DeMinimis Test Application Field Setting | Within DeMinimis Test Action Field Setting |
|
|
|---|---|---|---|
| Discontinue Amort. Streams | Apply Market Discount | Apply OID Only |
None | n/a | n/a | n/a |
All Discount Purchases | Eagle Accounting applies the DeMinimis test to the entire total discount stream. DeMinimis does not apply to securities bought at a market premium. If market discount passes DeMinimis, discontinue accretion of both steams. If market discount fails DeMinimis, accrete both streams. | n/a | n/a |
OID Only | Eagle Accounting applies the DeMinimis test to the OID stream. If OID passes DeMinimis, discontinue accretion of both streams. If OID fails DeMinimis, accrete both streams. | If OID passes DeMinimis, discontinue OID, and accrete market discount. If OID fails DeMinimis, accrete both streams. | n/a |
Acquisition Discount/ Market Discount | n/a | n/a | Eagle Accounting applies the DeMinimis test to the market discount stream or to the acquisition discount stream (if you purchase an OID-eligible bond below the adjusted issue price). If market discount passes DeMinimis, discontinue market discount accretion, and accrete OID. If market discount fails DeMinimis, accrete both streams. |
Apply Each Independently | Eagle Accounting applies the DeMinimis test independently to both the market discount stream and the OID stream. If market discount passes DeMinimis, discontinue market discount. If market discount fails DeMinimis, accrete market discount. If OID passes DeMinimis, discontinue OID. If OID fails DeMinimis, accrete OID. | n/a | n/a |
Example of DeMinimis Test for OID
Eagle Accounting calculates the DeMinimis test for OID as follows:
(.25 of 1% (.0025) of redemption price * the number of complete years to redemption) > (Stated Redemption Value - adjusted issue price)
Stated Redemption Value (Par or Call Price) =
Issue Date:
Maturity Date:
Issue Price =
$1,000.00
July 31, 2000
August 1, 2005
$990.00
Calculate DeMinimis
.25 of 1% (.0025) of redemption price: (1,000.00 * .0025) =
Number of Complete Years to Redemption: =
Amount of DeMinimis Calculation: =
Compare to Amount of OID Without Consideration of DeMinimis:
$2.50
X 5
$12.50
$10.00
Result
Because the OID amount falls within the DeMinimis rule, the fund does not accrete OID, but can have Market Discount, depending on the value set for the Within DeMinimis Test Application field.
Example of DeMinimis Test for Discount Purchases
Stated Redemption Value (Par or Call Price) =
Issue Date:
Maturity Date:
Purchase Price =
$1,000.00
July 31, 2000
August 1, 2005
$990.00
Calculate DeMinimis
.25 of 1% (.0025) of redemption price: (1,000.00 * .0025) =
Number of Complete Years to Redemption: =
Amount of DeMinimis Calculation: =
Compare to Amount of OID Without Consideration of DeMinimis:
$2.50
X 5
$12.50
$10.00
Result
Because the market discount amount falls within the DeMinimis rule, the fund does not accrete any market discount amortization.
When selecting DeMinimis for all market discount purchases, if the Security or OID falls within the DeMinimis test, Eagle Accounting discontinues amortization.
Stated Redemption Value (Par or Call Price, or Pre-Refunded Price) =
Adjusted Issue Price as of 10/01/2000 =
Unaccreted OID =
$1,000.00
($900.00)
$100.00
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