Amortization of Individual Components of Deferred Balance

Amortization of Individual Components of Deferred Balance - Fee, Premium or Discount, and Cost

As a continuation of Aggregation Account Level and Adjustment Computation and Ending Deferred Balance, the Interest Adjustment and the Ending Deferred balances are split up to compute the ending balances of the individual components. These components are, considered for the computation of Effective Interest Rate as well:

Fee
Premium or Discount
Cost

The LLFP application first computes the ratio of Fee, Premium or Discount, and Cost based on their values as on the date of initial recognition of the given account. Using this ratio, the application then splits the Interest Adjustment into individual components. The result of this split is the individual adjustment values:

Fee Adjustment
Premium or Discount Adjustment
Cost Adjustment

Post the computation of the individual adjustment values, the individual componentized ending deferred balances are computed by subtracting the individual beginning balances from their corresponding adjustment amounts.

Note:

Whenever the ending deferred balance becomes zero, the computation of interest adjustments is stopped forthwith.