Bond Functionality

The Debt Management module allows sites to manage bond issues, including allocating, tracking, and accounting for the use of bond funds. The system enables accounting and budget control agencies to meet their obligations with respect to the use of bond funds by handling the management and accounting for all different types of bonds such as revenue and general obligation along with other types of similar debt such as commercial paper.

Bond functionality starts with the seven sub types of bonds available in the Major Type of Bond field, which are shown in the table below. A Debt Type code is delivered with setup for each (parenthetical codes below). These seven can be cloned to create variants of each to satisfy reporting, workflow, or accounting control needs.

Sub Type (Debt Type)	Description
Capital Appreciation (CAB)	A bond issued at a substantial discount, which accretes in value through the compounding of interest over the life of the bond, so that discount is not amortized. Interest is paid out at maturity with the full amount of principal. The bond authorization is only reduced by par value minus the amount of discount as a Capital Appreciation bond is entered with the un-accreted amount as Principal. The discount is not entered. Instead, the amount entered as Principal results from the following calculation: (Number of Bonds Issued * Denomination) – Discount.
Convertible Capital Appreciation (CCAB)	A bond that starts off as Capital Appreciation but then later converts to a form that pays interest out instead of compounding.
Coupon (CPN)	A bond issued where only interest is paid on a rate or fixed amount basis with all principal being paid at maturity.
Zero Coupon (ZCPN)	A bond issued that is much like the Capital Appreciation bond in that it has a discounted amount that is not amortized, but is made up through the compounding of interest. The difference is that the full amount of Principal is entered for a Zero Coupon bond to reduce the Authorized Amount rather than an amount of Principal that is less by the true amount of Discount. Any additional discount that was not accounted for by compounding interest can be entered and amortized.
Variable Rate (VRB)	A bond issued where the interest rate will vary over the life of the issue.
Self Amortizing (SAB)	A bond issued where coupon payments pay interest in a decreasing schedule and principal in an increasing schedule.
Unspecified (UNSP)	A bond issued that is not completely one of the previous sub types.

When creating a Bond Setup (BONDS) or Bond Modification (BONDM) transaction, the bond sub types do not determine which tabs of the transactions are required and which are prohibited. Unlike loans and leases, the transaction tab rules do not vary based on the sub type. When required, the system will automatically insert a line on the setup transaction and (if creating a new bond) on a modification transaction.

The following table shows what transaction tabs are required when defining a bond debt instrument.

Transaction Tab	Required/Optional
Debt Instrument	Required
Paying Agent/Lender Information	Required
Bond Proceeds/Lender COA	Required
Borrower Information	Required but information is optional
Bond Payments/Borrower COA	Required
Schedule	Required
Schedule Details	Required
Call/Put Schedule	Optional
Debt Costs	Optional
Debt Instrument Alerts	Optional

Although bonds do not involve two parties on CGI Advantage Financial, they do require records on both the Lender and Borrower transaction tabs.

The Paying Agent for the bond issue is a vendor recorded on the Paying Agent/Lender Information tab.
One or more Bond Proceeds/Lender COA records are required to record where the bond proceeds are initially recorded and how amortizations are recorded.
One or more Bond Payments/Borrower COA records are required to record how all bond payments are made: Principal, Interest, Other Amount Payments, and Prepaid Interest.

Bonds have several features and restrictions features and restrictions that are not applicable to Leases or Loans.

The Authorization tab must have an Authorization Debt ID, which can be system-generated by checking the Auto Generate flag. The Debt Type field is required as well. At this point Bonds differ in that there is not any defaulting logic for Authorization Name, Authorization Short Name, Authorization Date, Authorization Start, or Authorized Amount. The reason is that the Authorization tab for Bonds is always a functioning level of definition.
Minimum Denomination is a required Authorization field that is not found for Loans and Leases.
Bonds have required Debt Instrument fields not found for Loans or Leases: Denomination, Number of Bonds Issued, and Bond Status.
The Bond Status field is used in addition to Debt Instrument Status. Bond Status starts off as In Progress. The field is changed to Paid at Maturity if the Debt Instrument Status is Bond Completed. When the Debt Instrument Status is Bond Manually Closed then one of the following must be selected for Bond Status: Called, Special Redemption, Refunded, or Defaulted.
Bonds have optional Debt Instrument fields not found for Loans or Leases: Taxable Status, Insurer, and Rating.
Bonds have optional Schedule fields not found for Loans and Leases: Yield to Maturity, Effective Yield from Compound Interest, Arbitrage Yield, and Purchased Interest.
Bonds have set usages for three of the Other Amount fields:
Other Amount 1 is for original issue discount
Other Amount 2 is for original issue premium
Other Amount 3 is for issue costs deducted from the proceeds
All five Schedule Generation Action fields are editable within certain restrictions. The fields are protected for Loans and Leases.
Bonds have Schedule Detail Types that are not available to Loans or Leases in addition to ones for Regular Payment and Amortization:
Refunding Payment – This setting is used when a bond issue is paid out early. In this event a BONDM transaction is processed to insert a new Schedule with a Schedule Detail with this setting. The old Schedule that was in progress then becomes a Historical Schedule.
Compounding Interest – This setting is used to trigger the Periodic Debt Accounting Chain to create an accrual of the interest instead of having the Debt Payment & Billing Chain create an interest payment to the Paying Agent. When compounding interest, choose a frequency that meets your reporting needs. Any more frequent than that has little benefit.
Purchased Interest – When the Schedule Start Date (Dated Date) was before the Issue Date, bondholders would have purchased an amount of interest equal to the time-frame between those dates. That purchased interest is then entered in the Purchased Interest field. The Initial Debt Accounting Chain will record that event, and then the Debt Payment & Billing Chain will reduce that account on the next coupon payment with accounting that is different from a normal interest payment.
The bond transactions have a Call/Put Schedule tab that is not available for Loans and Leases. This optional tab exists for defining any call or put options available for a bond issue.
Bond transactions have edits (delivered as warnings) that signal when the Schedule Type being used does not match what is expected for the Major Type of Bond. The severity of these edits can be increased to override to limit unusual setup or to reject to prevent unusual setup.
Bond transactions have edits (delivered as warnings) that signal when the Other Amount 1 and 2 fields on the Schedule tab of the bond transactions is an amount that does not match what is expected for the Major Type of Bond. The severity of these edits can be increased to override to limit unusual setup or to reject to prevent unusual setup.

For a full explanation of the delivered accounting events for bonds, please see the "Bonds" topic under Accounting Model Delivered Configuration > Debt - Accounting Model in the Financial Administration User Guide.