Eagle Accounting currently supports conversions for 1) a discount rate basis using ACT/360 to a daily compounding basis using ACT/365, and 2) semi-annual compounding basis using 30/360 to a monthly compounding basis using 30/360. This can apply to asset types such as:

• Certain commodity total return swaps linked to the Bloomberg Commodity Total Return Index (BCOMTR). Uses conversion for a discount rate basis using ACT/360 to a daily compounding basis using ACT/365. 

• Canadian National Housing Act MBS. Uses conversion for semi-annual compounding basis using 30/360 to a monthly compounding basis using 30/360.

Set Up Securities for Interest Rate Conversion

The security setup to convert the reference interest rate of a security from one rate quotation basis to a different rate quotation basis can vary based on whether you are setting up a floating rate security such as a commodity total return swap linked to the Bloomberg Commodity Total Return Index, or setting up a fixed rate security such as a Canadian National Housing Act MBS.

Assign the Rate Conversion Rule to a Floating Rate Security's Index

If you are setting up the interest rate conversion for an asset that is a floating rate or inverse floating rate security, such as a total return swap linked to the Bloomberg Commodity Total Return Index (BCOMTR), you can set up the index for the interest rate conversion. For example, you can assign the rate conversion rule to the total return swap accrual leg's underlying index before you set up the total return swap security for the interest rate conversion. Assigning the rate conversion rule directly to an underlying index is useful in cases where many assets share the same underlying index and use the same rate conversion rule. Otherwise, if you do not assign the rate conversion rule to an underlying index, you can assign the rate conversion rule at the asset level. 

You can use Reference Data Center to assign the rate conversion rule for the index security. Otherwise, if you are using Issue Viewer, you can update the index using the Index panel.

To set up interest rate conversion data for an underlying index:

1. In Accounting Center, in the left navigation pane, click Setup > Securities > Manage Securities > Issue Viewer.
   You see the Issue Viewer tool.

2. Click the Add arrow, and then click Index.
   You see the Index panel.

3. Under Interest Rate Conversion Flags, click the Rate Conversion Rule field, and select the appropriate rule.
   Once you select a rule, the panel displays that rule's criteria. For information about the Interest Rate Conversion Flag fields, see About Interest Rate Conversion Flags Fields.

4. Complete the remaining options on the Index panel.
   For more information, see Manage Indices in Issue Viewer.

5. Click Submit.

Define the Interest Rate Conversion Information for a Floating Rate Security

If you are setting up the interest rate conversion for an asset that is a floating rate security, such as a total return swap linked to the Bloomberg Commodity Total Return Index (BCOMTR), you can update the floating rate security. If you assigned the rate conversion rule to the asset's underlying index, you can set up the floating rate security for the interest rate conversion. Otherwise, you can can set up the floating rate security for the interest rate conversion and additionally assign the rate conversion rule. In this example, you update the accrual or financing leg of a total return swap security, which identifies the index as an underlying security. 

You can use Reference Data Center to define this information. Otherwise, if you are using Issue Viewer, you can update a total return swap's accrual leg in the Multiple Leg Swap pane's Interest Rate Conversion Flags Information section.

To set up the accrual leg of a total return swap for interest rate conversion:

1. In Accounting Center, in the left navigation pane, click Setup > Securities > Manage Securities > Issue Viewer.
   You see the Issue Viewer tool. 

2. Click Create New. 

3. Do one of the following to add or edit the total return swap floating rate security:

   • Click the Add arrow, point to Derivatives, and then click Total Rate Return Swap.

   • In the Issues Query tab, enter the criteria to identify the swap and click Search. Select the security row in the Query Results tab, and then click Change.

   
   You see the Total Rate Return Swap panel or the Change Swaps panel.

4. In the Multiple Leg Swap pane, click the row for the accrual or financing leg, which has a processing security type of Swap Leg Interest Accrual (SWLEAC), and a Coupon Type Code of Floating Rate (X). 

5. Under Swap Leg Underlying Information, in the Underlying Security ID or Underlying Security Name fields, select the index security for the accrual leg.

6. Under Interest Rate Conversion Flags, set the Convert Interest Rate field to Yes for the accrual leg. 
   In the Rate Conversion Rule field, you see the rate conversion rule associated with the underlying index you selected, along with the displayed rule criteria. For information about the Interest Rate Conversion Flag fields, see About Interest Rate Conversion Flags Fields.

7. If the Rate Conversion Rule field does not display a default value associated with the underlying index, you can select the appropriate rule for the accrual or financing leg.

8. Complete the remaining options on the panel for the swap contract, pay leg, and receive leg, as appropriate.
   For more information, see Manage Total Return Swaps in Issue Viewer.

9. Click Submit.

Define the Interest Rate Conversion Information for Fixed Rate Securities

If you are setting up the interest rate conversion for a fixed rate asset such as a Canadian National Housing Act MBS, you must update the interest rate conversion information for the security.

You can use Reference Data Center to provide interest rate conversion information for fixed income securities. Otherwise, these options are available in the Interest Rate Conversion Flags Information section in Issue Viewer's Long Term Debt panel, Short Term Debt panel, and Mortgage Backed Security panel.  You can use the Mortgage Backed Security panel for a Canadian National Housing Act MBS, as shown in the following procedure.

To set up an MBS for interest rate conversion:

1. In Accounting Center, in the left navigation pane, click Setup > Securities > Manage Securities > Issue Viewer.
   You see the Issue Viewer tool.

2. Do one of the following to add or edit the index security:

   • Click the Add arrow, point to Fixed Income, and then click Mortgage Backed Security.

   • In the Issues Query tab, enter the criteria to identify the security and click Search. Select the security row in the Query Results tab, and then click Change.

   
   You see the Mortgage Backed Security panel or the Change Mortgage Backed Security panel.

3. Under Interest Rate Conversion Flags, set the Convert Interest Rate field to Yes.
   This indicates the security is eligible for interest rate conversion.  

4. In the Rate Conversion Rule field, select the appropriate rule.
   You see the criteria associated with the selected rule. For information about the Interest Rate Conversion Flag fields, see About Interest Rate Conversion Flags Fields.

5. Complete the remaining options on the panel, as appropriate.
   For more information, see Manage MBSs in Issue Viewer.

6. Click Submit.

About the Earnings Process

For securities that have the Convert Interest Rate field set to Yes, Eagle Accounting's Earnings process uses the selected Rate Conversion Rule value to convert the coupon rates to derive accruals and cash flows based on the converted rate. For floating rate and inverse floating rate securities, the system uses the Rate Conversion Rule value selected for the underlying security, that is, the index.