In the Amortization & Accretion Rules panels, you can specify a value for the Stated the Stated Interest Processing (tag 16412) field, which determines whether to use stated interest processing, and the Stated Interest Recognition (tag 16413) field, which Indicates whether to which indicates you recognize coupon income and amortization on the contractual date or the actual settlement date when you use stated interest processing.
About Stated Interest Processing
Stated interest processing is an election for securities that use premium amortization where you recognize the amortization when either:
You reach the first day of the subsequent Coupon period (scheduled payment date).
Disposal transactions have accrued interest. This excludes non-taxable transactions.
You can create an amortization & accretion rule that uses stated interest processing to allow the entity/accounting basis to recognize interest and premium amortization when you receive a coupon.
Retail US taxpayers who recognize bond premium amortization record such amortization on a cash basis rather than on an accrual basis. As interest payments are recorded and paid, bond premium allocable to the payment is recorded at the same time. As bond sales with accrued interest results in recognition of interest income to the seller, the accrued interest of the sell is treated as stated interest and the period to date amortization proportionate to the quantity sold on a lot is recorded at that time.
About Life to Date Deferred Amortization at Disposition for a Conversion or Receive Transaction
When a security uses Stated Interest processing, the system calculates Life to Date Deferred Amortization at Disposition values for Conversion and Receive lots. It calculates the yield back to the original settlement date and price and produces the same yield as the original purchase after earnings have been run.
You can define the Life to Date Amortization Local (tag 580) and Life to Date Amortization Base (tag 595) field values for a Conversion or Receive transaction. However, the system does not require those values because Eagle Account calculates the correct amortization stream regardless The defined values represent the starting point for Life to Date Amortization; however, they are not required. If you define no values, Eagle Accounting calculates and uses the Life to Date Amortization at the previous coupon date as the starting point.
To define Life to Date Amortization values for a security that uses stated interest processing:
In Accounting Center, in the left navigation pane, click Transactions > Trades > Book Trade/Rebook Trade > Book Trade.
You see the Book Trade workspace.Complete the options in the Search Details pane and click Search.
You see a list of securities that meet the search criteria.Click the security for which you are processing a conversion or receive transaction.
Select a security that uses an amortization & accretion rule where you set the Stated Interest Processing (tag 16412) field to Yes.On the Book Trade tab, in the Actions group, click Action Rules, point to Other, and then click Conversion or Receive.
You see the Conversion of Position to Eagle STAR trade panel or the Receive security trade panel.In the Choose Method of Converting Life to Date Amortization (tag 7001) field, select Do Not Include Life to Date Amortization in Book Cost.
You see the Life to Date Amortization Local field and the Life to Date Amortization Base field.
NOTE: For lots following stated interest methodology, avoid using the Include Life to Date Amortization in Book Cost option.Enter a value for the Life to Date Amortization Local (tag 580) field; otherwise leave it blank.
If you specify a Life to Date Amortization Local value, the system records it, and in the subsequent coupon period only the Period-to-date Deferred Amortization at Disposition amount posts. Otherwise,
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if you do not specify a value, the entire Life-to-date Deferred Amortization at Disposition amount posts on the first day of the following coupon period or when shares are disposed (excluding non-taxable transactions). The system also displays the related Life to Date Amortization Base (tag 595) field value in the panel.
Complete the remaining options on the trade panel.
Click Submit.