PURPOSE
To show illustration of investment in bond FIFO at amortised cost.
OVERVIEW
TRANSACTION DETAILS
| Accounting Base Ccy |
| SGD |
Security Parameters
| Currency |
| Accrual Basis |
| Issue Date |
| Maturity Date |
| Coupon |
| Frequency |
| SGD |
| Act/365 |
15-Jul-02 |
15-Jan-04 |
2.8750% |
Quarterly |
Coupon Payment Schedule
| Type | End Date | VDate | Coupon | Coupon PPM |
|---|---|---|---|---|
| Issued Principal | 15-Jul-02 | 15-Jul-02 | 2.875000 | 0.000000 |
| Periodic Repayment | 15-Oct-02 | 15-Oct-02 | 2.875000 | 7,246.575340 |
| Periodic Repayment | 15-Jan-03 | 15-Jan-03 | 2.875000 | 7,246.575340 |
| Periodic Repayment | 15-Apr-03 | 15-Apr-03 | 2.875000 | 7,089.041100 |
| Periodic Repayment | 15-Jul-03 | 15-Jul-03 | 2.875000 | 7,167.808220 |
| Periodic Repayment | 15-Oct-03 | 15-Oct-03 | 2.875000 | 7,246.575340 |
| Periodic Repayment | 15-Jan-04 | 15-Jan-04 | 2.875000 | 7,246.575340 |
Transactions
| TradeID | Buy/Sell | Quantity | Price (%) | TDate | VDate | Purchase Interest | Proceeds |
|---|---|---|---|---|---|---|---|
| IVM1001 | Buy | 1,000,000.00 | 102.00 | 3-Feb-03 | 4-Feb-03 | 1,575.34 | 1,021,575.34 |
| IVM1002 | Buy | 2,000,000.00 | 97.00 | 15-Feb-03 | 16-Feb-03 | 5,041.10 | 1,945,041.10 |
| IVM1003 | Sell | 300,000.00 | 99.00 | 17-Apr-03 | 18-Apr-03 | 70.89 | 297,070.89 |
| IVM1004 | Sell | 1,050,000.00 | 101.50 | 24-Apr-03 | 25-Apr-03 | 827.05 | 1,066,577.05 |
Coupon Received
| TradeID | Quantity | VDate | Proceeds |
|---|---|---|---|
| CPN1001 | 3,000,000.00 | 15-Apr-03 | 21,267.12 |
SUMMARY OF JOURNALS
| ID | Date | Description |
|---|---|---|
| J1 | 3-Feb-03 | Trade Date Journals |
| J2 | 4-Feb-03 | Settlement Date Journals |
| J3 | 15-Feb-03 | Trade Date Journals |
| J4 | 16-Feb-03 | Settlement Date Journals |
| J5 | 28-Feb-03 | Month End Revaluation of Bond Investment position |
| J6 | 1-Mar-03 | Reversal of Month End Revaluation of Bond Investment position |
| J7 | 31-Mar-03 | Month End Revaluation of Bond Investment position |
| J8 | 1-Apr-03 | Reversal of Month End Revaluation of Bond Investment position |
| J9 | 15-Apr-03 | Coupon Settlement Journals |
| J10 | 17-Apr-03 | Trade Date Journals |
| J11 | 18-Apr-03 | Settlement Date Journals |
| J12 | 24-Apr-03 | Trade Date Journals |
| J13 | 25-Apr-03 | Settlement Date Journals |
| J14 | 30-Apr-03 | Month End Revaluation of Bond Investment position |
J1 Trade Date Journals
| TradeID | PostDate | B/P | Account | Ccy | Ccy Amt D/(CR) | Rate | Base | Base Amt D/(CR) | Line |
|---|---|---|---|---|---|---|---|---|---|
| IVM1001 | 3-Feb-03 | B | INV: Investment Bond Cost | SGD | 1,000,000.00 | 1.000000 | SGD | 1,000,000.00 | J1a |
| IVM1001 | 3-Feb-03 | P | INV:Bond Premium Amort/Dics Acc | SGD | 20,000.00 | 1.000000 | SGD | 20,000.00 | J1b |
| IVM1001 | 3-Feb-03 | P | INV: Investment Interest Income | SGD | 1,575.34 | 1.000000 | SGD | 1,575.34 | J1c |
| IVM1001 | 3-Feb-03 | B | INV: Due to Broker | SGD | -1,021,575.34 | 1.000000 | SGD | -1,021,575.34 | J1d |
Note J1c: Calculation of Accrued Interest
| Last Coupon Date | 15-Jan-03 | A |
| Next Coupon Date | 15-Apr-03 | B |
