Financial instruments needs to be initially measured and recognised at their fair value after transaction cost.
When a financial instrument is obtained at market rates, then the the instrument value is considered to be the fair value however when the financial instrument is obtained at off market rates (concessional rates are generally seen) then the fair value is obtained by discounting all the repayments at market rate on the date of recognition.
Let us take an example where there is a 10% debentures issued by an entity of Rs 1,000,000 at a concessional interest rate of 10% for a tenor of 5 years redeemable at par without any transaction cost. Where the market rate for similar debentures is 10%. Then the fair value for recognition is Rs 1,000,000 and it is amortised as per table 1.
Similarly, Let us take an example where there is a 5% debentures issued by an entity of Rs 1,000,000 at a concessional interest rate of 5% for a tenor of 5 years redeemable at par without any transaction cost. Where the market rate for similar debentures is 10% . Then the fair value for recognition is computed as per the table 1 and it is amortised as per table 2.