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Set Up Amortization Rules

Eagle Accounting allows you to amortize redeemable preferred stock for any available amortization method, such as effective yield or straight line methods. All existing processes, such as valuation, consider the amortization. You can amortize preferred stock that has a scheduled mandatory redemption date, scheduled redemption amount, and scheduled dividend payments as well as preferred stock redeemable at the option of the holder.
When you set up redeemable preferred stock securities that amortize, you can use an existing amortization/accretion rule or add a new one, and assign the rule at the appropriate level.

Set Up Security Processing Rules

If you want to amortize redeemable preferred stock, you must create a security processing rule. A security processing rule defines a set of income characteristics that you can apply to a security. It controls the income processing needed for instruments such as redeemable preferred stock. For more information, see Manage Security Processing Rules. 

To create a security processing rule for use in amortizing redeemable preferred stock:

1. Do one of the following: 
   - In Portfolio Data Center, in the left navigation pane, click Portfolio Desk > Accounting Portfolio Rules > Amortization & Accretion > Create Amortization & Accretion Rules. 
   - In Accounting Center, in the left navigation pane, click Setup > Portfolio Rules > Amortization & Accretion > Create Security Processing Rule.
   You see the Create Security Processing Rule panel.
2. Enter the Rule Name, Amortization Flag, and Maturity Type, as needed, which are actively used in processing.
   You can also set the remaining options in the panel to reflect the characteristics of the identified security for use in processing.
3. Click Submit.

After you define the security processing rule, you can assign this rule at the security level if the rule applies to the security across all entities/accounting bases. Otherwise, you can assign this rule to a basis processing rule that you then assign at the portfolio/basis level.

Set Up Basis Processing Rules

An Entity Basis Processing Rule defines a set of income characteristics that apply to one or more securities for a specific portfolio/accounting basis. For example, you can create a rule to make a redeemable preferred stock eligible for amortization only when processed for a specific portfolio. During processing, the system uses the income characteristics defined at the entity basis processing rule level to override any corresponding income characteristics defined at the security level. An entity basis processing rule for a given security supersedes any security processing rule assigned directly to that security.

You can change the rule to allow for historical changes. If the security is eligible for amortization but you need to disable amortization for a period of time, you must accomplish this using the amortization/accretion rule rather than the entity basis processing rule.

To add an entity basis processing rule:

1. From any Eagle window, click the Eagle Navigator button to access the Eagle Navigator.
2. Enter Add Entity Basis Processing Rule in the Start Search text box.

You see the Add Entity Basis Processing Rule panel.

1. Complete the options on the Add Entity Basis Processing Rule panel.

If you want the entity basis processing rule to apply to additional securities, use the pane that appears on the bottom of the Add Entity Basis Processing Rule panel, as follows:

• • Click the lower pane.
  • Right-click and select Add Rows.
  • Enter the number of rows you want to add in the Add Rows dialog box and click OK. You need to add a row for each additional security you want to associate with the rule.
  • Complete the fields on each row you added.

1. Click Submit.
2. After you create an entity basis processing rule, associate the rule with the appropriate portfolio/accounting basis (or multiple portfolios/bases).

You can select the rule in the Basis Processing Rule Name field (tag 7152) in the Add/Change Entity panel and Add/Change Accounting Basis panels.

Add a Redeemable Preferred Stock Security

When you add a redeemable preferred stock security that amortizes, in the Security Processing Rule Name (tag 3197) field, you can select the security processing rule that makes the security eligible for amortization if you want this rule applied for the security across all entities and accounting bases.
Otherwise, if you want your security processing rule applied for the security only for certain entities/accounting bases, you can leave the Security Processing Rule Name field blank and assign a security processing rule that allows amortization to an entity basis processing rule that you can associate with specific portfolios and/or accounting bases.
The following figure shows a security processing rule applied at the security level. In this example, you are applying the rule for the security across all entities and accounting bases.

Figure 47: Equity/Mutual Fund Panel - Accrual Information Section
If you plan to amortize the redeemable preferred stock that amortizes, you must also enter the fixed income fields used in the Income process.