The PIK bond corporate action triggers the accrual calculation process for the parent bond. The system calculates Interest up to the scheduled PIK bonds creates a coupon on the entitlement date (Coupon Payment Date -1) of the parent PIK bond . It applies the stated Coupon Rate or interest schedule of rates applicable to the parent bond through the accrual period. The parent bond is fully accrued as of the Ex-Date. No further interest accrues for the PIK bond for the current coupon period.The accrual process is modified for PIK bond processing only, to prohibit the creation of an Income Receivable upon Payment Date (coupon payment). The PIK bond processing security type (PST), DBIBPK, drives this change. All other accrual processing applies to the bond. The payment period rolls to the next period and interest again commences accruing in the new if no corporate action record exists. Setting up the PIK corporate action is not required to recognize a cash payment.
Optionally, a PIK corporate action can be used to process PIK Shares or Cash and Shares for any given period.
If you elect a rounding option for the Treatment of Fractional Shares (tag 3965) field, Eagle Accounting rolls back and replays income to adjust income for the fractional amount posted for the period.
The system calculates amortization using the normal amortization process, based on the specified rule.