Whenever an Exchange transaction is invoked, Eagle Accounting automatically trues up earnings to the day before ex-date. A backdated buy automatically initiates an Exchange corporate action. In addition, Eagle Accounting accrues earnings from the trade date of the open buy, to ex-date minus one.
You can set up the corporate action announcement's Treatment of Interest Indicator to determine how Eagle Accounting treats the period to date accrued interest for exchange offers or conversions when processing the corporate action. As part of normal STAR accrual processing, coupons typically post on coupon date. For exchange offers, you can elect to have coupons post on ex-date of the exchange offer rather than on coupon day. The system can generate a coupon on ex-date for income accrued to ex-date minus 1 or it can generate a coupon on ex-date for income accrued to pay date minus 1.
Manage Interest Treatment When You Post Coupons on Coupon Date
The Treatment of Interest Indicator, an option you can define in the Create Exchange Offers panel when you create a corporate action announcement for an exchange offer or conversion, determines how Eagle Accounting treats the period to date accrued interest for exchange offers or conversions when processing the corporate action. As part of normal Eagle Accounting accrual processing, coupons typically post on coupon date. You can select the following options for the Treatment of Interest Indicator field where coupons post on coupon date:
- Transfer. Transfers the interest receivable to the resulting debt security and continues to accrue interest. This is not a valid option when processing an exchange from a Fixed Income security to Equity. This option triggers a date-specific retro recalculation of yield and amortization from the beginning of the coupon period. For "like" securities where the attributes such as Coupon and Maturity Date are the same, this results in the same yield on the From and To side of the exchange. For securities with different attributes, you see an amortization delta true up on ex date.
- Allocate. Allocates interest receivable to the cost of the new security.
- Reverse. Reverses interest accrued in the current coupon period.
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