Q. I’m having trouble understanding the “change in accrued” column on the PortfolioCenter performance reports. Can you help?A. Accrued income is interest that has been earned but has not yet been paid to the shareholder. Currently, PortfolioCenter has no report that allows you to track down what went into these calculations for a specific account or position. Nor is there any detailed documentation explaining how the PortfoiloCenter software calculates accrued income.
Displaying accrued income for fixed income securities is the default, but the default option for equity, user defined or unit trust securities is not to display accrued income. If you want to include non-fixed income securities, you must first change the default setting in the portfolio details, and then have an accurate ex-date in the dividend transactions.
Many managers choose not to display accrued income on their PortfolioCenter reports — for any security type –, because clients find it confusing.
Here’s a brief, but rather technical explanation:
Accrued income for the security = (Total interest per year / payment frequency ) / number of days in period
where Total Interest per year = face value * interest rate
Change in Accrued = Ending Accrued – Beginning Accrued – Accrued Paid
where Ending Accrued = the accrued income at the end of the reporting period
Beginning Accrued = the accrued income at the beginning of the reporting period
Accrued Paid = total accrued income paid after the first day and before the last day of the reporting period
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