TRADE LIFE CYCLE FOR FIXED INCOME SECURITIES—AVAILABLE-FOR-SALE
- Buy the bond
- Accrued interest purchased
- Pay the contracted amount for the bond
- Coupon accrual
- Coupon receipt
- Reversal of accrued interest purchased
- Accrual of interest on valuation date
- Amortization of premium/discount on purchase
- Valuation of bond on valuation date
- Sell the bond
- Accrued interest on bond sold
- Receive the consideration
- Ascertain the profit/loss on the sale
- Fx revaluation entries
- Fx translation entries
Additional events in the trade life cycle
- Early redemption
- Maturity
- Write off
Trade and other details for the purpose of illustration
Let us assume the following details for the purpose of this illustration:
The trade life cycle for investment in bonds that are designated as available-for-sale is the same as given for trading securities except that at the time of ascertaining the fair value at the end of the reporting period, the accounting entry that is recorded in the book of accounts is different. The event in the trade life cycle that calls for a different treatment than the one given for trading securities is given in the following section.
Ascertain the fair value at the end of valuation date
At the end of the valuation date the fair value of the bonds is ascertained and the bonds are marked to ...
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