1. Cash Flow Engine Reference Guide
  2. Cash Flow Dictionary
  3. Cash Flow Columns
  4. Deferred Current Balance (DEFERRED_CUR_BAL)
  5. Module Usage

8.2.42.2 Module Usage

DEFERRED_CUR_BAL holds the amount of unamortized discount or premium (fee or cost) associated with a bond or other instrument record.

Discounted Instrument A discount loan or instrument is one with interest deducted from the face amount (CUR_PAR_BAL) of the loan at its origination. The discount amount (DEFERRED_CUR_BAL) is the difference between the loan's current market price (CUR_BOOK_BAL) and its stated par value (CUR_PAR_BAL). The DEFERRED_CUR_BAL, which represents income, is amortized over the life of the instrument according to a constant yield (IRR) calculation. Therefore, as the instrument approaches maturity, the CUR_BOOK_BAL approaches the CUR_PAR_BAL.

For discounted instruments, the DEFERRED_CUR_BAL should be a negative balance. This indicates to the Cash Flow Engine that the balance is income.

Premium Instrument A premium bond or instrument is one in which the face value is issued below the book value. The premium is represented by the DEFERRED_CUR_BAL field, and, as with discounts, the deferred portion is accreted over the life of the instrument. For a premium instrument, the DEFERRED_ CUR_BAL represents an expense.

For instruments sold at a premium, DEFERRED_CUR_BAL should be positive, indicating that the balance is an expense. The relationship between book, par, and the deferred amount is as follows: CUR_BOOK_BAL = CUR_PAR_BAL + DEFERRED_CUR_BAL

An example of this relationship for a discounted loan follows:

CUR_PAR_BAL = $10,000

CUR_BOOK_BAL = $9,000

DEFERRED_CUR_BAL = - $1,000

  1. A standard behavior is for the Cash Flow Engine to perform a constant-yield (IRR) amortization of the DEFERRED_CUR_BAL. This enables the deferred balance to be amortized evenly over the life of the instrument. This life-long amortization rather than a one-time realization of the deferred amount at the inception of the instrument is dictated by general accounting rules regarding discount or premium instruments. For certain fees and costs, as well as premiums and discounts, banks must recognize income/expense over the life of an account instead of at the inception of the account. Hence, some deferred balances are amortized over an account's maturity term even if the account itself does not amortize (Cash Flow Calculations, provides a textual explanation for the constant-yield calculation).

    In addition to level yield amortization of the discount or premium, users also have the option to apply a simplified straight-line amortization of the premium or discount. With this method, the discount or premium will be allocated in equal increments over the remaining life of the instrument. For related code values, see the description for Amortization Method for Premiums and Discounts (AMORT_METH_PDFC_CD).

  2. If the DEFERRED_CUR_BAL = 0, the cash flow engine recognizes this record as having no discount or premium (CUR_BOOK_BAL = CUR_PAR_BAL).