1. User Guide
  2. Business Rules Administration
  3. IFRS 9 Rules
  4. Amortization Rules

Amortization Rules

This module discusses the procedure to create rules for Amortization. Two Amortization Methods are supported that are as follows:
  • Effective Yield Amortization: As per IFRS 9 guidelines, financial institutions are required to recognize interest income using the Effective Interest Rate computed for the given instrument, instead of the Contractual Rate. Due to this change in the interest recognition process, in addition to the current practice of recognizing the interest using a contractual rate, financial institutions are required to pass an additional adjustment entry - Interest Adjustment Entry to be compliant with the IFRS 9 guidelines.
  • Straight-line Method Amortization: Straight-line method amortization is the simplest method for calculating amortization over time. Under this method, the same amount of fees, premiums, discounts, and costs are amortized over the life of the instrument.