Understand the Premium Proportional Option

In the Amortization & Accretion Rules panels, you can specify a value for the Premium Proportional (tag 4526) field. 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:

• 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.