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 1645-2.3 - Book value of investments; amortization of premium or discount

Current through Register Vol. 46, No. 28, July 10, 2024
(a) During the
						period the investment is held by the local agency, the purchase price is
						periodically adjusted by a straight-line amortization of the premium or
						discount on acquisition over the remaining life of the investments. The
						purchase price, as periodically adjusted, is known as the book value of the
						investment. The premium is defined as the excess of the purchase price over the
						face value of the securities and the discount as the excess of the face value
						over the purchase price. The amortized premium is charged through a journal
						entry to the applicable interest earned account (see §
												1645-2.4) and credited directly to
						the applicable investment account; similarly, the amortized discount is charged
						to the investment account and credited to the interest earned account. For
						investments other than U.S. series F, G, J and series K bonds, the entry is
						made at the end of each calendar quarter, beginning with the quarter the
						investment was acquired and as of the date of disposition or maturity of the
						investment. The entries for series F, G, J, and K bonds are made at periodic
						intervals corresponding with the table of redemption values printed on each
						bond (see §§ 1645-2.6 and
						1645-2.7). The effect of amortizing
						the premium or discount, it is evident, is to have the book value equal the
						face value as of the maturity date of the investment and to put the interest
						earned on a yield basis. Straight-line amortization of premium or discount
						means that the premium or discount is spread evenly over the period between the
						date of acquisition and the date of maturity. The computation is made on a
						daily basis for short-term investments and on a monthly basis for long-term
						investments. Thus, in the example given in section
						1645-2.2, the $692.47 premium paid
						on U.S. certificates of indebtedness (short-term investment) would be spread
						over the 360 days from June 6, 1955, the date of acquisition, to June 1, 1956,
						the date of maturity, and premium for 25 days would be amortized for the
						balance of the quarter ended June 30, 1955, 92 days for the quarter ended
						September 30, 1955, etc. As an example of the computation for a long term
						investment, assume that $10,000 face value of bonds, maturing July 1, 1961,
						were acquired for $9,700 on April 10, 1956. The $300 discount is spread evenly
						over the remaining life of the bonds (62 2/3 months) at the rate of $4.79 per
						month, or $14.37 per quarter. If the investment is disposed of prior to
						maturity, the book value will reflect the premium or discount amortized to the
						date of disposition and gain or loss on disposition will be computed
						accordingly (see §
												1645-2.5). The dates of disposition
						and acquisition are linked to the physical transfer of the securities between
						buyers and sellers or their agents and will generally differ from the dates the
						orders to buy or sell are given or the dates on which transfers of the cash
						occur. Statements rendered by banks or brokers handling investment transactions
						for local agencies should be carefully examined to determine the date of
						acquisition or disposition.
(b) The
						above provisions with respect to amortization of discount shall not apply to
						the discount on United States Treasury bills. These bills generally mature 90
						days after date of issue and are issued at a price below par value (discount)
						and are redeemed at maturity at face value. Such discount will not be amortized
						but will be considered as interest earned as of the date of sale or maturity.
						The interest earned (discount) should not be accrued but should be recorded as
						of the date of sale or maturity.