Non-Lease Accruals

This document covers accrual methods used for calculations outside lease/loan accrual.


ITC Accrual


Notes Payable Accrual


 

ITC Accrual

Investment Tax Credit income can be accrued using three methods:

The Proportional method is only valid if the asset is on lease. ITC income on off lease assets is always accrued using the Straight Line method. The calculations are outlined below:

Straight Line

ONE MONTH’S ITC INCOME =ORIGINAL ITC UNEARNED AMOUNT/ DEPRECIABLE LIFE IN MONTHS

Rule of 12 78ths

RULE 12 78THS FRACTION =
REMAINING MONTHS / ((REMAINING MONTHS* (REMAINING MONTHS + 1)) / 2) ONE MONTH’S ITC INCOME
= CURRENT ITC UNEARNED AMOUNT

Proportional

ONE MONTH’S ITC INCOME =
(INTEREST AMT ACCRUED FOR THIS PERIOD* ASSET’S PERCENTAGE OF THE LEASE)
* (ORIGINAL ITC UNEARNED AMOUNT / ORIGINAL LESSOR UNEARNED AMOUNT)

Note: The Interest Amt Accrued for this Period is a lease level amount. In order to get the amount of interest pertaining to an asset, the interest amount must be multiplied by the assets percentage of the lease.

 

Notes Payable Accrual

The Notes Payable enhancement provides actual daily balance outstanding interest calculations under both fixed and floating rate methods. Three repayment plans are available:

 

Day Calculations

For each of the four accrual methods, two basic day calculations are available: actual and 30-day months. Under the actual days method, all actual days elapsed are counted, including the 31st of appropriate months and the 29th of February in leap years. For example:

Period (exclusive of start day) Number of Days
January 27 to February 2 6
February 27 to March 2 3 (no leap year)
February 27 to March 2 4 (leap year)
March 27 to April 2 6
April 27 to May 2 5

 

The actual days method may be based upon a 360, 365, or 366 day year.

Under the 30-day months method, every month is considered to have 30 days (and the total number of days in the year is always 360). No interest is charged on the 31st of any month; a payment received on the 31st is treated

as if it were received on the 30th. There are always five days between the 27th of one month and the 2nd of the next month, regardless of the two months in question. For example:

Period (exclusive of start day) Number of Days
January 27 to February 2 5
February 27 to March 2 5
March 27 to April 2 5
April 27 to May 2 5

 

There are three days from February 28 to March 1. On leap years, there are two days from February 29 to March 1.

 

Interest Accrual

Interest accruals are always calculated in advance of the payment due. Interest is not charged on the day the notes payable starts, but is charged on the day it is paid off. Accordingly, normal monthly interest accruals accrue from the previous month’s payment due day + 1 day to the current month’s payment due day. Interest adjustments are made, as necessary, when the payment is actually received or when the next accrual occurs, whichever happens first.

Since interest accruals are performed in advance, certain assumptions must be made. These assumptions are based upon projected information. For example, assume that the current date is January 1, and that the payment due February 1 is to be accrued. The accrued interest is calculated assuming that the February 1 payment will be paid on February 1. In other words, the accrued interest is for the period January 2 through February 1, and is calculated based upon the current principal balance outstanding. If the notes payable is floating on a specified base rate, the interest accrued also assumes that the projected base rates for the January 2 - February 1 period will be the actual rates. If any of these assumptions do not hold true, the interest accrued (on January 1) must be adjusted.

 

Fixed Rate Interest Accrual Calculation

Interest is calculated monthly in advance, during the normal accrual process. It is also calculated (or recalculated) each time the principal balance changes (e.g., payments made or reversed, mid-term changes, or payoffs or payoff reversals).

The interest accrual calculation for fixed rate contracts is as follows:

PRINCIPAL BALANCE * (ANNUAL RATE / DAYS IN YEAR) * DAYS

PRINCIPAL BALANCE is the current principal balance of the notes payable as shown in the principal balance list.

ANNUAL RATE is the interest rate stated in the notes payable agreement and entered as the rate during the Book New Note update [U0901].

