Calculating Accrued Interest on Bonds Payable

USA Discussion in 'Technical Queries' started by SDR, Oct 19, 2017.

  1. SDR

    SDR

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    I know the basics of the calculation. My questions is really about the timing. A client paid their scheduled bond payment on 5/16, two weeks prior to the scheduled due date of 6/1. I need to book an accrual for interest as of 6/30 based on the amount of interest per the amortization schedule. My question is does the accrual period begin from the last actual date of payment(5/16) or the scheduled accrual date of 6/1? Note: Calculation is based on 30/360. Thanks for any help! Also, please provide any FASB/GASB guidance if possible.
     
    SDR, Oct 19, 2017
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  2. SDR

    kirby VIP Member

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    The answer lies within the bond agreement. You only have a calculation problem if the agreement calls for a "daily simple interest calculation" , which is very unusual for a bond. Otherwise most bonds read as " pay $x on due date, else there is a late payment charge" . The beauty of that is it maintains the original amort schedule without having to worry or calculate a new amort if a payment is a few days late.
    And in your case, if NOT daily simple interest then if you pay early - well then you paid early and you give effect to that on the balance sheet and we still follow the same amort & accrual schedule.
    So you need to read the bond agreement.
    This is a "business practice/common sense" item. No FASB I know will cover this.
     
    Last edited: Oct 27, 2017
    kirby, Oct 27, 2017
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