Understanding Interest Calculations

This topic discusses:

  • Interest calculation formula.

  • Basic steps to set up and calculate interest.

You calculate interest during construction—Allowance for Funds Used During Construction (AFUDC)—to capitalize the cost of company funds that are used over the course of a project. Interest is calculated based on this formula:

Interest During Construction = (Cost Accumulation*) × (Periodic Interest**)

*Accumulated costs based on a specified method of accumulation.

**Yearly interest rate divided by the number of periods in the fiscal year.

The basic steps to set up and calculate interest are:

  1. (Optional) Define interest types at the SetID level.

    See Interest Types Page.

  2. Establish period calculation factors at the SetID level.

  3. Define interest calculations at the business unit level.

  4. Identify projects and activities to include interest calculations.

  5. Establish status-based interest calculation factors.

  6. Accumulate transactions in the Project Transaction table (PROJ_RESOURCE).

  7. Run the interest calculation process.