| VDate | 4-Feb-03 | C |
| Days to Vdate (exclude 4-Feb) | 20 | D = C-A |
| Total Days (exclude 15-Apr) | 90 | E = B-A |
| Coupon PPM (Part Per Million) | 7,089.041100 | F |
| Quantity | 1,000,000.00 | G |
| Accrued Interest | 1,575.34 | H = F*D/E*G/1000000 |
J2 Settlement Date Journals
| TradeID | PostDate | B/P | Account | Ccy | Ccy Amt D/(CR) | Rate | Base | Base Amt D/(CR) | Line |
|---|---|---|---|---|---|---|---|---|---|
| IVM1001 | 4-Feb-03 | B | INV: Due to Broker | SGD | 1,021,575.34 | 1.000000 | SGD | 1,021,575.34 | J2a |
| IVM1001 | 4-Feb-03 | B | Cash at Bank | SGD | -1,021,575.34 | 1.000000 | SGD | -1,021,575.34 | J2b |
J3 Trade Date Journals
| TradeID | PostDate | B/P | Account | Ccy | Ccy Amt D/(CR) | Rate | Base | Base Amt D/(CR) | Line |
|---|---|---|---|---|---|---|---|---|---|
| IVM1002 | 15-Feb-03 | B | INV: Investment Bond Cost | SGD | 2,000,000.00 | 1.000000 | SGD | 2,000,000.00 | J3a |
| IVM1002 | 15-Feb-03 | P | INV:Bond Premium Amort/Dics Acc | SGD | -60,000.00 | 1.000000 | SGD | -60,000.00 | J3b |
| IVM1002 | 15-Feb-03 | P | INV: Investment Interest Income | SGD | 5,041.10 | 1.000000 | SGD | 5,041.10 | J3c |
| IVM1002 | 15-Feb-03 | B | INV: Due to Broker | SGD | -1,945,041.10 | 1.000000 | SGD | -1,945,041.10 | J3d |
Note J3c: Calculation of Accrued Interest
| Last Coupon Date | 15-Jan-03 | A |
| Next Coupon Date | 15-Apr-03 | B |
| VDate | 16-Feb-03 | C |
| Days to Vdate (exclude 16-Feb) | 32 | D = C-A |
| Total Days (exclude 15-Apr) | 90 | E = B-A |
| Coupon PPM (Part Per Million) | 7,089.041100 | F |
| Quantity | 2,000,000.00 | G |
| Accrued Interest | 5,041.10 | H = F*D/E*G/1000000 |
J4 Settlement Date Journals
| TradeID | PostDate | B/P | Account | Ccy | Ccy Amt D/(CR) | Rate | Base | Base Amt D/(CR) | Line |
|---|---|---|---|---|---|---|---|---|---|
| IVM1002 | 16-Feb-03 | B | INV: Due to Broker | SGD | 1,945,041.10 | 1.000000 | SGD | 1,945,041.10 | J4a |
| IVM1002 | 16-Feb-03 | B | Cash at Bank | SGD | -1,945,041.10 | 1.000000 | SGD | -1,945,041.10 | J4b |
J5 Month End Revaluation of Bond Investment position
| TradeID | PostDate | B/P | Account | Ccy | Ccy Amt D/(CR) | Rate | Base | Base Amt D/(CR) | Line |
|---|---|---|---|---|---|---|---|---|---|
| Portfolio/Sec | 28-Feb-03 | B | INV: Investment Interest Receivable | SGD | 10,633.56 | 1.000000 | SGD | 10,633.56 | J5a |
| Portfolio/Sec | 28-Feb-03 | P | INV: Investment Interest Income | SGD | -10,633.56 | 1.000000 | SGD | -10,633.56 | J5b |
| Portfolio/Sec | 28-Feb-03 | B | INV: Bond Premium/Discount | SGD | -39,165.86 | 1.000000 | SGD | -39,165.86 | J5c |
| Portfolio/Sec | 28-Feb-03 | P | INV:Bond Premium Amort/Disc Acc | SGD | 39,165.86 | 1.000000 | SGD | 39,165.86 | J5d |
Note J5b: Calculation of Accrued Interest
| Last Coupon Date | 15-Jan-03 | A |
| Next Coupon Date | 15-Apr-03 | B |
| VDate | 28-Feb-03 | C |
| Days to Vdate (include 28-Feb) | 45 | D = C-A+1 |
| Total Days (exclude 15-Apr) | 90 | E = B-A |
| Coupon PPM (Part Per Million) | 7,089.041100 | F |
| Quantity | 3,000,000.00 | G |
| Accrued Interest | 10,633.56 | H = F*D/E*G/1000000 |
Note J5d: Calculation of Bond Premium Amort/Disc Acc
