About Coupon Period Fields

You can use the following coupon period fields when you set up fixed income securities for use with Eagle Accounting. 

Add Payment Frequency Examples

Eagle Accounting can support any bonds that pay on a certain number of days every coupon period and/or certain number of months every coupon period. If there is a payment frequency that Eagle Accounting does not currently have established, you can add a Code Value to the Payment Freq code category using the following format: Number of days in each coupon period, followed by an underscore and then a capital D - if the bond pays in number of Days. If the bond pays in number of Months, the code value Number of months in each coupon period, followed by an underscore and then a capital M.

Code Value for Every 84 Days Example

For example, if an entity owns a bond that pays every 84 days, you can create a Code Value of 84_D in the PAYMENT FREQ code category.

To create a code value for this example:

1. In Accounting Center, in the left navigation, click Setup > Codes.
   You see the Codes workspace.
2. Click the Search chevron to expand the Search pane.
3. Select search criteria such as a Code Name of PAYMENT FREQ and a Source Name of EAGLE PACE, and then click Search.
   You see a row for the for the PAYMENT FREQ code category,
4. Expand the row to view related code values, and confirm that you need to add a new value.
5. Click Add Code Value at the end of the list of codes. 
   You see a new row.
6. Enter 84_D in the Code Value Short Description column, Every 84 Days in the Code Value Long Description column, and EAGLE PACE in the Source Name column. 
   

Code Value for Every 5 Months Example

In this example, where an entity owns a bond that pays every 5 months, you can create a Code Value of 5_M in the PAYMENT FREQ code category. See the following figure.

Interest Payment Timing Example

A security that pays semi-annual has a First Coupon Date of 2/28/99, and a Last Coupon Date of 2/28/05.

In the Interest Payment Timing field, if you select Last Day of the Month or leave the Interest Payment Timing field null:

• Eagle Accounting generates the coupon on February 28th (February 29th in a leap year) and August 31st.

If you select Same Day of the Month in the Timing of Payment field:

• Eagle Accounting calculates the coupon to occur on February 28th and August 28th.

Day of Month Override Examples

Pay Quarterly on 4th Business Day of Month Example

For example, a security that pays quarterly, and on the 4th business day of the month, would have Payment Frequency set to Quarterly and the Day of Month Override field set to 4th Business Day (4_B). The First Coupon Date and Last Coupon Date must be in sync based on the Payment Frequency field and Day of Month Override values. 

The following figure shows Issue Viewer's Long Term Debt panel. The Payment Frequency field is set to Quarterly and the Day of Month Override field is set to 4th Business Day (4_B)

Pay 4th Thursday of Month Example

If you want to set up a security that pays on the fourth Thursday of every month, you must set the Payment Frequency field to Monthly and the Day of Month Override field to WDC (Week Day of First Coupon). Eagle Accounting then determines which day of the month is the First Coupon Date, and generates the coupon schedule from that point forward. Again, note that the First Coupon Date and Last Coupon Date must be in sync, based on the Payment Frequency field and Day of Month Override values. An example of this setup follows. The following figure shows the Issue Viewer tool's Long Term Debt panel. 

Business Day Convention Example

Consider the example earlier on this page, of a security paying on the fourth Thursday of every month. In the United States, the fourth Thursday in November is the Thanksgiving Day Holiday, and is therefore a nonbusiness day. If an issuer of this security pays the coupon on the next business day, and adjusts the coupon payment based on rolling the coupon end date forward, the SMF setup would be as follows. See the following figure that shows Issue Viewer's Long Term Debt panel with a Business Day Convention field set to Following Business Day - Adjusted. 

How Eagle Accounting Creates the Coupon Schedule

Eagle Accounting uses the Coupon Date and Payment Frequency fields to create the complete coupon schedule of the bond, from issuance to maturity date.

Create the First Coupon Period

Eagle Accounting calculates the cash flow from the Settlement Date of the trade, to create the expected cash flow for the calculation of amortization yield, trade yield, generation of future cash flows, and for accrual processing. Eagle Accounting uses the period from Dated Date to First Coupon Date to create the first coupon period, because the first coupon period of a security can be a long-length coupon period, a short coupon period, or a normal length coupon period.

