How Do I Select a Day Count Basis?

Basics

The day count basis for a convertible note is a standardized way of counting the number of days between two dates. This is important when computing the amount of interest accrued as of a certain date. The amount of interest accrued is different when different day count bases are used.

The Carta platform supports the two most common day count conventions: Actual/365 and 30/360.


How to Select a Day Count Basis

How do you know which day count basis to select? It's usually simple. Your convertible note language will most likely specify the length of the year used to calculate interest.

If the length of the year is 365 days, select "Actual/365".

If the length of the year is 360 days, select "30/360", unless the convertible note has language that mentions "actual calendar days elapsed". In this case, select "Actual/360".


Actual/365

This day count basis assumes that each year has 365 days. When accrued interest is calculated, the actual number of days elapsed between the issue date and the interest calculation date is used.


30/360

This day count basis assumes that each year has 360 days. Each month is treated as having 30 days. When accrued interest is calculated, these assumptions are used to determine the number of days between the issue date and the interest calculation date.


Actual/360

This day count basis assumes that each year has 360 days. When accrued interest is calculated, the actual number of days elapsed between the issue date and the interest calculation date is used.