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 how to recognize 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's Earnings process recognizes each coupon rate as it becomes effective for purposes of deriving cash flows and, in turn, amortization yields.
No Bifurcation Par Restricted. Default. Eagle Accounting's Earnings process recognizes current and future coupon rates for the purpose of deriving cash flows, and, in turn, amortization yield. In the event that amortization/accretion transcends par, Eagle Accounting amortizes to par and stops. This option overrides the amortization rule's Amortization Cap/Floor Method (tag 10130) field setting.
No Bifurcation Transcend Par. Eagle Accounting's Earnings process recognizes the current and future coupon rates for the purpose of deriving cash flows, and, in turn, amortization yields. This option overrides the amortization rule's Amortization Cap/Floor Method (tag 10130) field setting.

Set Up Amortization Rules for Step Bonds

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