How does LUSID calculate amortisation and accretion?

The concept of amortisation and accretion involves adjusting a bond's cost basis and simultaneously recognizing P&L over the period a bond is held.

• Amortisation
  When you purchase a bond at a premium (purchase price above maturity value), LUSID amortises that premium between the bond's settlement date and maturity date. Amortisation involves adjusting the cost basis (price paid) for a bond towards maturity value for each day the bond is held. It decreases both the cost basis of the bond and reported interest income over time.

• Accretion
  When you purchase a bond at a discount (purchase price below maturity value), LUSID accretes that discount between the bond's settlement date and maturity date. Accretion involves adjusting the cost basis (price paid) for a bond toward maturity value for each day the bond is held. It increases both the cost basis of the bond and reported interest income over time.

For simplicity, and to reflect standard practice, the amortisation of premium and accretion of discount are together referred to as amortisation for the remainder of this topic.

LUSID can calculate amortisation for the following types of instrument:

• Bond

• ComplexBond (coming soon)

• InflationLinkedBond (coming soon)

By default, amortisation is disabled. To enable it, choose an amortisation method.