Accounting treatment of bonds purchased at discount or premium

(a) Liquidity Fund (1) When bonds are purchased at a premium, the amount of the premium shall be amortized daily on a straight line basis over the life of the bond. The amortization shall be charged against income daily. (2) When bonds are purchased at a discount, the amount of the discount shall be accreted daily on a straight line basis over the life of the bond and shall be treated as income on a daily basis. (3) Accretion income shall be distributed. (b) Other funds (1) When bonds are purchased at a premium, the amount of the premium shall be amortized monthly on a straight line basis over the life of the bond. The monthly amortization shall be charged against income. (2) When bonds are purchased at a discount, the amount of the discount shall be accreted monthly on a straight line basis over the life of the bond. The monthly accretion shall be reflected as income. (3) Accretion income shall not be distributed. (c) When bonds purchased at a discount or premium are sold, the difference between the sale price and the purchase price or amortized or accreted purchase price shall be treated as a realized gain or loss under section 3-31b-10 of the Regulations of Connecticut State Agencies.