Effective interest ... On what basis?

In May 1993, the FASB issued SFAS 115, "Accounting for Certain Investments in Debt and Equity Securities." The new statement requires a market-based valuation method for equity securities and certain investments in debt securities on the statement of financial position while simultaneously maintaining a historical cost-based measurement system on the income statement. This lack of symmetry creates a theoretical problem when measuring interest income following the required revaluation of a debt security. SFAS 115 requires that certain investment securities be shown on the statement of financial position at fair value. This requirement should enhance the integrity of the information reported on the statement of financial position in that in will be more relevant and reliable.