The Meaning of Rounding Period

2.1.1 The Meaning of Rounding Period

Commission can be defined as a flat amount or it can be expressed in terms of a rate.

A commission rule defines the basic attributes of a commission. The procedure for defining commission rules is described under Processing Commissions. The following commission calculation parameters, are defined for a commission rule:

The rounding period
The rate period

These rules are then linked to a product. For instance, you process an LC contract under a product, all the parameters defined for the rule linked to the product, will be applicable to the LC. Some of these parameters can be changed, when an LC is processed. The calculation of commission will be based on the changed parameters, for such an LC.

The commission rate for an LC is always quoted in multiples of a month. The calculation of commission is also done for a whole period, which should necessarily be an entire month.

Fractional periods in the tenor of an LC are thus rounded up based on a rounding period you specify, for a rule.

The tenor of the LC and the rounding period together decide the Good Until Date (GUD). This is the date until which the commission on an LC will be applied.

Note:

As a corollary, for an LC, additional commission will be applied when the Expiry Date is extended, only if the new Expiry Date is beyond the original Good Until Date. This is because the commission was originally calculated till the Good Until Date.

Parent topic: Calculation Parameters for Rate Type Commission