IVM1001 IVM1002
| TDate | Quantity | Amortised Price + | Premium/ Disc | Quantity | AccretedPrice + | Premium/ Disc | Total Quantity | Total Premium/ Disc |
| 28-Feb-03 | 1,000,000.00 | 1.01855549410187 | 18,555.49 | 2,000,000.00 | 0.971139326374233 | -57,721.35 | 3,000,000.00 | -39,165.86 |
I | J | K = (j-1)*I | L | M | N = (M-1)*K | O = I+L | P = K+N |
+ Amortised/accreted price is based on the amortisation/accretion schedule closing price as at 28-Feb (month end date). Please refer constant yield amortisation/accretion model in the Related Information section.
J6 Reversal of Month End Revaluation of Bond Investment position
| TradeID | PostDate | B/P | Account | Ccy | Ccy Amt D/(CR) | Rate | Base | Base Amt D/(CR) | Line |
|---|---|---|---|---|---|---|---|---|---|
| Portfolio/Sec | 1-Mar-03 | B | INV: Investment Interest Receivable | SGD | -10,633.56 | 1.000000 | SGD | -10,633.56 | J6a |
| Portfolio/Sec | 1-Mar-03 | P | INV: Investment Interest Income | SGD | 10,633.56 | 1.000000 | SGD | 10,633.56 | J6b |
| Portfolio/Sec | 1-Mar-03 | B | INV: Bond Premium/Discount | SGD | 39,165.86 | 1.000000 | SGD | 39,165.86 | J6c |
| Portfolio/Sec | 1-Mar-03 | P | INV:Bond Premium Amort/Disc Acc | SGD | -39,165.86 | 1.000000 | SGD | -39,165.86 | J6d |
J7 Month End Revaluation of Bond Investment position
| TradeID | PostDate | B/P | Account | Ccy | Ccy Amt D/(CR) | Rate | Base | Base Amt D/(CR) | Line |
|---|---|---|---|---|---|---|---|---|---|
| Portfolio/Sec | 31-Mar-03 | B | INV: Investment Interest Receivable | SGD | 17,958.90 | 1.000000 | SGD | 17,958.90 | J7a |
| Portfolio/Sec | 31-Mar-03 | P | INV: Investment Interest Income | SGD | -17,958.90 | 1.000000 | SGD | -17,958.90 | J7b |
| Portfolio/Sec | 31-Mar-03 | B | INV: Bond Premium/Discount | SGD | -35,503.83 | 1.000000 | SGD | -35,503.83 | J7c |
| Portfolio/Sec | 31-Mar-03 | P | INV:Bond Premium Amort/Disc Acc | SGD | 35,503.83 | 1.000000 | SGD | 35,503.83 | J7d |
Note J7b: Calculation of Accrued Interest
| Last Coupon Date | 15-Jan-03 | A |
| Next Coupon Date | 15-Apr-03 | B |
| VDate | 31-Mar-03 | C |
| Days to Vdate (include 31-Mar) | 76 | D = C-A+1 |
| Total Days (exclude 15-Apr) | 90 | E = B-A |
| Coupon PPM (Part Per Million) | 7,089.041100 | F |
| Quantity | 3,000,000.00 | G |
| Accrued Interest | 17,958.90 | H = F*D/E*G/1000000 |
Note J7d: Calculation of Bond Premium Amort/Disc Acc
IVM1001 IVM1002
| TDate | Quantity | Amortised Price + | Premium/ Disc | Quantity | AccretedPrice + | Premium/ Disc | Total Quantity | Total Premium/ Disc |
| 28-Feb-03 | 1,000,000.00 | 1.01855549410187 | 18,555.49 | 2,000,000.00 | 0.971139326374233 | -57,721.35 | 3,000,000.00 | -39,165.86 |
| 31-Mar-03 | 1,000,000.00 | 1.01676327386654 | 16,763.27 | 2,000,000.00 | 0.973866451074559 | -52,267.10 | 3,000,000.00 | -35,503.83 |
I | J | K = (j-1)*I | L | M | N = (M-1)*K | O = I+L | P = K+N |
+ Amortised/accreted price is based on the amortisation/accretion schedule closing price as at 31-Mar (month end date). Please refer constant yield amortisation/accretion model in the Related Information section.
