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Eagle Accounting has the following requirements prior to processing ILB transactions:
The security master record information must be correctly established by populating all of the required fields. Security master record information includes the security master record for the ILB bond, the security master record for the index used to mark to market the change in inflation, and the actual CPI value/user-provided ILB index ratio in the variable rate table.
CPI values must exist in the variable rate table and consist of enough data to correctly calculate the original ILB index ratio as of original settlement date for converted ILB tax lots. In addition, ILB index ratios must exist as of the settlement dates of each transaction. Eagle Accounting also requires enough future data to calculate the daily ILB Index ratio for each day earnings has been invoked. In the case of as-of transactions, Eagle Accounting automatically runs earnings up to post date of the trade. Therefore, you must have CPI /user-provided ILB Index ratio values in the variable rate table to prevent the failure of earnings.
When processing an open or close tax lot transaction of an inflation linked bond, Eagle Accounting requires you to enter all required fields, and provide an inflation adjusted clean price. There are two reasons for providing a clean inflation adjusted price. First, Eagle Accounting creates a separate value in the transaction record by recording any applicable trade interest bought or sold, and whether that interest is to be cum or ex interest. The need for a clean price is to prevent double counting the interest amount traded. Secondly, Eagle Accounting needs an inflation adjusted price (real price) to calculate the principal cost of the transaction. To do this, Eagle Accounting multiplies the nominal shares * the ILB index ratio * the price of the transaction. The benefit of using inflation adjusted prices in transactions, rather than nominal prices, is that targeted redemption prices, such a maturity or call/ prices, do not have to be adjusted when there is a change in values affecting inflation.
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