16 Computation and Amortization of Cost of Interest Subvention

OFS Loan Loss Forecasting and Provisioning application are enabled to compute and amortize the Cost of Interest Subvention. To calculate this, as the first step, the cost involved is identified by subtracting Original Fair Value from Original Outstanding Amount.

There are two different ways through which the Original Fair Value can be obtained. The first option is to fetch this value from OFS HM output tables if the OFS HM application is installed. Otherwise, the cost must be provided in the FSI Account Inception Details table.

Note:

You need to execute the Fair Value Run for the Account Start Date.

The computation and amortization of the Cost of Interest Subvention consist of the following three steps:

• Step 1: Computation of Current Period Amortization Amount
• Step 2: Computation of Ending Balance of Interest Subvention Cost
• Step 3: Computation of Interest Subvention Amortization Rate

The process also involves equating the Carrying Amount as End of Period Carrying Amount of Outstanding Amount as of Last Accrual Date. Interest Subvention Amortization Rate as of Last Accrual Date is identified as Amortization Rate and Interest Subvention Cost at End of Period as of Last Accrual Date is identified as Interest Subvention Cost at End of Period.

For the calculation, for every subsequent period, the Interest Subvention Amortization Rate is obtained from the immediate predecessor period. The Interest Subvention Amortization Rate on the final period will be zero.

Note:

The downloaded Cost of Interest Subvention must be a positive value.