.
- Often used only when immaterial differences exist.
Summary
Straight-line amortization simplifies calculations but is less accurate than the effective interest method.