Accrued Interest Adjustment Law and Legal Definition

An accrued interest adjustment is an adjustment by which the taxable interest income is reduced by deducting the extra amount of interest that is paid to the owner of a convertible bond or other fixed income security. An accrued interest adjustment just like an ordinary interest is always taxable. The amount that is paid as extra amount of interest will always vary on the basis of the number of days that has elapsed since the last interest payment is made, but not including, the settlement date.