About Holding Term Granularity

The following example indicates how the system will perform ledger account mapping for Cost of Investments based on holding term.  

In this example, the system will map long term holdings to the generic core account for Cost of Investments. The system will automatically map short term holdings to the core account, Cost of Investments -ST and will automatically map cash equivalent holdings to the core account, Cost of Investments - CE. All these core accounts are posted directly into the ledger.

Notice that there is no account explicitly created for long term holdings. Long term activity remains in the original core account used by Eagle clients who do not use ledger granularity (for example, Cost of Investments). Fixed income securities in the original core account are treated as long term. 

Also, the system does not apply holding term granularity rules to derivative securities. When you apply ledger granularity and you set up holding term granularity rules, be aware that the ledger entries for derivative securities do not reflect activity in three different buckets (Long Term, Short Term, and Cash Equivalent). Derivatives post to the core Long Term accounts.

Use Holding Term Granularity in Combination with Custom Granularity

You must create ledger granularity rules in addition to any holding term granularity details to enable ledger reports to break out a specified core account with holding term breakouts. If you want your reports to break out accounts for fixed income versus equity or other types of assets, you can define custom granularity rule details for that purpose.

When you use holding term granularity, you can break out accounts by holding term alone or by both holding term granularity and custom granularity criteria. For example, you can set up a ledger granularity rule to differentiate between long term, short term, and cash equivalent Cost of Investments and also break out the cost for long term government bonds. In this case, you define a ledger granularity rule that includes both holding term rule details and custom granularity rule details. You define custom granularity rules to identify criteria for long term government bonds. If you use a combination of holding term granularity and custom granularity in a ledger granularity rule, you must also create customized ledger accounts in your Custom Chart of Accounts to use for the breakouts.

How Eagle Determines a Lot's Holding Term in Investment Accounting

When Eagle processes a transaction, it recognizes the ledger granularity rule in effect for the transaction's entity/accounting basis and security. For holding term granularity rules, it posts to an account based on the holding term of the lot.

The system automatically determines the holding term for a lot when it processes the trade. The system compares the trade's original acquisition date to its maturity date and then uses the following criteria to assign the holding term:

• Long Term. Long term lots have an original acquisition date greater than one year from maturity.

• Short Term. Short term lots have an original acquisition date greater than 90 days (or 3 months) from maturity but also equal to or less than one year from maturity.

• Cash Equivalent. Cash equivalent lots have an original acquisition date equal to or less than 90 days (or 3 months) from maturity.

You can have the system use 3 months rather than 90 days as the cutoff between a short term and cash equivalent holding term by choosing a holding term method at the entity/accounting basis level. Eagle Accounting accounts for leap years when determining whether to classify a lot as long term or short term.

You can also manually override the system calculated holding term value for a trade. See the Specify the Holding Term when Booking a Trade section for more information. 

The system uses the Holding Term field at the trade level to determine ledger account mapping to core (long term), short term, or cash equivalent.

How Eagle Determines a Lot's Holding Term in Insurance Accounting

For Eagle Insurance clients who use a STAT accounting basis and use the Post STAT Unrealized process, the system can use the Post STAT Unrealized process to provide holding term information for ledger granularity. The Post STAT Unrealized process uses Schedule D codes to determine whether STAT basis positions have a holding term of long term, short term, or cash equivalent.

The system assigns the holding term during transaction processing, using the Schedule D code to determine the holding term as follows:

• Long Term. D1, DBC1, DBA1, BA1, DBDD1, DBDDBA1, DBDD21, DL1DL1D21, D22, E1, DBDD22, DBDDBB1, DL1DL1D1, DBB1, DL1E1, DL1D21, DL1D22, DBDE1, D21, DBD1, and DL1D1.

• Short Term. DA1, DL1DA1, and DBDDA1 (all DA1 schedules).

• Cash Equivalent. E2, DL1E2, and DBDE2 (all E2 schedules).

The Schedule D value and the holding term value must match to keep ledger entries for unrealized gain/loss (URGL) in line with the rest of the lot level ledger postings.

How Eagle Determines the Holding Term for Corporate Actions

When you use a corporate action in Eagle Accounting to transfer an asset from one security to another security, Eagle calculates the holding term on the To side based on the original acquisition date and maturity date of that asset/lot. For non taxable corporate actions, the original acquisition date does not change in the From and To sides, and the holding term is transferred to the To side. For taxable corporate actions, the corporate action has a new original acquisition date that is equal to the trade date of the corporate action, so Eagle Accounting recalculates the holding term.

How Eagle Determines the Holding Term for Interportfolio Transfers

When you use an interportfolio transfer in Eagle Accounting to transfer an asset from one entity to another entity, Eagle calculates the holding term on the To side based on the original acquisition date and maturity date of that asset/lot. For interportfolio transfers that are transferred at market, Eagle Accounting updates the original acquisition date and recalculates the holding term. For interportfolio transfers with other transfer methods (for example, amortized cost, original cost), Eagle Accounting maintains the original acquisition cost and the holding term.

Unrealized Processing and Holding Term Granularity for Investment Accounting

If you use holding term granularity rules with Investment Accounting, be aware that the system does not break out holding term for unrealized accounts. Because the system performs unrealized gain/loss (URGL) processing at the position level for Investment Accounting, the lot level holding term information is not available at the time of URGL processing. As a workaround, the URGL process recognizes balances in the following accounts:

• 1011100101 - NET UNREALIZED APPRECIATION OF INVESTMENTS - ST

• 1011200101 - NET UNREALIZED APPRECIATION OF INVESTMENTS - CE

• 1011100102 - NET UNREALIZED DEPRECIATION OF INVESTMENTS - ST

• 1011200102 - NET UNREALIZED DEPRECIATION OF INVESTMENTS - CE

• 1011100201 - NET UNREALIZED CURRENCY APPRECIATION OF INVESTMENTS - ST

• 1011200201 - NET UNREALIZED CURRENCY APPRECIATION OF INVESTMENTS - CE

• 1011100202 - NET UNREALIZED CURRENCY DEPRECIATION OF INVESTMENTS - ST

• 1011200202 - NET UNREALIZED CURRENCY DEPRECIATION OF INVESTMENTS - CE

You can post manual ledger reclass entries from the core (long term) balances into these accounts on the day unrealized gain/loss is processed. The following day, during URGL processing, the system automatically reverses the balances in the previous accounts so there is no break in ledger balances.

Unrealized Processing and Holding Term Granularity for Insurance Accounting

For Eagle Insurance clients who use a STAT accounting basis and use the Post STAT Unrealized process, the system generates holding term accounts for each holding term category. The breakout into long term, short term, and cash equivalent accounts is based exclusively on the schedule for individual lots.