Example of Multiperiod Accounting

Example

A personal loan was originated with the following information:

Origination date: 01-Jul-2016
Origination fee: USD 300.00
Loan duration: 6 months
Maturity date: 31-Dec-2016

Upon loan origination on 01-JUL-2016 the origination fee must be booked as unearned income:

Initial Journal Entry for Loan Fee

This table contains the journal that is created when the loan is originated.

	Entered DR (USD)	Entered CR (USD)
Receivable	300.00
Unearned Fee Income		300.00

The unearned fee income must be split over the life of the loan. Each portion must be recognized as income in the corresponding accounting periods, between Jul-2016 and Dec-2016. The amounts in each period would depend on the proration formula used. For example:

Monthly Journal Entry for Loan Fee

This table contains of the journal achieved using a user-defined formula.

	Entered DR (USD)	Entered CR (USD)
Unearned Fee Income	50.00
Loan Fee Income		50.00

Using Multiperiod Subledger Accounting Rules

Accounting Hub users can define subledger accounting rules to create the multiperiod accounting entries. For example:

This table contains the usage of journal lines rules, account rules and the usage associated with multiperiod accounting.

Journal Line Rules	Account Rules	Usage
Unearned Fee Income Side = Credit Multiperiod Option = No Multiperiod Class = Loan Fee The Entered Amount accounting attribute is mapped to a source that provides the fee amount.	Unearned Fee Income Account	Journal line rule for the deferral entry. Used to generate a credit line to the unearned fee income account.
Loan Fee Income Side = Credit Multiperiod Option = Yes Multiperiod Class = Loan fee Accounting attributes: Multiperiod Start Date = Origination date Multiperiod End Date = Maturity date The Entered Amount accounting attribute is mapped to a formula to prorate the fee amount.	Loan Fee Income Account	Journal line rule for the recognition entry. Used by the Create Multiperiod Accounting process to generate future entries with prorate amounts, such as the CR 50.00 (USD) in the example.

Journal Line Rules

Account Rules

Usage

Unearned Fee Income

Side = Credit
Multiperiod Option = No
Multiperiod Class = Loan Fee

The Entered Amount accounting attribute is mapped to a source that provides the fee amount.

Unearned Fee Income Account

Journal line rule for the deferral entry.

Used to generate a credit line to the unearned fee income account.

Loan Fee Income

Side = Credit
Multiperiod Option = Yes
Multiperiod Class = Loan fee
Accounting attributes:
- Multiperiod Start Date = Origination date
- Multiperiod End Date = Maturity date

The Entered Amount accounting attribute is mapped to a formula to prorate the fee amount.

Loan Fee Income Account

Journal line rule for the recognition entry.

Used by the Create Multiperiod Accounting process to generate future entries with prorate amounts, such as the CR 50.00 (USD) in the example.

Define a user-defined formula to calculate the total entered amount to be recognized from the multiperiod start date until the end of current accounting period.
Assign the user-defined formula to the Entered Amount accounting attribute.
The Create Multiperiod Accounting process calculates entered amount for the multiperiod entries as:

Entered Amount = Amount Returned by User-Defined formula - Multiperiod Recognized Entered Amount
- Where the:
  - Multiperiod Recognized Entered Amount is calculated and stored in the Accounting Hub data model as the total amount recognized for the transaction in prior periods.
- The approach handles any rounding differences in prorated entered currency amounts.

Sample User-Defined Formulas

These sample user-defined formula definitions can be used to prorate the loan fee amount.

Prorate by Number of Periods

To prorate the entered amount evenly across each period:

" Multiperiod Original Entered Amount" * NumberofGLPeriod ("Origination Date", "Last Day of Current Accounting Period") / NumberofGLPeriod ("Origination Date", "Maturity Date")
- Where the:
  - Multiperiod Original Entered Amount, Origination Date and Maturity Date are standard application sources (Application: Loans).
  - Last Day of Current Accounting Period is a system source (Application: Subledger Accounting).
  - NumberofGLPeriod is a predefined numeric function.
The entered amount for the multiperiod journal would be calculated as follows:

This table contains the Multiperiod Accounting amount computed if recognition is defined to Prorate by Number of Periods.

Accounting Date	Number of Periods Since Multiperiod Start Date	Multiperiod Recognized Entered Amount (A)	Amount Returned from User-Defined Formula (B)	Multiperiod Journal Entered Amount (B-A)
31-Jul-16	1	0.00	300.00*1/6=50.00	50.00
31-Aug-16	2	0.00+50.00=50.00	300.00*2/6=100.00	100.00-50.00=50.00
30-Sep-16	3	50.00+50.00=100.00	300.00*3/6=150.00	150.00-100.00=50.00
31-Oct-16	4	100.00+50.00=150.00	300.00*4/6=200.00	200.00-150.00=50.00
30-Nov-16	5	150.00+50.00=200.00	300.00*5/6=250.00	250.00-200.00=50.00
31-Dec-16	6	200.00+50.00=250.00	300.00*6/6=300.00	300.00-250.00=50.00

Note: These columns are calculated by the Create Multiperiod Accounting process:

Prorate by Number of Days

To prorate entered amount by the actual number of days in each period:

" Multiperiod Original Entered Amount" * ("Last Day of Current Accounting Period" - "Origination Date" + 1) / ("Maturity Date" - "Origination Date" +1)
The entered amount for the multiperiod journal is calculated as follows:

This table contains the Multiperiod Accounting amount computed if recognition is defined to Prorate by Number of Days.