J8 Reversal of Month End Revaluation of Bond Investment position
| TradeID | PostDate | B/P | Account | Ccy | Ccy Amt D/(CR) | Rate | Base | Base Amt D/(CR) | Line |
|---|---|---|---|---|---|---|---|---|---|
| Portfolio/Sec | 1-Apr-03 | B | INV: Investment Interest Receivable | SGD | -17,958.90 | 1.000000 | SGD | -17,958.90 | J8a |
| Portfolio/Sec | 1-Apr-03 | P | INV: Investment Interest Income | SGD | 17,958.90 | 1.000000 | SGD | 17,958.90 | J8b |
| Portfolio/Sec | 1-Apr-03 | B | INV: Bond Premium/Discount | SGD | 35,503.83 | 1.000000 | SGD | 35,503.83 | J8c |
| Portfolio/Sec | 1-Apr-03 | P | INV:Bond Premium Amort/Disc Acc | SGD | -35,503.83 | 1.000000 | SGD | -35,503.83 | J8d |
J9 Coupon Settlement Journals
| TradeID | PostDate | B/P | Account | Ccy | Ccy Amt D/(CR) | Rate | Base | Base Amt D/(CR) | Line |
|---|---|---|---|---|---|---|---|---|---|
| CPN1001 | 15-Apr-03 | P | INV: Investment Interest Income | SGD | -21,267.12 | 1.000000 | SGD | -21,267.12 | J9a |
| CPN1001 | 15-Apr-03 | B | Cash at Bank | SGD | 21,267.12 | 1.000000 | SGD | 21,267.12 | J9b |
J10 Trade Date Journals
| TradeID | PostDate | B/P | Account | Ccy | Ccy Amt D/(CR) | Rate | Base | Base Amt D/(CR) | Line |
|---|---|---|---|---|---|---|---|---|---|
| IVM1003 | 17-Apr-03 | B | INV: Investment Bond Cost | SGD | -300,000.00 | 1.000000 | SGD | -300,000.00 | J10a |
| IVM1003 | 17-Apr-03 | P | INV: Investment Interest Income | SGD | -70.89 | 1.000000 | SGD | -70.89 | J10b |
| IVM1003 | 17-Apr-03 | P | INV:Bond Premium Amort/Dics Acc | SGD | -4,751.34 | 1.000000 | SGD | -4,751.34 | J10c |
| IVM1003 | 17-Apr-03 | P | INV: Trading Income Price Impact | SGD | 7,751.34 | 1.000000 | SGD | 7,751.34 | J10d |
| IVM1003 | 17-Apr-03 | B | INV: Due From Broker | SGD | 297,070.89 | 1.000000 | SGD | 297,070.89 | J10e |
Note J10b: Calculation of Accrued Interest
| Last Coupon Date | 15-Apr-03 | A |
| Next Coupon Date | 15-Jul-03 | B |
| VDate | 18-Apr-03 | C |
| Days to Vdate (exclude 18-Apr) | 3 | D = C-A |
| Total Days (exclude 15-Jul) | 91 | E = B-A |
| Coupon PPM (Part Per Million) | 7,167.808220 | F |
| Quantity | 300,000.00 | G |
| Accrued Interest | 70.89 | H = F*D/E*G/1000000 |
Note J10c: Calculation of Bond Premium Amort/Disc Acc
I | J | K | L = (K-J)*I |
|
| TradeID | Quantity | At Par | Amortised Price + | Profit/(Loss) |
| IVM1003 | 300,000.00 | 1.000000 | 1.0158378093090 | 4,751.34 |
+ Amortised price is based on the amortisation schedule closing price as at 16-Apr (TDate – 1). Please refer constant yield amortisation/accretion model in the Related Information section.
