B.4.4 DILQ: Contract Interest Liquidation

Table B-7 Accounting Entries

Accounting Role	Amount Tag	Dr./Cr. Indicator
CUSTOMER	DV_IN_INT_ILIQ	DEBIT
DV_IN_INT_INC	DV_IN_INT_ILIQ	CREDIT
CUSTOMER	DV_OUT_INT_ELIQ	CREDIT
DV_OUT_INT_EXP	DV_OUT_INT_ELIQ	DEBIT

Maintain the following accounting entry set-up when an arrears contract is liquidated with previous year adjustment option.

Table B-8 Adjustment Option

In/ Outleg	Dr./Cr. Indicator	Accounting Role	Amount Tag
In	Debit	Customer	Component_RLIQ
	Credit	Component_REC	Component_RLIQ
Out	Debit	Component_PAY	Component_RLIQ
	Credit	Component_RLIQ	Component_RLIQ
In	Debit	Component_INC_UNRLZ	Component_RLIQ_PY
	Credit	Component_INC	Component_RLIQ_PY
	Debit	Component_INC_UNRLZ	Component_RLIQ_CY
	Credit	Component_INC	Component_RLIQ_CY
Out	Debit	Component_EXP	Component_RLIQ_PY
-	Credit	Component_EXP_UNRLZ	Component_RLIQ_PY
-	Debit	Component_EXP	Component_RLIQ_PY
-	Credit	Component_EXP_UNRLZ	Component_RLIQ_PY

Following are the accounting entries for netting transaction for below scenarios:

Table B-9 When negative interest is more than the positive interest for a given period during liquidation

In/ Outleg	Dr./Cr. Indicator	Accounting Role	Amount Tag
In	Debit	Negative Interest Comp _EXP	Negative Interest Comp _RLIQ/ELIQ
	Credit	CUSTOMER	Negative Interest Comp _RLIQ/ELIQ
Out	Debit	CUSTOMER	Negative Interest Comp _RLIQ/ELIQ
-	Credit	Negative Interest Comp _REC	Negative Interest Comp _RLIQ/ELIQ

Table B-10 When positive interest is more than the negative interest for a given period during liquidation

In/ Outleg	Dr./Cr. Indicator	Accounting Role	Amount Tag
In	Credit	Main Interest Comp _REC	Main Interest Comp _RLIQ/ELIQ
	Debit	CUSTOMER	Main Interest Comp _RLIQ/ELIQ
Out	Credit	CUSTOMER	Main Interest Comp _RLIQ/ELIQ
Out	Debit	Main Interest Comp _EXP	Main Interest Comp _RLIQ/ELIQ

Advices

Nil

Accounting Entry Setup (Settlement on Cash basis - Advance and Arrears)

Table B-11 Accounting Entries Table

DR/CR	Accounting Role		Amount Tag
DR	CUSTOMER	Customer	DV_IN_INT_ILIQ	Interest amount (Inleg)
CR	DV_IN_INT _INC	In leg Income GL	DV_IN_INT_ILIQ	Interest amount (Inleg)
DR	DV_OUT_INT_EXP	Out legExpense GL	DV_IN_INT_ELIQ	Interest amount (Outleg)
CR	CUSTOMER	Customer	NET_INT_INC	Interest amount (Outleg)
DR	CUSTOMER	Customer	NET_INT_INC	Net Income
CR	DV_IN_INT _INC	Net Income	NET_INT_EXP
DR	DV_OUT_INT_EXP	Net Expense	NET_INT_EXP	Net Expense
CR	CUSTOMER	Customer	NET_INT_EXP

Assume the following parameters for a DV IRS deal.

In leg start date –: 01-jan-2004

Frequency -: Quarterly

In leg payment method-: Arrears

Accrual: No

In leg interest Component-: DV_IN_INT

Out leg start date-: 01-january-2004

Frequency-: Half yearly

Out leg payment method-: Arrears

Accrual: ‘No’

Out leg interest Component-: DV_OUT_INT

Assume the following cash flows: