Set Up an Entity/Accounting Basis for Amortization
- Nancy Cohn (Deactivated)
After you set up an amortization rule, you can choose that rule in the Primary Amortization/Accretion Rule field for any entities you create.
Define an Amortization Rule When You Create a New Entity
When you use the Create/Edit Entity (or Create Master Fund) panel to add an entity, you can identify the amortization rule to use with that entity.Â
After you create an accounting rule and related amortization rule, you can assign the accounting and amortization rule to the entity in the Primary Amortization/Accretion Rule field (tag 3197). The Primary Amortization/Accretion Rule field is located in the Earnings/Amortization Fields area of the panel. Be aware that the amortization rule created in the entity is also created in the entity's primary accounting basis.Â
The following option is available in the Create/Edit Entity panel and the Create Master Fund panel. These panels are available in Portfolio Data Center and in Accounting Center.Â
Option | Tag | Description |
|---|---|---|
Primary Amortization/Accretion Rule | 3197 | Specifies the amortization/accretion rule for the primary accounting basis that the system uses to process earnings. You can set up amortization/accretion rules for IFRS that amortize average cost portfolios on an effective yield basis. If you change the Primary Amortization Rule at the accounting basis level, the next time you process earnings the system creates a retrospective amortization rule calculation from the original settlement date of the trade (on all open lots). The system calculates the trade yield based on the primary amortization/accretion rule for the entity, so it is important to keep the values that exist on the entity and the primary accounting basis consistent. The system updates values changed on the entity panel via the primary accounting basis, but does not change entity values when you make the change through the change accounting basis panel. |
Eagle Accounting processes earnings using the amortization rule on the accounting basis. Eagle Accounting sets the Primary Amortization/Accretion Rule Instance (tag 4622), which is hidden and locked in the core set of panels, based upon the value in the Primary Amortization/Accretion Rule. The Primary Amortization/Accretion Rule Instance is the field that is stored in the database, and Primary Amortization/ Accretion Rule (tag 3197) is not. This field exists on both the Entity and the Accounting Basis records. Eagle Accounting uses the value from the Accounting Basis for processing, and it can be edited after initial setup.Â
Change the Amortization Rule for an Entity
When you change the amortization rule on an existing entity, Eagle Accounting also changes the amortization rule on the entity's primary accounting basis. However, if you change the amortization rule on the primary accounting basis, Eagle Accounting does not update the value on the related entity record.Â
Therefore, if you want to change the value of the amortization rule on the primary accounting basis, do so by changing the amortization rule at the entity level. If there is a disconnect between these two fields, there can possibly be an incorrect trade yield result when Eagle Accounting does the calculation. If there is a change to the Entity Record/Primary Accounting Basis field, Eagle Accounting recalculates the amortization retrospectively from settlement date.
Define an Amortization Rule When You Create an Accounting Basis
Eagle Accounting allows you to create multiple accounting bases (multiple books). You can apply a different amortization rule for each basis. When earnings are invoked, Eagle Accounting looks to the amortization rules when processing amortization and yield calculations.Â
When you use the Add a Basis to a Portfolio panel to add an additional accounting basis for an entity or master fund, you can enter a value for the Primary Amortization/Accretion Rule field (tag 3197). This field is located in the Core Accounting Fields area.
Change the Amortization Rule on an Accounting Basis
When you use the Edit a Basis on a Portfolio panel to change an additional accounting basis for an entity or master fund, you can change a value for the Primary Amortization/Accretion Rule field (tag 3197). This field is located in the Core Accounting Fields area.
Be aware that if you change the amortization rule on the primary accounting basis, Eagle Accounting does not update the value on the entity record. Therefore, if you want to change the value of the amortization on the primary accounting basis, do so using the Create/Edit Entity panel or the Edit Master Fund/Sector panel. If there is a disconnect between the entity and primary accounting basis for the primary amortization rule, there could possibly be an incorrect trade yield result when Eagle Accounting calculates the yield.
When changing the amortization rule on an accounting basis, Eagle Accounting recalculates the yield and amortization based on the new amortization rule, and recalculates the amortization retrospectively, from the settlement date of the tax lot.Â