Use the effective interest rate method to account for premium/discount amortization on bonds payable.

- IFRS requires the effective interest rate method to be used to amortize any premium or discount.

- Under this method, premiums and discounts are amortized in a manner that results in the interest expense for each accounting period being equal to a constant percentage of the bond's book, or carrying, value.

- That is, the interest expense changes every period, but the effective interest rate on the bond's book value is constant.

- This constant percentage is called the "yield" and represents the market rate of interest at the date of issue.