Set Up Reference Data for Step Bonds

Owned by Nancy Cohn (Deactivated)
Last updated: Jan 11, 2024
2 min read

When you use step bonds, ensure you set up the security master information and the variable rates as reference data. 

Set Up Securities with a Coupon Type Code of Step

Eagle Accounting recognizes a security as a step bond when you set the security's Coupon Type Code (tag 97) option to Step Rate (S). You can use Reference Data Center to do so. For information, see Create and Delete Securities. Otherwise, if you use Issue Viewer, you can use the security entry panels available. For details, see Set Up Securities in Issue Viewer.

Detailed information about the available Coupon Type Code field values appears in About the Coupon and Coupon Type Code Fields. That page describes the Step (S) option as follows: 

Step (S). The security has fixed coupon dates, and uses a variable rate based on the security identifier to calculate the coupon for use in earnings. The Step Coupon Type Code assumes that all the coupon rates are known at the time of issue. For securities with a Step Coupon Type, you enter the coupon rates in the Variable Rate panel, and enter rates based on the variable rate security's Primary Asset ID. 

When you use the Step Coupon Type, the system then only uses the Coupon Rate field (tag 70) on the SMF for reporting, and it does no processing with that field.

For the Step Coupon Type, in the Amortization & Accretion Rules panel, Eagle Accounting provides the ability to recognize all future coupon rates that apply to the calculation of future cash flows for amortization yield, or to only recognize the most current coupon rate that applies to the calculation of future cash flows for amortization yield. The Step Bond Utilize Bifurcation Method field drives this processing in the Amortization Rule panel. 

Set Up Variable Rates

Step bond are securities with a predefined variable rate schedule. Because the variable rates are predetermined, Eagle Accounting allows you to recognize all future rates in the calculation of cash flows, or to only recognize the most current variable rate, and use that rate for the projection of future cash flows. The recognition of future cash flows in Eagle Accounting is determined by the value in the Step Bond Utilize Bifurcation Method (tag 3934) field in the amortization rule. For more information about setting up variable rates, see Understand Variable Rates for a Security.