10.10 Accrual of ICCF Components
When you are defining the interest, commission, charge or fee components (ICCF components) for a loan product, you should also specify whether accruals have to be done for the accruable ICCF components. You can specify this through the Product ICCF Details screen.
If accruals should be done, the frequency of accrual should also be specified for a product (through the Product Preferences screen), at the time of product definition. For all loans for which accruals fall due today, the Automatic Contract Update function passes the accrual entries. Accrual of interest, commission, charge or fee is done during the end of day processing of the Automatic Contract Update function.
In some cases, if an event occurs in between two scheduled accruals, accrual entries are passed for that event, immediately.
Example
The last accrual date for Ms Yvonne Cousteau’s loan was 31 March 1998 and the next one is due on 30 April 1998. Now, if a manual liquidation is done on 15 April 1998, the accrual entries are passed immediately by the system.
- If you specified that processing has to be done today (the last working day before the holiday) for automatic events right up to the day before the next working day, the events falling on the holiday are processed during end of day on the last working day before the holiday.
- If you specified that processing has to be done only up to the System Date (today), then only the events scheduled for today (the last working day before the holiday) are processed. The events of the holiday are processed on the next working day after the holiday, during beginning of day processing
An Accrual Control Journal is generated by the Automatic Contract Update function, reporting the details of the accruals performed.
For a loan on which there is a default in payment, you can specify that aging analysis should be done. This analysis involves the change of status of a loan. When the status is changed, you can also specify that the accruals on the loan should be stopped. For such loans, the accrual entries are not passed; they are only calculated and reported in the Accrual Control Journal under Memo Accruals
Processing of interest based on interest period basis
During periodic accruals for a contract, interest accruals also depend on the interest period basis defined for the contract. The interest period basis determines whether the interest calculation for schedules takes into account the schedule start dates or the end dates, or both, or whether it excludes both. The following considerations would be applicable:- For contracts booked with the interest period basis as Include To Date or Include From and To Date, in case a prepayment is made for the entire contract amount, the maturity date is not considered in the interest calculations.
- For contracts booked with the interest period basis as Include To Date and Include From and To Date, the final periodic accrual process accrues interest for the maturity date too.
- Refinance calculations are made along the same lines as interest calculations. For the options Include To Date and Exclude From and To Date, no refinance income/ expense is reported for the value date. For the options Include To Date and Include From and To Date, refinance income/expense is reported for the maturity date too.
- During rollover of a contract that has been booked with the Include From and To Date interest period basis, interest for the rollover date is applied twice.