Accrual/Deferral 

Use

You can carry out accrual/deferral runs for interest and premiums/discounts using the reset procedure or the difference procedure. If you use the reset procedure, you must reset the accrual/deferral run separately.

Features

The following accrual/deferral functions are available:

Accruals/deferrals are part of the income calculation. The function recognizes expenses and revenues related to the accounting period just ended (such as the last fiscal year).

To reflect expenses and revenues correctly in the balance sheet, they have to be assigned to the correct accounting period, regardless of when they are due for payment. Expenses and revenues are therefore accrued/deferred on a specific key date (e.g. end of a fiscal year).

Loans management provides a program which determines the accrual/deferral amounts and generates the corresponding posting records for interest payments, discounts and premiums.

The system calculates the accrual/deferral flows on the basis of the capital amounts and calculation bases as at the accrual/deferral key date. Flows after this key date are not considered.

As a result deferral items and accrual items are created.

There are two procedures:

This procedure is used for accruals/deferrals of interest payments and charges. The accrual/deferral amount is calculated and posted for the period between the start of the accrual/deferral period and the key date (accruals) and between the key date and the end of the accrual/deferral period (deferrals) for the related item (for instance, interest payment). At a later date (generally on the following working day) this posting is reset via the corresponding reset posting, in order to make the corresponding adjustment to the related income statement accounts. You must carry out the reset posting separately.

This procedure is used for accruals/deferrals of discounts and premiums. The premium/discount is generally withheld when a loan is disbursed and is posted to the related accounts for prepaid/deferred items. This item is then written back on a pro rata temporis basis or pro rata interest basis. The accrual/deferral amount is based on the period between the last accrual/deferral run and the key date. If the accrual/deferral is made on a pro rata interest basis, the calculation is based on the interest amount in the period. In this case, there is no reset posting.

Unscheduled write-backs as a result of unscheduled repayments or partial sales (of borrower’s note loans) are disclosed separately.

You have withheld a discount of USD 10,000 for a loan term of 10 years. Using the pro rata temporis calculation method, USD 1,000 of the original amount is posted each year from the prepaid/deferred items account to revenue.

You use this function to reset an accrual deferral run, or part of an accrual deferral run performed on a certain key date using the reset procedure.

You must reset all accruals and deferrals made using the reset procedure before the next accrual/deferral run.

The reset posting is a reverse posting for the accrual/deferral.

You can reverse one or several accrual/deferral record(s), including premium/discount accruals/deferrals, interest accruals/deferrals and accrual/deferral reset postings. For more information, see Reversing Accruals/Deferrals.