In the Amortization & Accretion Rules panels, you can specify a value for the Stated Interest Processing (tag 16412) field, which determines whether to use stated interest processing, and the Stated Interest Recognization Recognition (tag 161316413) field, which Indicates whether to recognize coupon income and amortization on the contractual date or the actual settlement date when you use stated interest processing.
About Stated Interest Processing
Stated interest processing allows you to only recognize premium is an election for securities that use premium amortization where you recognize the amortization when either:
- Coupon payments are received, either on a contractual or actual settlement date basisYou reach the first day of the subsequent Coupon period (scheduled payment date).
- Disposal transactions that have accrued interest. This excludes non-taxable transactions.
You can create an amortization & accretion rule that uses stated interest processing to allow the entity/accounting basis to recognize interest and premium amortization when cash is receivedyou receive a coupon.
Retail US taxpayers who recognize bond premium amortization record such amortization on a cash basis rather than on an accrual basis. As interest payments are recorded and paid, bond premium allocable to the payment is recorded at the same time. As bond sales with accrued interest results in recognition of interest income to the seller, the accrued interest of the sell is treated as stated interest and the period to date amortization proportionate to the quantity sold on a lot is recorded at that time.
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About Life to Date Deferred Amortization at Disposition for a Conversion or
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Receive Transaction
When you set up amortization rules with Amortization at Disposition set to Yes and enter a Conversion or a Receipt transaction, the following fields are available in the Conversion and Receipt trade panels. The panels display the amortization at disposition life to date local and base fields (tags 5548 and 5549) when you convert or receive a debt security and the original purchase price (tag 45) is not equal to the maturity price (tag 42).
- Life to Date Deferred Amortization at Disposition Local (tag 5548). Specifies the projected local life-to-date amortization for an amortization at disposition lot. This option applies to a lot where the amortization/accretion rule has Amortization at Disposition set to Yes. If an amortization rule using stated interest processing applies to the lot, this value represents Life to Date Deferred Stated Amortization Local.
- Life to Date Deferred Amortization at Disposition Base (tag 5549). Displays the projected base life-to-date amortization.for an amortization at disposition lot. This option applies to a lot where the amortization/accretion rule has Amortization at Disposition set to Yes. If an amortization rule using stated interest processing applies to the lot, this value represents Life to Date Deferred Stated Amortization Base.
Transfer Life to Date Deferred Stated Amortization for a Conversion or Receipt
However, when you set up amortization rules with Stated Interest Processing set to Yes and enter a Conversion or a Receipt transaction, the following fields are available in the Conversion and Receipt trade panels. The system applies a different field name to tags 5548 and 5549 when you use stated interest processing. The panels display the deferred stated amortization life to date local and base fields (tags 5548 and 5549) when you convert or receive a debt security and the original purchase price (tag 45) is not equal to the maturity price (tag 42).
- Life to Date Deferred Stated Amortization Local (tag 5548). Specifies the projected local life-to-date amortization for a stated interest processing lot. This option applies to a lot where the amortization/accretion rule has Stated Interest Processing set to Yes.
- Life to Date Deferred Stated Amortization Base (tag 5549). Displays the projected base life-to-date amortization.for a stated interest processing lot. This option applies to a lot where the amortization/accretion rule has Stated Interest Processing set to Yes.
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WRITERS NOTE: cannot view 2 new field names in GUI. Do they appear? |
Calculate Current Period to Date Amortization After a Conversion or Receipt
If you use stated interest processing, you can transfer amortization for the current coupon period, starting the beginning of the current period. The system can calculate this value on the first day of earnings after a Conversion or a Receipt. This applies if you use stated interest processing, and the transaction applies to premium purchases. Stated Interest processing posts amortization corresponding to the period in which a coupon was accrued. You can provide this value, amortization for the current coupon period, starting the beginning of the current period. Without it, amortization can be understated.
When you use stated interest processing, you can use the Receive and Conversion trade panels to specify the amount of deferred received PTD amortization for debt securities for the current coupon period. The panels display the amortization at disposition period to date local and base fields (tags 11932 and 11933) when you convert ore receive a debt security and the original purchase price (tag 45) is not equal to the maturity price (tag 42).
- Period to Date Amort at Disp Local (tag 11932). Specifies the projected local period-to-date amortization for an amortization at disposition lot. This option applies to a lot where the amortization/accretion rule has Stated Interest Processing set to Yes.
- Period to Date Amort at Disp Base (tag 11933). Displays the projected base period-to-date amortization.for an amortization at disposition lot. This option applies to a lot where the amortization/accretion rule has Stated Interest Prociessing set to Yes.
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Are there 2 set of period to date field names? Under what conditions do the period to date fields appear? should I mention the hidden fields that you cannot set for Stated Interest Processing? BT notes mention (hidden) Retro Indicator set to D (Date Specific)? Also setting the ? What values must you enter. Then how to process? DP, MW. ( add xref from Receive trade page.) What to say about preminum only? Mention option, Do Not Include Life to Date Amortization in Book Cost? |
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a security uses Stated Interest processing, the system calculates Life to Date Deferred Amortization at Disposition values for Conversion and Receive lots. It calculates the yield back to the original settlement date and price and produces the same yield as the original purchase after earnings have been run.
You can define the Life to Date Amortization Local (tag 580) and Life to Date Amortization Base (tag 595) field values for a Conversion or Receive transaction. However, the system does not require those values because Eagle Account calculates the correct amortization stream regardless.
To define Life to Date Amortization values for a security that uses stated interest processing:
- In Accounting Center, in the left navigation pane, click Transactions > Trades > Book Trade/Rebook Trade > Book Trade.
You see the Book Trade workspace. - Complete the options in the Search Details pane and click Search.
You see a list of securities that meet the search criteria. - Click the security for which you are processing a conversion or receive transaction.
Select a security that uses an amortization & accretion rule where you set the Stated Interest Processing (tag 16412) field to Yes. - On the Book Trade tab, in the Actions group, click Action Rules, point to Other, and then click Conversion or Receive.
You see the Conversion of Position to Eagle STAR trade panel or the Receive security trade panel. - In the Choose Method of Converting Life to Date Amortization (tag 7001) field, select Do Not Include Life to Date Amortization in Book Cost.
You see the Life to Date Amortization Local field and the Life to Date Amortization Base field. - Enter a value for the Life to Date Amortization Local (tag 580) field; otherwise leave it blank.
If you specify a Life to Date Amortization Local value, the system records it, and in the subsequent coupon period only the Period-to-date Deferred Amortization at Disposition amount posts. Otherwise, If you do not specify a value, the entire Life-to-date Deferred Amortization at Disposition amount posts on the first day of the following coupon period or when shares are disposed (excluding non-taxable transactions). The system also displays the related Life to Date Amortization Base (tag 595) field value in the panel. - Complete the remaining options on the trade panel.
- Click Submit.