SECURITIES - 19464

(Revised: 08/2024)

 

Agencies/Departments that invest trust moneys in securities (e.g., stocks, bonds, treasury bills, notes, and letters of credit) may make arrangements with the State Treasurer’s Office (STO) or, in some instances, with the California Public Employees' Retirement System, to handle purchase and sale transactions. The STO holds these securities for safekeeping. The head of the agency/department or a delegated representative shall send a letter to the STO similar to that prescribed in SAM Section 19423.

Agencies/Departments shall observe the following principles when accounting for investments in securities:

• Keep separate accounts for par value, premium, discounts, and accrued interest purchased on the stated rate of interest securities.
• Record the "no stated rate of interest" securities at cost and recognize interest only at the time of sale or maturity and as of each June 30 (when the interest will be accrued).
• Amortize the premium and accumulate the discount as of each June 30 using the “interest method” (amortization of premium and discount is used to yield an equal periodic rate of interest).
• Accrue interest as of each June 30.
• Develop bond amortization schedules or purchase them from a publishing company. Calculate the effective yield to the nearest basis point (1/100 of 1 percent). When ordering bond amortization schedules, the following information is required:
  • Face value
  • Purchase price
  • Coupon rate
  • Maturity date (month, day, year)
  • Purchase date (month, day, year)
  • A note that amortization is required as of each June 30 only

The following entries illustrate the prescribed procedure for the stated rate of interest securities only:

Record purchase of securities:

Debit/ Credit	Account	Legacy Account	Account Description	Note
Debit	1209000	1320	Accrued Interest Receivable	a
Debit	1501000	2012	Investments in Securities	b
Debit	1501200	2013	Premium on Securities	c
Credit	1101400	1120	Agency Trust Fund Cash	d
Credit	1501300	2014	Discount on Securities	e

Note:

1.  Interest accrued on securities at the date of purchase.
2.  Face value of securities having a par value.
3.  Premium paid on securities.
4.  Amount paid for securities.
5.  The sum amount of the face value and accrued interest purchased exceeds the purchase price.

Record interest payments received:

Debit/ Credit	Account	Legacy Account	Account Description	Note
Debit	1101400	1120	Agency Trust Fund Cash	a
Credit	1200000	1313	Accounts Receivable - Revenue	b
Credit	1209000	1320	Accrued Interest Receivable	c
Credit	3902000	5530	Fund Balance - Unappropriated	d

Note:

1.  Cash received.
2.  Interest received that was accrued at the previous June 30.
3.  Interest received that was accrued at the date of purchase.
4.  Interest received that was not accrued at the previous June 30.

Record the par value of maturing securities received:

Debit/ Credit	Account	Legacy Account	Account Description	Note
Debit	1101400	1120	Agency Trust Fund Cash	a
Credit	1200000	1313	Accounts Receivable - Revenue	b
Credit	1501100	2011	Investments in Securities at Cost	c
Credit	3902000	5530	Fund Balance - Unappropriated	d

Note:

1.  Cash received.
2.  Interest accrued at the previous June 30 on the maturing securities.
3.  Cost of “no stated rate of interest” securities sold.
4.  a-(b+c). Debit account if b+c exceeds a.

Record accrued interest at June 30:

Debit/ Credit	Account	Legacy Account	Account Description	Note
Debit	1200000	1313	Accounts Receivable - Revenue	a
Credit	3902000	5530	Fund Balance - Unappropriated	a

Note:

1.  Interest accrued at June 30 at the purchase yield rate.