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Re: sap treasury 04I Bonds

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Krishna, you don't have to post any interest as soon you sold the bond.

 

This situation is called - Accrued interest purchased - i will describe the situation from Person who purchased you bonds.

 

Interest on bonds is payable by the issuer on the coupon date. The investor should account for the interest on the coupon date.

However, the interest accrues on the bond on a daily basis even though it is paid periodically as per the terms of the bond. The terms of corporate bonds usually specify a semiannual or quarterly basis.

Hence when the bond is purchased, the investor actually pays not merely for the value of the bond but also for the interest element from the previous coupon date (there is no copon date but your purchase of the bond 22.09.2014) until the date of the trade (22.11.2014). This is known as accrued interest on the bond and the price that is quoted along with the accrued interest is known as a "dirty price."

The accounting standard requires that the accrued interest purchased should not be capitalized along with the bond cost, but should be taken to the accrued interest purchased account. This is reversed on the date on which the investor accounts for the first interest receipt after acquiring the bonds.

 

So your 50 000 000 INR have to contain value of your bonds plus interests for the period 22.09.2014 - 22.11.2014.


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