• A Long Length Coupon Period is a coupon period that contains more accrual days than would normally occur, based on the payment frequency of the bond.
• A Short Length Coupon Period is a coupon period that contains less accrual days than would normally occur, based on the payment frequency of the bond.

Create the Second to Penultimate Coupon Period

Eagle Accounting then uses the First Coupon Date, Payment Frequency, Interest Payment Timing, Day of Month Override, Business Day convention and Last Coupon Date to create the second to penultimate (penultimate means 2nd to last) coupon period. Last Coupon Date stands for last modal coupon date or last normal coupon date. In most cases the Last Coupon Date field should be sent to the penultimate coupon because the Last Coupon Date can have a short, normal, or long coupon period.

Create the Last Coupon Period

Eagle Accounting then calculates from the Last Coupon Date to Maturity Date to generate the last coupon period, because the last coupon period can have a short, long, or normal coupon period. Note that you can set the Last Coupon Date to the maturity date, if the security has a last modal (normal length) coupon period. However, it is suggested that, as a norm, you set the Last Coupon Date as the penultimate coupon date, to avoid incorrectly setting up the Last Coupon Date. If the Last Coupon Date is not in sync with the values in the Payment Frequency, Interest Payment Timing, Day of Month Override, Business Day Convention, and Last Coupon Date fields, an error occurs in Eagle Accounting when the earnings process is invoked. You see an error message in Automation Center's Exceptions workspace, indicating an invalid Last Coupon Date.

To facilitate entering and validating the Last Coupon Date, Eagle Accounting provides the Calculate/Validate Last Coupon Date field and the Valid Last Normal Coupon Date field. 

About Unscheduled Coupons 

If the security does not have a logical payment frequency, or has a payment frequency that cannot be derived from the Coupon Payment fields, you must set up the security with an Unscheduled Variable Rate security Coupon Type. The Unscheduled Coupon Type field allows you to enter a rate, date, and a cash movement flag in the Variable Rate table. Each time a rate and date is entered in the Variable Rate table with the Cash Movement Flag field set to Yes, Eagle Accounting drops a coupon payment. An example of a security that should be set up with an Unscheduled Variable Rate Coupon Type is a security that changes payment frequency over the life of the bond, or a bond that has a First Coupon Date that is not the normal expected day that the bond pays in the future.

Last Coupon Date Calculation and Validation

To facilitate entering and validating the Last Coupon Date, Eagle Accounting provides the following options.

Calculate/Validate Last Coupon Date (tag 2337). Determines whether Eagle Accounting validates the Last Coupon Date value. Options include:

• Calculate Last Coupon Date. Eagle Accounting calculates and displays a valid last coupon date in the Last Coupon Date field based on the values in the Payment Frequency, Payment Timing, Business Calendar, Business Day Adjust, and Day of Month Override. Note that Eagle Accounting can only calculate a Normal length or short last coupon period when asked to calculate a short last coupon date. 
• Validate Last Coupon Date. Eagle Accounting calculates a valid Last Coupon Date based on the values in the First Coupon Date, Last Coupon Date, Payment Frequency, Payment Timing, Business Calendar, Business Day Adjust, and Day of Month Override. Eagle Accounting returns the value in the Valid Last Normal Coupon Date field (tag 2311). If the dates in the Valid Last Normal Coupon Date field and value in the Last Coupon Date (tag 474) field do not match, Eagle Accounting generates the following error :  (ERR): Last Coupon Date is not valid" in the Valid Last Normal Coupon Date field (Errors/Warnings column). If the value in the Last Coupon Date field and Valid Last Normal Coupon Date (tag 2311) field do match, the system does not generate an error message. See the following figure.

Valid Last Normal Coupon Date (tag 2311). Displays the calculated penultimate coupon, based upon the values in the Payment Frequency, Payment Timing, Business Calendar, Business Day Adjust, and Day of Month Override fields.

Coupon and Type Fields

Coupon (tag 70). Specifies the rate at which the security accrues interest. It is expressed as an accrual rate. A value of zero is required for zero coupon bonds.