Note J10d: Calculation of Trading Income Price Impact
M | N | O | P = (M-O)*N |
||
| TradeID | Liquidating | Selling Price | Quantity | Amortised Price + | Profit/(Loss) |
| IVM1003 | IVM1001 | 0.990000 | 300,000.00 | 1.0158378093090 | -7,751.34 |
+ Amortised price is based on the amortisation schedule closing price as at 16-Apr (TDate – 1). Please refer constant yield amortisation/accretion model in the Related Information section.
J11 Settlement Date Journals
| TradeID | PostDate | B/P | Account | Ccy | Ccy Amt D/(CR) | Rate | Base | Base Amt D/(CR) | Line |
|---|---|---|---|---|---|---|---|---|---|
| IVM1003 | 18-Apr-03 | B | INV: Due From Broker | SGD | -297,070.89 | 1.000000 | SGD | -297,070.89 | J11a |
| IVM1003 | 18-Apr-03 | B | Cash at Bank | SGD | 297,070.89 | 1.000000 | SGD | 297,070.89 | J11b |
J12 Trade Date Journals
| TradeID | PostDate | B/P | Account | Ccy | Ccy Amt D/(CR) | Rate | Base | Base Amt D/(CR) | Line |
|---|---|---|---|---|---|---|---|---|---|
| IVM1004 | 24-Apr-03 | B | INV: Investment Bond Cost | SGD | -1,050,000.00 | 1.000000 | SGD | -1,050,000.00 | J12a |
| IVM1004 | 24-Apr-03 | P | INV: Investment Interest Income | SGD | -827.05 | 1.000000 | SGD | -827.05 | J12b |
| IVM1004 | 24-Apr-03 | P | INV:Bond Premium Amort/Dics Acc | SGD | -2,367.70 | 1.000000 | SGD | -2,367.70 | J12c |
| IVM1004 | 24-Apr-03 | P | INV: Trading Income Price Impact | SGD | -13,382.30 | 1.000000 | SGD | -13,382.30 | J12d |
| IVM1004 | 24-Apr-03 | B | INV: Due From Broker | SGD | 1,066,577.05 | 1.000000 | SGD | 1,066,577.05 | J12e |
Note J12b: Calculation of Accrued Interest
| Last Coupon Date | 15-Apr-03 | A |
| Next Coupon Date | 15-Jul-03 | B |
| VDate | 25-Apr-03 | C |
| Days to Vdate (exclude 25-Apr) | 10 | D = C-A |
| Total Days (exclude 15-Jul) | 91 | E = B-A |
| Coupon PPM (Part Per Million) | 7,167.808220 | F |
| Quantity | 1,050,000.00 | G |
| Accrued Interest | 827.05 | H = F*D/E*G/1000000 |
Note J12c: Calculation of Bond Premium Amort/Disc Acc
I | J | K | L = (K-J)*I |
|
| TradeID | Quantity | At Par | Price + | Profit/(Loss) |
| IVM1003 | 700,000.00 | 1.000000 | 1.0154328226871 | 10,802.98 |
| IVM1003 | 350,000.00 | 1.000000 | 0.9758991885043 | -8,435.28 |
2,367.70 |
+ Price is based on the amortisation/accretion schedule closing price as at 23-Apr (TDate – 1). Please refer constant yield amortisation/accretion model in the Related Information section.
Note J12d: Calculation of Trading Income Price Impact
M | N | O | P = (M-O)*N |
||
| TradeID | Liquidating | Selling Price | Quantity | Amortised Price + | Profit/(Loss) |
| IVM1004 | IVM1001 | 1.015000 | 700,000.00 | 1.0154328226871 | -302.98 |
| IVM1004 | IVM1002 | 1.015000 | 350,000.00 | 0.9758991885043 | 13,685.28 |
13,382.30 |
+ Amortised price is based on the amortisation schedule opening price as at 24-Apr.