Accounting Date	Number of Days Since Multiperiod Start Date	Multiperiod Recognized Entered Amount (A)	Amount Returned from User-Defined Formula (B)	Multiperiod Journal Entered Amount (B-A)
31-Jul-16	31	0.00	300.00*31/184.00=50.54	50.54
31-Aug-16	62	0.00+50.54=50.54	300.00*62/184.00=100.09	100.09-50.54=50.55
30-Sep-16	92	50.54+50.55=100.09	300.00*92/184.00=150	150.00-100.09=48.91
31-Oct-16	123	100.09+48.91=150.00	300.00*123/184.00=200.54	200.54-150.00=50.54
30-Nov-16	153	150.00+50.54=200.54	300.00*153/184.00=249.46	249.46-200.54=48.92
31-Dec-16	184	200.54+48.92=249.46	300.00*184/184.00=300.00	300.00-249.46=50.54

Note that rounding differences, if any, are included in the resulting entered amount for the multiperiod journals.

Using Multiperiod Accounting for Foreign Currency

In the multiperiod accounting journal for foreign currency, the accounted amount is derived from the accrued amount / entered amount on the accrual line.

To calculate the accounted amount for multiperiod recognition entries, follow this logic:

Calculate the unrounded entered amount to be recognized from the multiperiod start date to the last day of the current period.
Calculate the unrounded entered amount to be recognized for the current period as Step 1 minus the total rounded entered amount from all multiperiod recognition lines in previous periods.
Calculate the unrounded accounted amount for the current period as Step 2* accrual accounted amount/accrual entered amount.
The last multiperiod recognition entry will include a rounding difference, so it's calculated as: 'accrual amount' minus 'total amount from all multiperiod recognition lines in previous periods', for both entered and accounted amounts.

Here's an example illustrating the exact amount on a customer's invoice.

Invoice:

Accrual amount in USD	Accrual amount in JPY	MPA start date	MPA start date
4016.25	457612	1-Jan-21	31-Dec-21

Formula (Prorate by number of GL period)

(("Multiperiod Original Entered Amount" * NumberOfGLPeriod("Invoice Distribution Multiperiod Accounting Start Date","Last Day of Current Accounting Period")) / NumberOfGLPeriod("Invoice Distribution Multiperiod Accounting Start Date","Invoice Distribution Multiperiod Accounting End Date"))

Period	Entered amount to be recognized from Day1 to last day of current period (USD)	MPA journal unrounded entered amount (USD)	MPA journal unrounded accounted amount (JPY)	MPA journal rounded entered amount (USD)	MPA journal rounded accounted amount (JPY)	Total Recognized amount to-date (USD)	Total Recognized amount to-date(JPY)
1	334.6875	334.6875	38134.33333	334.69	38134	334.69	38134
2	669.375	334.685	38134.04848	334.69	38134	669.38	76268
3	1004.0625	334.6825	38133.76363	334.68	38134	1004.06	114402
4	1338.75	334.69	38134.61818	334.69	38135	1338.75	152537
5	1673.4375	334.6875	38134.33333	334.69	38134	1673.44	190671
6	2008.125	334.685	38134.04848	334.69	38134	2008.13	228805
7	2342.8125	334.6825	38133.76363	334.68	38134	2342.81	266939
8	2677.5	334.69	38134.61818	334.69	38135	2677.5	305074
9	3012.1875	334.6875	38134.33333	334.69	38134	3012.19	343208
10	3346.875	334.685	38134.04848	334.69	38134	3346.88	381342
11	3681.5625	334.6825	38133.76363	334.68	38134	3681.56	419476
12	4016.25	334.69	38134.61818	334.69	38136	4016.25	457612

Prerequisites

Provide date format sources to store the multiperiod start and end dates in transaction objects.

For the event class that supports multiperiod accounting, assign these sources to the accounting attributes:
- Multiperiod Start Date
- Multiperiod End Date

Define the multiperiod class in the subledger accounting lookup. The multiperiod class is used to identify the journal line for which the amount is prorated across multiple accounting periods.

Tip: Accounted amounts for multiperiod journals are calculated by the Create Multiperiod Accounting process prorating proportionally to the entered amount. Rounding error differences are included in the prorated amount.Multiperiod transaction data must be available in transaction objects until the last multiperiod entry has been accounted in final status.