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Eagle Accounting's dividend processing allow you to recognize dividend income in the accounting ledger on an ex-date basis or on a cash settlement basis. This article describes how to recognize dividend income on a cash settlement basis.

An accounting basis level election is available which indicates whether to recognize dividend income on an ex-date basis or on a cash settlement basis. If you set the election to record income on a cash settlement basis, you can also elect whether to record the dividend income using the ex-date FX rate or the settlement date FX rate. You can override this basis-level election at the security-specific level, using Security Processing Rules. The ability to recognize dividend income on a cash settlement basis does not apply to Registered Investment Company (RIC) and Real Estate Investment Trust (REIT) securities, as a general rule, Dividend processing always recognizes dividend income for RICs and REITs on an ex-date basis, so long as you identify the security using the RIC Flag or REIT Flag options.


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Set Up Entities to Recognize Cash-Based Dividend Income

You can set up the Cash Based Div Recognition Flag field (tag 16160) and the FX Election for Cash Div Recognition field (tag 16161 in the panels where you define entities, master funds, and accounting bases as follows. The following are the basis-level options in the Create/Edit Entity panel, the Add a Basis to a Portfolio panel, the Create Master Fund panel, and the Create Security Processing Rule panel that apply to recognizing cash-based dividend income.


Option
Tag
Description
Cash Based Div Recognition Flag16160Indicates whether the system settles trades, coupons, and miscellaneous income and expenses automatically. Options include:
  • No. Default. The system does not automatically settle trades, coupons, and miscellaneous income and expenses. You must schedule the settlement for these transactions using the Run Contract Cash panel. Or, manually settle the transactions using the Run Multiple Settlements panel. If you use cash segregation based on actual cash settlements, you can schedule settlements using the Run Cash Auto Match panel and create settlements manually using Cash Matching. Eagle recommends that you set this field to No.
  • Yes. The system automatically settles trades, coupons, and miscellaneous income and expenses. If you enter Yes, the system creates a settlement as soon as the trade is processed. There is no trade to settle date gain/loss. This applies even if the settlement date is in the future.
FX Election for Cash Div Recognition16161Indicates whether the system segregates derivative positions by clearing broker for the entity. Otherwise, If you do not use cash segregation for the entity, you can segregate derivatives in order to allow the system to process derivatives with multiple brokers. Options include:
  • Yes. Eagle Accounting segregates derivatives. If you set the Position Cash Segregation Basis Indicator field to Yes, indicating that you use cash segregation and the entity has a custody accounting basis, the system sets the Segregate Derivatives field to Yes. The system must additionally segregate derivatives on the non custody basis because cost is notional and the system determines cash based on the lot closed. If you set the Position Cash Segregation Basis Indicator field to no and the entity does not use cash segregation, you can also select Yes to process derivatives with multiple brokers and keep positions segregated by clearing broker. 
  • No. Default. Eagle Accounting does not segregate derivatives. 

Set Up Securities when You Recognize Cash-Based Divided Income

The REIT Flag field (tag 16159) was added to the Equity/Mutual Fund panel.

Set Up Security Processing Rules when You Recognize Cash-Based Divided Income

You can set up the Cash Based Div Recognition Flag field (tag 16160) and the FX Election for Cash Div Recognition field (tag 16161 in the panels where you define entities, master funds, accounting bases, and security processing rules. 

Set Up Reports to Recognize Cash-Based Dividend Income

Several reports were updated to ensure this new cash dividend recognition method is correctly reflected. These reports include Traded Cash Activity, Dividend Income, Consolidated Earned Income, Ledger Sub-Ledger Recon, and Unsettled Transactions.

Set Up Control Center for Cash-Based Dividend Income

In Control Center, the EPDIT edit test was updated. This edit test leverages the Past Due Interest report (SPRECEIVABLEPAYABLEREPORT), and compares the report output results to a user defined day tolerance. If the interest receivable balance is past due (unsettled) and exceeds the tolerance setting, a raised edit test result is delivered to Control Center. An alert is generated for each day that the receivable balance remains unsettled.BLEREPORT), and compares the report output results to a user defined day tolerance. If the interest receivable balance is past due (unsettled) and exceeds the tolerance setting, a raised edit test result is delivered to Control Center. An alert is generated for each day that the receivable balance remains unsettled.