Eagle Accounting uses the rate in the Coupon field in the earnings process for securities with a Fixed coupon type. For securities with a Variable Rate, Unscheduled Variable Rate, Step Coupon, Floating Rate, and Inverse Floating Rate Coupon types, the system does not use this field in the earnings process; it uses it for reference and reporting only.

If the value of this field changes after a position exists, provided the Coupon Type is Fixed, the change affect the current and future coupon periods' earnings. Prior coupon periods' earnings are not affected by a change to this field, unless earnings are rolled backed to that period and then rolled forward, or a trade is backdated for a previous coupon period and thus, when earnings roll forward, they pick up the new value when the earnings process runs.

Coupon Type Code (tag 97). Indicates the type of coupon that is associated with the security. The options include Floating Rate (X), Inverse Floating Rate (R), Variable Rate (I), Step Coupon (S), Fixed Rate (F), and Unscheduled Variable Rate (V). This field is required. When Coupon Type is set to X, I, S, F, R, or V, the Coupon field in the SMF (tag 70) is for reference only, because the system does no processing on tag 70.

Options include:

• Floating Rate (X). The security has fixed coupon dates, and uses a variable rate that is based on an underlying index and index offset to calculate the coupon to use for earnings. You must enter the rate in the Variable Rate table.
  
  After you select Floating Rate, the following fields become visible: Underlying Issue Name (tag 1141), Underlying Asset ID (tag 1348), Index Offset (tag 215), First Rate Reset Date (tag 10911), Reset Frequency code. In the Underlying Issue Name (tag 1141) and Underlying Asset ID (tag 1348) fields, populate the index on which the security calculates the coupon rate. Then populate the rates for the index in the Variable Rate table that is associated with the Primary Asset ID of the Underlying Index. The Index Offset is the field where you input the basis point adjustment for the calculation of the coupon. The formula for calculating the coupon rate of a floating rate security follows:

Coupon Rate = Index on Floating Rate security + Index Offset

• Inverse Floating Rate (R). The security has fixed coupon dates, and uses a variable rate whose coupon rate is calculated inversely to the underlying index that is attached to it. You must enter the rate in the Variable Rate table.
  
  When you select Inverse Floater, the following fields become visible and required: Inverse Floater Rate (tag 1553), Inverse Floater Multiple (tag 4532), Underlying Issue Name (tag 1141), Underlying Asset ID (tag 1348), and Index Offset (tag 215). You populate the rates for the index in the Variable Rate table that is associated with the Primary Asset ID of the Underlying Index. The formula for calculating a coupon rate for a security that has Inverse Floater Coupon Type follows.

Coupon Rate = (Inverse Floater Rate - (Inverse Floater Rate Multiplier * (Index on Floating Rate Security + Index Offset)))

• Variable Rate (I). The security has fixed coupon dates, and uses a variable rate based on the security identifier to calculate the coupon for use in earnings. For securities with a Variable Rate 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.
  
  For Variable Rates, when you select a Coupon Type of Variable Rate, the system then only uses the Coupon Rate field (tag 70) on the SMF for reporting, and does no processing with that field.
• 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 cash 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. 
  
  
• Fixed Rate (F). The security has fixed coupon dates, and has a fixed coupon rate to calculate the coupon for use in earnings. Eagle Accounting calculates earnings based on the value entered in the Coupon field (tag 70).
  
  
• Unscheduled Variable Rate (V). You can use an unscheduled variable rate coupon type when the coupon schedule of a bond cannot be calculated based on fields that derive the payment frequency. When you encounter a security such as this, you need to set up the security as an unscheduled variable rate. Eagle Accounting drops a coupon record for each value in the variable rate that has the Cash Movement Flag (tag 3449) set to Yes. When you use an Unscheduled Variable Rate:
  • The system then only uses the Coupon Rate field (tag 70) on the SMF for reporting and does no processing with that field.
  • The Interest Payment Frequency (tag 1523), Business Day Convention, and Day of Month Override (tag 1533) tags become available for reporting purposes only, because Eagle Accounting drives all coupon information off of the data in the Variable Rate table.
  • The system uses the Payment Frequency (tag 2287) and Payment Frequency Code (tag 472) for the periodicity for calculating the amortization and trade yield.

The following tables compare the coupon types.