What is Bond Interest Expense?

Bond interest expense is the aggregate interest expense incurred during a reporting period for an organization’s bonds payable. This expense includes the amortization of any premium or discount on issued bonds for the reporting period, which is based on the price at which they were sold to investors. It also includes the amortization of any bond issue costs over the same period.

Example of Bond Interest Expense

A company has issued $1,000,000 of bonds with a stated interest rate of 6%. For the current year, this means that the company will pay out $60,000 of interest expense to bond holders. In addition, the bonds were actually sold at a discount from their face value, so that investors can earn a higher interest rate. The amount of this discount scheduled to be amortized in the current period is $20,000. These two figures are added together to arrive at a total bond interest expense of $80,000 for the reporting year.