Set Up Entities and Accounting Bases
Eagle
clients can identify this setting for each accounting basis where they want to apply this methodology by setting the Income/Prepayment Fee Treatment field. This field is available in the Corporate Action Fields section of the Create/Edit Entity panel, the Create Master Fund panel, the Add a Basis to a Portfolio panel, and the Edit Master Fund/Sector panel. A description of this option follows.
Option | Tag | Description |
|---|---|---|
Income/Prepayment Fee Treatment | 16739 | Identifies the types of corporate actions for the entity's selected accounting basis that use the income/prepayment fee treatment. The income/prepayment fee treatment supports NAIC accounting requirements relating to prepayment penalties, acceleration fees, and make-whole call provision fees on bonds. The system uses this setting in conjunction with the Income/Prepayment Fee Treatment field applied at the corporate action transaction level. Options include:
NOTE: If you enable use of the income/prepayment fee treatment for specific types of corporate actions at the entity/basis level, be aware that the system does not consider the basis level Redemption Gain/Loss Indicator field setting for transactions that use the income/prepayment fee treatment. If you set the Redemption Gain/Loss Indicator field to Amortization, the system treats those transactions as if you set the Redemption Gain/Loss Indicator field to Gain/Loss |
Set Up Securities
You can identify a security that is a private placement on the security master file by setting the Private Placement (tag 1421) field to Yes. You can use Reference Data Center to create and edit securities. Otherwise, if you use Issue Viewer, you can use the entry panels for fixed income securities. |
Set Up Corporate Actions
The system can identify amounts representing prepayment fees/acceleration fees/make-whole call provision amounts on disposition transactions of bonds that are called above or below par value.
When you create a corporate action announcement for a call or principal repayment, you can indicate whether to apply the income/prepayment fee treatment to transactions associated with that announcement. The following
field in the Create Calls/Put/Refund panel
is related to use of the income/prepayment fee treatment. For general information about this panel, see
Create Calls/Puts/Refund Panel Options.
Option | Tag | Description |
|---|
Income/Prepayment Fee Treatment | 16739 | Indicates whether the selected call or principal repayment is eligible for the system to apply the income/prepayment fee treatment. The income/payment fee treatment supports the National Association of Insurance Commissioners (NAIC) accounting requirements relating to prepayment penalties, acceleration fees, and make-whole call provision fees on bonds. The system applies this accounting treatment during corporate action processing only if the transaction's accounting basis also has the Income/Prepayment Fee Treatment field set to enable processing for selected type of corporate action. This field appear only if you set the Corporate Action Type field to Call or Principal Repayment. Options include:
|
Process Corporate Actions
When Eagle Accounting processes corporate actions for entities with the Income/Prepayment Fee Treatment field set to All, Calls Only, or Principal Repayments Only, it compares the accounting basis-level setting to the corporate action-level setting of the Income/Prepayment Fee Treatment of Call, Principal Repayment, or None. It applies the income/prepayment fee treatment only to those call or principal repayments that are eligible for the treatment at both the entity and corporate action transaction levels.
For corporate action transactions that qualify for the income/prepayment fee treatment, Eagle Accounting calculates these values as follows:
Local Security Gain/(Loss) = Par Value – Local Amortized Cost
Base Security Gain/(Loss) = (Par Value / Trade Date FX Rate) – Base Amortized Cost
Local Income/Prepayment Fee = Local Proceeds – Par Value
Base Income/Prepayment Fee = Base Proceeds – (Par Value / Trade Date FX Rate)
Local Principal Cash = Par Value
Base Principal Cash = Par Value / Trade Date FX Rate
Local Income Cash = Local Traded Interest + Local Income/Prepayment Fee
Base Income Cash = Base Traded Interest + Base Income/Prepayment Fee
Reporting
Eagle's core accounting standard report package reflects realized security gain/loss and prepayment fees/acceleration fees/make-whole call provision amounts on calls and principal repayment transactions of fixed income securities in entity bases that elect this treatment.
Eagle's Insurance reports and schedules also reflect this accounting treatment. The Prepayment Penalty and Acceleration Fee disclosure displays a count of the number of positions and the aggregate amount of income for securities sold, redeemed or otherwise disposed of, which generate investment income as a result of a prepayment penalty and/or acceleration fee.