4.5.2.1 FASB Amortization

Financial Accounting Standards Board (FASB) amortization in OFSLLCS enables the system to distribute eligible fees, costs, and similar amounts over the life of an account. Instead of recognizing the entire amount at the beginning, the system gradually recognizes these amounts across the account term. This process ensures that income and expense recognition remains aligned with the account’s repayment schedule.

When Financial Accounting Standards Board (FASB) processing is enabled for an account, the system creates an internal amortization schedule based on the repayment plan. Using this schedule, the system calculates the effective interest rate and applies it during each processing cycle to determine the amount to be recognized for the respective period.

Process Flow

The amortization process in OFSLLCS follows these steps:

• The system identifies account balances that are configured for FASB amortization.
• The system reads the account’s repayment schedule and generates an internal FASB amortization schedule.
• Based on the scheduled cash flows, the system calculates the effective interest rate required for the amortization process.
• During each amortization run, the system uses this rate to recognize the appropriate portion of income or expense for the current period.
• After the amortization amount is posted, the system updates the remaining amortization balance.
• If key account attributes change, such as repayment terms, due dates, or draw period details, the system regenerates the amortization schedule and recalculates the effective interest rate to ensure accurate amortization processing.