Mandatory Call Corporate Action Example

The SMF setup used for this example follows.

Long Term Debt Coupon Periods

Coupon

5.000000

 

Coupon Type Code

Fixed Rate

 

Day Count Basis

30/360

 

Payment Frequency

Semiannual

 

Payment Frequency Code 

6_M

 

Long Term Debt Dates

 

 

Issue Price

100.00000000

 

Issue Date

20020101

 

Dated Date

20020101

 

First Coupon Date

20020701

 

Last Coupon Date

20060701

 

Maturity Date

20070701

 

Maturity Price

100.00

 

In the following figure, the Create Calls/Puts/Refunds panel shows this example of a mandatory Call corporate action.

When the system processes the Call, Eagle Accounting creates a close or disposition for the entire position, for every holder of the security in Eagle Accounting, at a Price of 102 USD. Back-dated trades of this security cause the corporate action process to be invoked; Eagle Accounting automatically fires off earnings, and then trues up earnings up to the ex-date of the Call/Put/Pre-Refund.

If you run the corporate action and the date before, you had Par of 1,000,000.00 and an Amortized Cost of 1,025,000.00, and the Redemption Gain Loss Indicator option on the accounting basis is set to:

  • Gain/Loss, Eagle Accounting treats the 5,000 loss caused by the Call transaction as an actual loss.

  • Amortize, Eagle Accounting treats the 5,000 loss caused by the Call transaction as Accelerated Amortization, and it appears as close amortization on the Cost object.