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 1645-2.6 - Investments in U. S. series F and series J bonds

Current through Register Vol. 46, No. 28, July 10, 2024
U.S. series F bonds were issued on a discount basis of
						  74 per cent of their maturity value until April 1952, at which time the U. S.
						  Treasury replaced them by series J bonds, which are issued on a discount basis
						  of 72 per cent of their maturity value. Both are basically the same type of
						  security and the description of the investment features and accounting
						  treatment which follows is applicable to each.
(a)
[Investment features.]
No interest, as such, is paid on the bonds, but the
						  redemption values of the bonds increase at the end of the first year from the
						  date of issue and at the end of each successive semiannual period thereafter
						  until, at maturity, the bond is redeemable at face value. The bonds are
						  registered and cannot be bought and sold on the open market but are directly
						  purchased from and redeemed by the issuer, the U. S. government, through any
						  Federal reserve bank or other authorized agencies. No commission is payable on
						  either the purchase or redemption of these bonds. The bonds may be redeemed
						  prior to maturity at fixed redemption values, in accordance with a table of
						  redemption values appearing on each bond. Because of the sharp reduction in
						  yield resulting from redemption prior to maturity, these bonds are suitable
						  only for long-term investments, such as of replacement reserve
						  funds.
(b)
[Accounting treatment.]
The bonds are charged, when purchased, to the
						  appropriate investment account in the 1170 group of asset accounts. However,
						  the procedure for recording the interest earned, which is reflected by an
						  increase in the redemption value, differs from that of other investments in two
						  respects. First, the increase in redemption value is charged to the applicable
						  investment account so that the book value of the investment agrees with the
						  redemption value, rather than to an accrued interest receivable account. The
						  credit for the increase in redemption value is to the applicable interest
						  earned account. Second, the increase in redemption values is not continuous,
						  but occurs at stated intervals, in accordance with the table of redemption
						  values. To illustrate, the issue price of a $1,000 maturity value series F bond
						  is $740. No change in the redemption value of the bond takes place until the
						  end of the first year from the date of issue, when the redemption values rises
						  to $742. If the issue date was May 1, 1947, no entry would be made until April
						  30, 1948, when the investment account would be charged with two dollars and the
						  interest earned account credited. Thereafter, similar entries would be made at
						  the end of each six-month period to reflect the increases in redemption
						  value.