SAC Including Interest and Accrued Interest Adjustment
Example
Initial Data
Date |
Flow |
Nominal Amount |
Amount in Position Currency |
|---|---|---|---|
06/01/00 |
1st Purchase |
1,000,000 |
700,000 |
0615/00 |
2nd Purchase |
500,000 |
375,000 |
11/01/00 |
1st Sale |
100,000 |
65,000 |
12/31/00 |
Interest |
56,000 |
|
03/01/01 |
2nd Sale |
1,400,000 |
1,260,000 |
Conditions
Interest is calculated and paid annually on December 31.
The final repayment is for December 31, 2001 (100% repayment price).
Interest calculation method 360/360 is used.
Amortization Key Date |
Effective Interest Rate |
|---|---|
06/15/00 |
30.4741056 |
11/01/00 |
28.7343312 |
Note
We have specified only the effective interest rates to demonstrate the matter clearly. The amortization calculations on 06/15/00 and 11/01/00 are not described here.
Key Date Valuation for 12/29/00 (Including Amortization)
The nominal amount is 1,400,000. The calculation is based on the first sale.The amortized acquisition costs for 12/29/00 amount to 1,091,257. An artificial position inflow is generated for the key date of the last position change (11/01/00 in this case). This generates the cash flow relevant for amortization. The amortization amount is adjusted by the accrued interest amount.
Position Date
Flow
Nominal Amount
Amount in Position Currency
11/01/00
Inflow
1,400,000
+ 1,091,257
11/01/00
Accrued interest
- 46,822
12/31/00
Interest
56,000
12/31/01
Interest
56,000
12/31/01
1,400,000
- 1,400,000
Coupon relevant for accrued interest on 11/01/00:
Calculation from: 01/01/00
Calculation to: 11/01/00
Number of days: 301
Coupon/Interest amount:56,000
Accrued interest amount:56,000 x 301/360 = 46,822
The effective interest rate of the cash flow is 28.7343310%.
Note: This calculation is based on an approximation method. To prove that the effective interest rate is correct, proceed as follows:
After interest factors have been determined for the individual flows, they are then discounted. If the net present value of the cash flow is zero, the effective interest rate used is correct.
The total of the net present values of the flows after 12/29/00 (two interest flows and repayment) determines an amortization value of 1,185,347. Accrued interest is calculated on the amortization key date (12/29/00) to adjust the amortization amount.
Coupon relevant for accrued interest on 12/29/00:
Calculation from: 01/01/00
Calculation to: 12/29/00
Number of days: 358
Coupon/Interest amount:56,000
Accrued interest amount:56,000 x 358/360 = 55,689
On 12/29/00, the amortization amount (net present value) is 1,185,347 – 55,689 = 1,129,658. This results in a write-up of 1,129,658 – 1,091,257 = 38,401 on 12/29/00.
Key Date Valuation for 01/03/01 (Including Amortization)
The nominal amount is 1,400,000. The calculation is based on the key date valuation for December 29, 2000.The amortized acquisition costs for 01/03/01 amount to 1,129,658. An artificial position inflow is generated for the key date of the last position change (12/29/00 in this case). This generates the cash flow relevant for amortization. The amortization amount is adjusted by the accrued interest amount.
Position Date
Flow
Nominal Amount
Amount in Position Currency
12/29/00
Inflow
1,400,000
+ 1,129,658
12/29/00
Accrued interest
- 55,689
12/31/00
Interest
56,000
12/31/01
Interest
56,000
12/31/01
Outflow
1,400,000
- 1,400,000
Coupon relevant for accrued interest on 12/29/00:
Calculation from: 01/01/00
Calculation to: 12/29/00
Number of days: 358
Coupon/Interest amount:56,000
Accrued interest amount:56,000 x 358/360 = 55,689
The effective interest rate of the cash flow is 28.7343310%.
Note: This calculation is based on an approximation method. To prove that the effective interest rate is correct, proceed as follows:
After interest factors have been determined for the individual flows, they are then discounted. If the net present value of the cash flow is zero, the effective interest rate used is correct.
The total of the net present values of the flows after 01/03/01 (interest flows and repayment) determines an amortization value of 1132,500. Accrued interest is calculated on the amortization key date (01/03/01) to adjust the amortization amount.
Coupon relevant for accrued interest on 01/01/01:
Calculation from: 01/01/01
Calculation to: 01/03/01
Number of days: 2
Coupon/Interest amount:56,000
Accrued interest amount:56,000 x 2/360 = 311
On 01/03/01, the amortization amount (net present value) is 1,132,600 – 311 = 1,132,288. This results in a write-up of 1,132,288 – 1,129,658 = 2,630 on 01/03/01. In contrast to the method in IAS 39, there is no write-down.