The following example for a mandatory exchange offer corporate action illustrates the use of two options you can select for the Treatment of Interest Indicator that allow you to generate the coupon based on ex date rather than on coupon date. These options include Receive Income Accrued to Ex Date and Receive Income Accrued to Pay Date. It also shows how you can define a Payment Override Factor for an exchange offer offer. For more information about these options, see About Earnings for Exchange Offers and Conversions.
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- The system creates a receivable/payable record (coupon) on the From security based on the ex-date minus one Local and Base PTD accrued values. In this case Accrued PTD is 11,944.45 and Accrued Interest Purchased is 833.33, resulting in a coupon on ex date (10/4) for 12,777.78. Additionally, Eagle Accounting creates a close of the From security and an open of the To security with a cost of 1,009,395.19.
- No accruals or amortization occur on or after the ex date as part of processing the corporate action.
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- The system creates a receivable/payable record on the From security on the ex date based upon the Payment Override Factor Factor.
- Assuming the same values used above in as the Receive Income Accrued to Ex Date example and a Payment Override Factor of 1.5, the new coupon on the ex date (10/4) is for 15,000 ((1,000,000 * 1.5)/100).
- The new adjusted Accrued PTD after payment override is 14,166.67 (15,000 – 833.33) (Accrued Interest Purchased.)
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- The system creates a receivable/payable record (coupon) on the From security) based on the pay date minus one Local and Base PTD accrued values. In this case the projected Accrued PTD (3 additional days of interest to 10/6) is 12,361.12 and Accrued Interest Purchased is 833.33, resulting in a coupon on the ex date (10/4) for 13,194.12. Additionally, Eagle Accounting creates a close of the From security and an open of the To security with a cost of 1,009,374.57.
- Earnings should continue to accrue on the close lots until payment date minus one of the action.
- The system should create the full cash receivable record as part of the corporate action process, but the system records any difference in the final cash payment and what has been accrued as a contra asset (unearned ptd interest and so on, similar to the processing of ex interest bond processing). It then reduces the unearned ptd income balance daily during the income process until payment date minus one, at which point it is fully accrued.
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