Because the variable rates are predetermined for a step bond, Eagle Accounting allows you to recognize all future rates in the calculation of cash flows, or to only recognize the most current variable rate, and use that rate for the projection of future cash flows. The recognition of future cash flows in Eagle Accounting is determined by the value in the Step Bond Utilize Bifurcation Method (tag 3934) field in the amortization rule.
A description of the Step Bond Utilize Bifurcation Method (tag 3934) field, located in the Amortization & Accretion Rules panels, follows. For more information about creating amortization & accretion rules, see Manage Amortization & Accretion Rules.
The following are the options in the Amortization & Accretion Rules panels.
| Option | Tag | Description |
|---|
| Step Bond Utilize Bifurcation Method | 3934 | Indicates whether how to recognize known future cash flows (variable rates) for amortization yield calculation of step bonds. Eagle Accounting recognizes a security as a step bond when you set the Coupon Type Code (tag 97) option to Step Rate (S). Options include: Eagle Accounting does not recognize known future variable rates in the projection of future cash flow, when calculating amortization yield for step bonds, which in essence, treat the bond as a regular variable rate bond. In prior versions, this option was Yes- Eagle Accounting's Earnings process recognizes each coupon rate as it becomes effective for purposes of deriving cash flows and, in turn, amortization yields.
- No Bifurcation Par Restricted. Default. Eagle Accounting
does recognize known future variable - 's Earnings process recognizes current and future coupon rates for the
projection cash flow, when calculating amortization yield for step bonds- deriving cash flows, and, in turn, amortization yield. In the event that
by recognizing all the known coupon rates causes the to transcend the par of the security- transcends par, Eagle Accounting amortizes
at . In addition, this - and stops. This option overrides
if - the amortization rule's Amortization Cap/Floor Method
field is set to No Restriction to go away from par. In prior versions, this option was No.- (tag 10130) field setting.
- No Bifurcation Transcend Par. Eagle Accounting
does recognize known future variable - 's Earnings process recognizes the current and future coupon rates for the
projection cash flow, when calculating amortization yield for Step Bonds. If recognizing all the known coupon rates causes the amortization/accretion to transcend the par of the security, Eagle Accounting stops amortizing at par- deriving cash flows, and, in turn, amortization yields. This option overrides the amortization rule's Amortization Cap/Floor Method (tag 10130) field setting.
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