Premium Proportional

Premium Proportional (tag 4526).  The Premium Proportional field is only a viable option when you recognize OID amortization. Options include:

• Yes. Eagle Accounting nets the values of the acquisition premium stream and OID amortization steam on the general ledger (for OID eligible bonds purchased at a discount, but still above the adjusted issue price). Eagle Accounting tracks the acquisition premium and OID amortization separately on the subledger. Eagle Accounting calculates the acquisition amortization premium stream daily delta in proportion to the amount of the OID being recognized. Eagle Accounting uses the following formula to calculate the acquisition premium daily delta:

Total Acquisition Premium to be Recognized
------------------------------------------------------------------ = Acquisition Premium Daily Delta
Total OID Amortization to be Recognized 

NOTE: Acquisition Premium: Acquisition Premium is recognized when a bond has Original Issue Discount, is purchased for an amount less than the Stated Redemption Price, but greater than the adjusted issue price.

• No. Eagle Accounting tracks the acquisition premium and OID amortization stream separately on the general ledger and sub ledger. Eagle Accounting adheres to the applicable amortization method being used for OID amortization.
  An example follows.

Premium Proportional Example

A position has $10.00 of Daily Acquisition Premium Amortization, and $100 of OID Amortization.

If you set Premium Proportional to No, Eagle Accounting creates the amortization general ledger entries shown in the following table.

If you set Premium Proportional to Yes, Eagle Accounting creates the amortization general ledger entries shown in the following table.