Bond Accounting

Description of how the accounting of Bonds work in Treasury System.

Example: If you Issue a Bond

At start

At start you will debit the checking account and credit your debt account with the Clean price of the Bond. If the Sell is made within a coupon period the accrued coupon is credited as Bought /Sold coupon. The Bought/Sold coupon is realised at start.

Example: You Issue 10 MSEK at the price 100,2 with accrued coupon of 13 333,33.

Coupons

The Coupons are booked as interest expenses.

Unrealised

At month end Treasury Systems create accounting for the accrued interest and if the sell has been done to a premium or discount Treasury Systems book the accrued premium discount according to the effective interest method (amortized cost). The accounting will be reversed the first day of next month.

At maturity

At maturity the checking account will be credited with the nominal amount. The debt account will be debited with the clean price. If there is an premium or discount it will also be booked.

You also have the possibility to automatically create accounting from long to short. 

Buy back

If you buy back your bond earlier you can choose if you will keep the position open (continues) or realise and close (partly) the position.

Example 1: You close the position then the accounting is done in gross.

You buy back 4,5MSEK at the price 100,6.

You reduce the the original debt and since you had a premium you also reduce the premium. Treasury Systems will use a Interim account in order to make the accounting balance.

You credit the checking account with the clean price, this transaction also generated a premium.  Treasury systems will use the interim account again to balance the accounting. 

And at maturity you will now credit from the checking account,  you will debit the remaining debt as clean price  

(10 020 000-4 509 000= 5 511 000)

and the remaining premium.

Example 2: You countinue and keep the position open.

You buy back 4,5MSEK at the price 100,6.

No result will be realised at this moment.

Both the Sell and the Buy deals will continue until maturity and then you do accounting for the original sell deal.

and for the buy deal