J13 Settlement Date Journals
| TradeID | PostDate | B/P | Account | Ccy | Ccy Amt D/(CR) | Rate | Base | Base Amt D/(CR) | Line |
|---|---|---|---|---|---|---|---|---|---|
| IVM1004 | 25-Apr-03 | B | INV: Due From Broker | SGD | -1,066,577.05 | 1.000000 | SGD | -1,066,577.05 | J13a |
| IVM1004 | 25-Apr-03 | B | Cash at Bank | SGD | 1,066,577.05 | 1.000000 | SGD | 1,066,577.05 | J13b |
J14 Month End Revaluation of Bond Investment position
| TradeID | PostDate | B/P | Account | Ccy | Ccy Amt D/(CR) | Rate | Base | Base Amt D/(CR) | Line |
|---|---|---|---|---|---|---|---|---|---|
| Portfolio/Sec | 30-Apr-03 | B | INV: Investment Interest Receivable | SGD | 2,079.45 | 1.000000 | SGD | 2,079.45 | J14a |
| Portfolio/Sec | 30-Apr-03 | P | INV: Investment Interest Income | SGD | -2,079.45 | 1.000000 | SGD | -2,079.45 | J14b |
| Portfolio/Sec | 30-Apr-03 | B | INV: Bond Premium/Discount | SGD | -38,742.92 | 1.000000 | SGD | -38,742.92 | J14c |
| Portfolio/Sec | 30-Apr-03 | P | INV:Bond Premium Amort/Disc Acc | SGD | 38,742.92 | 1.000000 | SGD | 38,742.92 | J14d |
Note J14b: Calculation of Accrued Interest
| Last Coupon Date | 15-Apr-03 | A |
| Next Coupon Date | 15-Jul-03 | B |
| VDate | 30-Apr-03 | C |
| Days to Vdate (include 30-Apr) | 16 | D = C-A+1 |
| Total Days (exclude 15-Jul) | 91 | E = B-A |
| Coupon PPM (Part Per Million) | 7,167.808220 | F |
| Quantity | 1,650,000.00 | G |
| Accrued Interest | 2,079.45 | H = F*D/E*G/1000000 |
Note J14d: Calculation of Bond Premium Amort/Disc Acc
IVM1001 IVM1002
| TDate | Quantity | Amortised Price + | Premium/ Disc | Quantity | AccretedPrice + | Premium/ Disc | Total Quantity | Total Premium/ Disc |
| 28-Feb-03 | 1,000,000.00 | 1.01855549410187 | 18,555.49 | 2,000,000.00 | 0.971139326374233 | -57,721.35 | 3,000,000.00 | -39,165.86 |
| 31-Mar-03 | 1,000,000.00 | 1.01676327386654 | 16,763.27 | 2,000,000.00 | 0.973866451074559 | -52,267.10 | 3,000,000.00 | -35,503.83 |
| 17-Apr-03 | 700,000.00 | 1.01577995765083 | 11,045.97 | 2,000,000.00 | 0.975368136157947 | -49,263.73 | 2,700,000.00 | -38,217.76 |
| 24-Apr-03 | 0 | 1.01537496269047 | 0.00 | 1,650,000.00 | 0.975987750351635 | -39,620.21 | 1,650,000.00 | -39,620.21 |
| 30-Apr-03 | 0 | 1.01502777769259 | 0.00 | 1,650,000.00 | 0.976519440410502 | -38,742.92 | 1,650,000.00 | -38,742.92 |
I | J | K = (j-1)*I | L | M | N = (M-1)*K | O = I+L | P = K+N |
+ Amortised/accreted price is based on the amortisation/accretion schedule closing price as at 30-Apr (month end date). Please refer constant yield amortisation/accretion model in the Related Information section.
EXCHANGE RATES
The following rates were used for this illustration.
Spot Rate
| SGD | 1.000000 |
FREQUENTLY ASKED QUESTIONS
FAQ01. When we buy a bond, why does the system journals the purchase interest to the interest income instead of interest receivable?
