This page describes two coupon period fields, the Coupon field and the Coupon Type Code field, that you can use when you set up fixed income securities for use with Eagle Accounting.
Coupon
Coupon (tag 70). Specifies the rate at which the security accrues interest. It is expressed as an accrual rate. A value of zero is required for zero coupon bonds.
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If the value of this field changes after a position exists, provided the Coupon Type is Fixed, the change affect the current and future coupon periods' earnings. Prior coupon periods' earnings are not affected by a change to this field, unless earnings are rolled backed to that period and then rolled forward, or a trade is backdated for a previous coupon period and thus, when earnings roll forward, they pick up the new value when the earnings process runs.
Coupon Type Code
Coupon Type Code (tag 97). Indicates the type of coupon that is associated with the security. The options include Floating Rate (X), Inverse Floating Rate (R), Variable Rate (I), Step Coupon (S), Fixed Rate (F), and Unscheduled Variable Rate (V). This field is required. When Coupon Type is set to X, I, S, F, R, or V, the Coupon field in the SMF (tag 70) is for reference only, because the system does no processing on tag 70.
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- Variable Rate (I). The security has fixed coupon dates, and uses a variable rate based on the security identifier to calculate the coupon for use in earnings. For securities with a Variable Rate Coupon Type, you enter the coupon rates in the Variable Rate panel, and enter rates based on the variable rate security's Primary Asset ID.
For Variable Rates, when you select a Coupon Type of Variable Rate, the system then only uses the Coupon Rate field (tag 70) on the SMF for reporting, and does no processing with that field. - Step (S). The security has fixed coupon dates, and uses a variable rate based on the security identifier to calculate the coupon for use in earnings. The Step Coupon Type Code assumes that all the coupon rates are known at the time of issue. For securities with a Step Coupon Type, you enter the coupon rates in the Variable Rate panel, and enter rates based on the variable rate security's Primary Asset ID.
When you use the Step Coupon Type, the system then only uses the Coupon Rate field (tag 70) on the SMF for reporting, and it does no processing with that field.
For the Step Coupon Type, in the Amortization & Accretion Rules panel, Eagle Accounting provides the ability to recognize all future cash coupon rates that apply to the calculation of future cash flows for amortization yield, or to only recognize the most current coupon rate that applies to the calculation of future cash flows for amortization yield. The Step Bond Utilize Bifurcation Method field drives this processing in the Amortization Rule panel. - Fixed Rate (F). The security has fixed coupon dates, and has a fixed coupon rate to calculate the coupon for use in earnings. Eagle Accounting calculates earnings based on the value entered in the Coupon field (tag 70).
- Unscheduled Variable Rate (V). You can use an unscheduled variable rate coupon type when the coupon schedule of a bond cannot be calculated based on fields that derive the payment frequency. When you encounter a security such as this, you need to set up the security as an unscheduled variable rate. Eagle Accounting drops a coupon record for each value in the variable rate that has the Cash Movement Flag (tag 3449) set to Yes. When you use an Unscheduled Variable Rate:
- The system then only uses the Coupon Rate field (tag 70) on the SMF for reporting and does no processing with that field.
- The Interest Payment Frequency (tag 1523), Business Day Convention, and Day of Month Override (tag 1533) tags become available for reporting purposes only, because Eagle Accounting drives all coupon information off of the data in the Variable Rate table.
- The system uses the Payment Frequency (tag 2287) and Payment Frequency Code (tag 472) for the periodicity for calculating the amortization and trade yield.
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