Set Up Amortization Rules for Step Bonds

Because the variable rates are predetermined for a step bond, Eagle Accounting allows you to recognize all future rates in the calculation of cash flows, or to only recognize the most current variable rate, and use that rate for the projection of future cash flows. The recognition of future cash flows in Eagle Accounting is determined by the value in the Step Bond Utilize Bifurcation Method (tag 3934) field in the amortization rule.

A description of the Step Bond Utilize Bifurcation Method (tag 3934) field, located in the Amortization & Accretion Rules panels, follows. For more information about creating amortization & accretion rules, see Manage Amortization & Accretion Rules.

The following are the options in the Amortization & Accretion Rules panels.

Option

Tag

Description

Step Bond Utilize Bifurcation Method

3934

Indicates whether to recognize known future cash flows (variable rates) for amortization yield calculation of step bonds. Eagle Accounting recognizes a security as a step bond when you set the Coupon Type Code (tag 97) option to Step Rate (S). Options include:

Bifurcation. Eagle Accounting does not recognize known future variable rates in the projection of future cash flow, when calculating amortization yield for step bonds, which in essence, treat the bond as a regular variable rate bond. In prior versions, this option was Yes.
No Bifurcation Par Restricted. Default. Eagle Accounting does recognize known future variable rates for the projection of cash flow, when calculating amortization yield for step bonds. In the event that by recognizing all the known coupon rates causes the amortization/accretion to transcend the par of the security, Eagle Accounting amortizes at par. In addition, this option overrides if the amortization rule's Amortization Cap/Floor Method field is set to No Restriction to go away from par. In prior versions, this option was No.
No Bifurcation Transcend Par. Eagle Accounting does recognize known future variable rates for the projection of cash flow, when calculating amortization yield for Step Bonds. If recognizing all the known coupon rates causes the amortization/accretion to transcend the par of the security, Eagle Accounting stops amortizing at par.