8.2.3.2 Module Usage
Oracle ALM and Oracle FTP Cash Flow Methodologies use ACCRUAL_BASIS_CD for calculating interest income (financial element 430).
The accrual basis values are represented by code values as follows:
Table 8-2 List of Cash Flow Columns
| Code Value | Accrual Basis |
|---|---|
| 1 | 30/360 |
| 2 | Actual/360 |
| 3 | Actual/Actual |
| 4 | 30/365 |
| 5 | 30/Actual |
| 6 | Actual/365 |
| 7 | Business/252 |
Note:
For BUS/252 Accrual Basis: As a prerequisite, a holiday calendar must be defined, so the engine can determine the number of business days for the numerator (BUS). If Holiday calendar is not selected, and accrual basis code is BUS/252, then it defaults to Actual/Actual.Oracle ALM and Oracle FTP Cash Flow Methodologies reference INT_TYPE in
determining whether interest payments are made in arrears or in advance.
- If
INT_TYPE= 1, the record is considered an interest in arrears. Interest payments are paid at the end of the payment period along with the principal payments. The following calculations assume that the interest is to be calculated as an interest in arrears. - If
INT_TYPE= 2, the record is considered interest in advance.Note:
The following calculations assume a monthly payment frequency. - If the ACCRUAL_BASIS_CD is 30/360, 30/365 or 30/Actual, OFSAA uses the following
formula to calculate interest income on a payment date: Previous Period's Ending
Balance * Cur Net Rate/100 * PMT_FREQ [number of months] * x * (Next Payment
Date - Last Payment Date)/(Next Payment Date - Calculated Last Payment Date)
Replace x with one of the three accrual basis values mentioned earlier.
Note:
The actual denominator refers to the actual number of days in the year. Other than leap years, this equals 365 days. Also, note that the Calculated Last Payment Date is the Next Payment Date rolled back by the number of months in PMT_ FREQ.The final portion of the earlier calculation:
(Next Payment Date - Last Payment Date)/(Next Payment Date - Calculated Last Payment Date) is a ratio that calculates the percentage of the payment frequency period that should be applied to calculate the Interest Income amount. This adjustment is done for the following use cases:
- For stub or extended payment at the origination or maturity of a record, where for the first forecasted payment, the Last Payment Date is not necessarily equal to the Calculated Last Payment Date.
- For Payment dates impacted by Holiday adjustment (when Holiday calculation method is Recalculate Payment).
If the Last Payment Date is precisely equal to the Calculated Last Payment Date, then the ratio is equal to 1 and therefore does not impact the Interest Income calculation.
Note:
When interest calculated for days, see following scenarios:- Payment period (PMT_FREQ_MULT) is in days
- Reprice period (REPIRCE_FREQ_MULT) is in days, applicable for adjustable/floating record.
- Multiple repricing records, where a record reprices multiple times within a payment period, whenever interest calculated for days. For example, interest calculated from 6/30/2017 (NEXT_PAYMENT_DATE) to 7/15/2017 (NEXT_REPRICE_DATE) for 15 days.
- When the payment/reprice date gets Holiday adjusted with holiday calculation as ‘Recalculate Payment’. Multiple repricing record, where a record reprices/payment dates get Holiday adjusted with holiday calculation as ‘Recalculate Payment’.
- A record with the accrual basis of 30/360, 30/365, and 30/Actual is converted into Actual/365. A record having 30/365 convention, is converted into Actual/365 multiplied by the ratio of (360/365). For a record with 30/Actual accrual is converted into Actual/365 and is multiplied by the ratio of (360/Actual).
If the ACCRUAL_BASIS_CD is Actual/365, Actual/Actual, or Actual/360, OFSAA uses the following formula to calculate interest income on a payment date:
- Previous Period's Ending Balance * Cur Net Rate/100 * (Next Payment Date - Last Payment Date)/y
- Replace y with the denominator of one of the three accrual basis values
mentioned earlier.
The actual numerator refers to the actual number of days in the current month.
The preceding two equations represent Interest in Arrears income calculations. The interest in advance calculations is indicated in the INT_TYPE section.
- If a compounding method has been chosen, OFSAA derives the compounded rate before calculating the preceding interest income amounts.
- If the ACCRUAL_BASIS_CD is Business/252, the following formula is used to
calculate interest income on a payment date:
Previous Period's Ending Balance * Cur Net Rate/100* (Next Payment Date-Last Payment Date-y)/(252) Here, y is the number of holidays/weekend days in the payment period.
Interest Cash Flow will be paid out on the next payment date. If the next payment turns out to be a holiday and you have selected the option of “Recalculate payment”, then the calculation will use the holiday adjusted next payment date and holiday adjusted last payment date in the calculation and payout on the holiday adjusted next payment date. If you have selected the “Shift Dates only” option, then the calculated interest Cash Flow will be output to the adjusted payment date with no recalculation of interest income.