Bond Accounting (bond entered the old way)

Created by Karin Östergren, Modified on Wed, 07 Feb 2024 at 04:54 PM by Karin Östergren

Description of how the accounting of Bonds work in Treasury System when the bond is entered in "the old way".

 

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 realized at start.

 

Example: You Issue on 2022-03-16 1 MSEK at the price 99,8 with accrued coupon of 194,44

  

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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.

 

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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.

 

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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 realize and close (partly) the position.

   

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

You buy back 0,4 MSEK at the price 99,5.

 

You reduce the the original debt and since you had a discount you also reduce the gain (discount on the close deal). Reduce 800 of the total gain of 2 000 gives 1 200). Treasury Systems will use a Interim account in order to make the accounting balance. You also credit the bank account (checking account) with the clean price and bought/sold interest.

 

You credit the checking account with the clean price.

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When the bond finally matured, the remaining debt will be debited (clean price) and the remaining discount. 

(998 000 - 399 200 = 598 800) and discount of 2 000.

 

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Example 2: You have chosen countinued and keep the position open.


As we have redone the way to entering bonds in TS and to make it possible to have one sell and one buy transaction that is not closing down the sell position you need to reenter the Sell bond in TS. Then cancel the original sell transaction. 

Do buy back as an added deal on the same deal as the reentered Sell bond transaction.


No result will be realised at this moment. You will both have a coupon to pay on the total Sell amount and another coupon to receive (on the buy back amount).

 

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.

 

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