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When you book a buy of a convertible bond at a premium, you see the following additional fields on the Open Debt panel.
Convertible Indicator (tag 1531). Displays a value of Y if you select a security with its Convertible Indicator set to Y at the security level. Indicates the selected security is a convertible bond. The panel displays this field as part of the security master lookup.
Underlying Security Market Price (tag 319). Specifies the price of the underlying security on the trade date of the transaction. This field appears if you select a convertible bond security in the security master lookup fields and that security has a Convertible Indicator set to Y. If you are using the SRPM method, Eagle Accounting use this field along with the Underlying Security to Base FX Rate (tag 9) value to derive the Stated Redemption price at maturity as part of processing the trade. For more information about the SRPM method, see About Calculating Amortization Yield for Convertible Bonds
Conversion Premium (tag 5727). Specifies the embedded equity option value. For more information about the EEOV method, see About Calculating Amortization Yield for Convertible Bonds
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In prior versions, the Conversion Premium stored the difference between the market value of one share of the bond, and the market value of the shares that would be held if the bond were converted. (Stated Redemption Price at Maturity (SRPM) minus Purchase Price = Conversion Premium). |
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A description of these calculated values follows.
Underlying Security to Base FX Rate (tag 9). The system retrieves this value as part of the processing. The Underlying Security to Base FX Rate is returned from the FX Rate table (based on the FX Source on the Primary Accounting basis) and is used in the calculation to derive the SRPM when the underlying security Asset Currency does not match the Asset Currency of the convertible bond. This field is retrieved in the establishing of the tax lot.
Stated Redemption Price at Maturity (tag 42). The market value of a unit of the bond. If you purchase a convertible bond at a premium and the transaction uses the Stated Redemption Price at Maturity (SRPM) convertible option price method, Eagle Accounting calculates the SRPM (that is, the market value of a share if converted to the underlying security) as part of the processing transaction. Eagle Accounting uses the Stated Redemption Price at Maturity (SRPM) as the target maturity price in the calculation of yield and amortization.