When purchasing a new bond normal journals would be:
Dr Bond
Dr Bond Premium
Dr Interest Receivable
Cr Bank
CS Lucas solution instead posted the follows:
Dr Bond
Dr Bond Premium
Dr Investment Interest Income
Cr Bank
The CS Lucas solution bond purchase journals complement the manner that subsequent month end journal of interest accruals will be book.
Month end interest accruals booked by CS Lucas system is not incremental from the date of purchase. Instead, it is from the last coupon date to the month end.
Month end interest in the CS Lucas solution are fully reversed at the beginning of the following month.
At the next month end, again the full accrual is made to that month end. The change in the accrual between the months is the net charge to the Income Statement.
Below is an illustration of what happens in a case of the bond purchase.
| Dr / (Cr) | |||||||||||||||||||||||||
| P/L Int Income | B/S Int Receivable | ||||||||||||||||||||||||
| Last Coupon Date | 13-Mar-12 | ||||||||||||||||||||||||
| Daily Interest (say) | $10 | ||||||||||||||||||||||||
| Purchase Interest (Vdate) | 15-Apr-12 | ||||||||||||||||||||||||
| Days | 33 | ||||||||||||||||||||||||
| Purchase Interest | $330 | $330 | |||||||||||||||||||||||
| Month End | |||||||||||||||||||||||||
| Days (inclusive) | 30-Apr-12 | ||||||||||||||||||||||||
| Days | 49 | ||||||||||||||||||||||||
| Accruals | $490 | ($490) | $490 | ||||||||||||||||||||||
| ($160) | $490 | ||||||||||||||||||||||||
| Note 1 | Note 2 | ||||||||||||||||||||||||
Note 1: This 16 days interest from 15-Apr to 30-Apr (inclusive) at $10 per day. The period for which the bond is held. Total $160.
Note 2: This 49 days interest from 13-Mar to 30-Apr (inclusive) at $10 per day. This is the total amount that is accrued as receivable to the holder. Total $490.
FAQ02. How does unsettled bond transaction affect the computation of interest accrual for accounting?
The example below shows how the interest accrual is computed.
Bond Coupon Schedule
This bond has several positions as below.
| Trade ID | Ticker | TDate | VDate | B/S | Quantity | Price | Purchase Interest | Net Proceeds |
| IVM1001 | SIASP 3.22 | 8-May-18 | 11-May-18 | Buy | 3,000,000 | 101.55% | 32,288.22 | 3,078,788.22 |
| IVM1002 | SIASP 3.22 | 11-May-18 | 16-May-18 | Buy | 1,500,000 | 101.55% | 16,805.75 | 1,540,055.75 |
| IVM1003 | SIASP 3.22 | 17-May-18 | 22-May-18 | Buy | 1,000,000 | 101.45% | 11,733.15 | 1,026,233.15 |
| IVM1004 | SIASP 3.22 | 31-May-18 | 5-Jun-18 | Buy | 2,000,000 | 101.53% | 25,936.44 | 2,056,536.44 |
Computation of interest accrual as at 31 May 2018
Settled Position*
| Quantity | 5,500,000.00 | A | ||||||||
| Last Coupon Date | 9-Jan-18 | B | ||||||||
| Next Coupon Date | 9-Jul-18 | C | ||||||||
| As At Date | 31-May-18 | D | ||||||||
| Total Days | 181 | E = C-B | ||||||||
| Days to As At Date | 143 | F = D-B+1 | ||||||||
| Coupon PPM | 15,967.67123 | G | ||||||||
| Accrued Interest | 69,384.38 | H = G/E*F*A/1000000 |
Unsettled Position*
| Quantity | 2,000,000.00 | |
| Purchase Interest | 25,936.44 | I |
| Total Accrued Interest | 95,320.82 | J = H+I |
*Settled position is all investment trades where VDate is before and on reporting as at date.
RELATED INFORMATION
CHANGE HISTORY
| Date | By | Changes |
|---|---|---|
| 12-Mar-2012 | CS | Creation. |
| 21-Jun-2016 | RJ | Rewritten. Reformatted. |
| 23-Aug-2018 | TS | Added FAQ02. |
| 08-May-2020 | LT | Re-formatting. |
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