New York Codes, Rules and Regulations › Title 9 - EXECUTIVE DEPARTMENT › Subtitle S - Division of Housing and Community Renewal › Chapter III - Low Rent Housing › Subchapter D - Accounting Manual For Public Housing Agencies › Part 1645 - Investments › Subpart 1645-2 - Accounting For Investments › Section 1645-2.2 - Acquisition of investments

Current through Register Vol. 46, No. 28, July 10, 2024
(a) The
						making of an investment of funds in the custody of a local agency should be
						authorized by resolution of the local agency. No investment shall, however, be
						made without the prior approval of the division.
(b) The accounting treatment of the elements
						involved in the acquisition of investments is as follows:
Element
Accounting
										treatment
Purchase price
Charge to the appropriate account in the 1170,
									 Investments, group of asset accounts.
Premium or discount
Do not set up on acquisition, but amortize over
									 holding period as described in section
									 1645-2.3.
Accrued interest purchased
Charge to account 1144, Accrued Interest
									 Receivable on Investments.
Expenses of acquisition
Charge directly to the same account that the
									 interest earned on the investment will be credited to. See section
									 1645-2.4.
(c) The
purchase price
of
						the investment means the actual price paid by the local agency on acquisition,
						exclusive of accrued interest purchased or expenses of acquisition, such as
						brokers commissions, postage, registry and insurance fees, etc., if any. The
premium or discount
is the difference between the purchase
						price and the face value of the investment. With respect to the expenses of
						acquisition, many banks will handle the purchase of U.S. government securities
						without charging brokerage commissions. The division will be glad to advise
						local agencies experiencing difficulty in this respect. There may, however, be
						a charge, in the case of upstate local agencies, to cover the out-of-pocket
						expenses for telephone, postage, insurance and registry fees for mailing the
						securities from New York. All the information required to reflect the
						acquisition of investments on the books will appear on the statement furnished
						by the bank or broker handling the transaction. Prices of bonds are either
						quoted on a yield basis, or on the basis of so much per $1,000 face value, but
						the statement should also show the purchase price in dollars. The accounting
						treatment of the acquisition of investments is illustrated in the following
						example. Assume that on June 6, 1948 a local agency bought, through a bank,
						$1,648,000 face value of one-year one and one-quarter per cent U.S.
						Certificates of Indebtedness, issued June 1, 1948, to yield 1.21 per cent. The
						investment was made for the development fund and the bank's statement of the
						transaction shows that the accrued interest purchased from the date of issue to
						the date of purchase, is $282.19 and that the purchase price, based on the 1.21
						per cent yield, was $1,648,692.47. The bank made a charge of $32.85 for
						postage. The entry recording this transaction would be made through the cash
						disbursements-voucher register, as follows:
Entry (1):
Debit: Account 1172, Development
Fund Investments
$1,648,692.47
						  .......................................................................................................
Debit: Account 1144, Accrued Interest
Receivable on Investments
$
282.19
Debit: Account 1420.1, Interest Expense
$
32.85
Credit: Account 1111, Development Fund
$1,649,007.51
						  ........................................................................
The same entry would be made if the above transaction
							 represented a direct application by bank of the proceeds of a temporary loan
							 note issue (see Part 1643, Financing).