These dialogs record accretion or amortization for bond investments, and are only available in the Professional and Advisor versions of Fund Manager.
For bonds that are purchased at a discount, accretion occurs between the bond's purchase date and date of maturity. Similarly, bonds that are purchased at a premium are amortized between the purchase date and maturity date. When accreting or amortizing your bonds you will generally want to record these amounts at the end of each tax reporting period.
You may elect to record your own amounts for accretion or amortization, or have Fund Manager calculate the amounts for you. Fund Manager uses the "constant yield" method to calculate the amounts of accretion or amortization. The Yield To Maturity (YTM) for the bond is used here. You can either specify the YTM to use in the calculation, or have Fund Manager calculate the YTM of your bond for you.
It is important to record accretion and amortization in chronological order if you are having Fund Manager do the calculation for you. You normally should also use the same value for YTM in accretion/amortization calculations for the life of the bond. When using the built-in calculator the memo field records the accretions/amortization date range covered, and also the YTM value used in the calculation.
When recording an accretion or amortization, two distribution transactions of equal amounts but opposite sign are recorded. For accretion entries, a positive valued distribution of type "Accretion" will be recorded, and a negative valued distribution of type "Return of Capital" will be recorded. The two amounts are equal, but opposite in sign. The net effect is there is no cash flow, no change in performance, but you've accumulated some accretion, and raised your tax cost basis by equal amounts. Return of Capital distributions affect your cost basis for all shares owned as of the date of the distribution. A positive Return of Capital lowers your tax cost basis, and a negative Return of Capital raises your tax cost basis. For amortization entries, a negative valued distribution of type "Amortization" will be recorded, and a positive valued distribution of type "Return of Capital" will be recorded. Here is an example of each an Accretion and Amortization of $100:
+ $100 Accretion Distribution
- $100 Return of Capital Distribution
- $100 Amortization Distribution
+ $100 Return of Capital Distribution
When using Fund Manager to calculate accretion and amortization it is best to record the purchase date as of the settlement date, rather than the trade date.
When using Fund Manager to calculate the accretion or amortization, a log file will be created with the details of the calculation. The log file is named "ACRAMT_log.csv", and will be placed in the current user's AppData\Roaming\Fund Manager folder (usually a hidden folder). This log file is deleted upon exiting Fund Manager.
The calculator uses your purchase price, including commission, as your starting cost basis. When Fund Manager calculates the YTM, the calculation is done as of the bond's purchase date.
Calculator Limitations: The amortization and accretion calculator in Fund Manager currently does not support bonds that have been purchased on more than one occasion. For bonds that have been purchased on more than one occasion you could break these into separate investments in order to use the calculator.
By default, Fund Manager places accretion and amortization distributions into the same named distribution types. If you prefer these be placed in a different distribution type, you can customize this with a registry entry. Create a new registry string value at:
HKEY_CURRENT_USER\Software\Beiley Software\Fund Manager\CurrentVersion\miscprefs
named "acrdisttype" or "amtdisttype" and set them to the 0 based index of the distribution type you wish to use. The distribution types, and their order, can be viewed in the Distribution Labels dialog. For example, if you wish to set the accretion entries to go into the distribution type with the original label of "Other", set "acrdisttype" to 7, as "Other" is the 8th distribution type listed in the Distribution Labels dialog.
Bond Income Style Properties
Yield To Maturity (YTM)
Recording Bond Transactions