DAYS IN YEAR is the contractual year base stated in the notes payable agreement and entered as part of the accrual method. It may be fixed at 360, 365, or be the actual number of days in the year (365 or 366).

DAYS is the number of days of the period from the last payment or accrual to the current date. For 30/360 accrual methods, the number of days in the month is fixed at 30. For all other methods, the actual number of days between the begin date to the end date of the accrual period should be used.

 

Floating Rate Interest Accrual Calculation

Interest is calculated monthly in advance, during the normal accrual process. It is also calculated (or recalculated) each time the principal balance changes (e.g., payments made or reversed, mid-term changes, or payoffs or payoff reversals).

The following interest accrual calculation for floating rate contracts is performed for each day in the accrual period. This repetition of the interest calculation for each day in the accrual period effectively is performing a daily interest calculation. Therefore, base rate changes during the period are automatically taken into account.

PRINCIPAL BALANCE * (BASE RATE + ADD-ON) / DAYS IN YEAR

PRINCIPAL BALANCE is the current principal balance of the notes payable as shown in the principal balance list.

BASE RATE is the annual rate on which the notes payable is floating, as stated in the notes payable agreement and entered during the Book New Note update [U0901]. Notes Payable agreements may have different base rates.

ADD-ON is the number of basis points over or under the BASE RATE, as stated in the notes payable agreement and entered during the Book New Note update [U0901]. BASE RATE + ADD-ON represents the actual interest rate for the notes payable for the day. A maximum and/or minimum annual rate may be specified for each notes payable during the Book New Note update [U0901].

DAYS IN YEAR is the contractual year base stated in the notes payable agreement and entered as part of the accrual method. It may be fixed at 360, 365, or be the actual number of days in the year (365 or 366).

 

Notes Payable Accrual Methods: Principal and Interest (P&I)

 

The scheduled full payment amount (principal and interest) is entered into the payment schedule for the lease during New Lease Booking [U0101]. Step and skip payments are entered as normal. No payment – principal or interest – is due for a skip payment. Interest-only payments are not allowed for this method.

The following is a sample amortization schedule using Principal and Interest floating actual/360 (RAF0) accrual method.

Outstanding Principal Balance = $10,000
Rate = floating
Payment Schedule = 12 monthly payments of $900.00 (arrears)
Commencement = December 30, 1989

 

Date # Int Rate Prin Bal Int Prin Pmt Due Date Pmt Recd Date Intr Paid Prin Paid New Prin Bal
01/90 31 12.0 10,000.00 103.33 796.67 01/30 01/30 103.33 796.67 9,203.33
02/90 29 12.0 9,203.33 88.97 811.03 02/28 02/28 88.97 811.03 8,392.30
03/90 30 12.0 8,329.03 83.92 816.08 03/30 03/30 83.92 816.08 7,576.22
04/90 31 12.0 7,576.22 78.29 821.71 04/30 04/30 78.29 821.71 6,754.51
05/90 30 12.0 6,754.51 67.55 832.45 05/30 05/30 67.55 832.45 5,922.05
06/90 31 12.5 5,922.05 63.74 836.26 06/30 06/30 63.74 836.26 5,085.80
07/90 30 12.5 5,085.80 52.98 847.02 07/30 07/30 52.98 847.02 4,238.78
08/90 31 12.5 4,238.78 45.63 854.37 08/30 08/30 45.63 854.37 3,384.40
09/90 31 12.5 3,384.40 36.43 863.57 09/30 09/30 36.43 863.57 2,520.83
10/90 30 12.5 2,520.83 26.26 873.74 10/30 10/30 26.26 873.74 1,647.09
11/90 31 12.5 1,647.09 17.73 882.27 11/30 11/30 17.73 882.27 764.82
12/90 30 12.5 764.82 7.97 764.82 12/30 12/30 7.97 765.14 0
        672.79 10000.00     672.79 10000.00  

 

Notes Payable Accrual Methods: Principal plus Interest (P+I)

  • RPF0 Floating rate Arrears; actual over 360
  • RPF5 Floating rate Arrears; actual over 365
  • RPF6 Floating rate Arrears; actual over actual
  • RPFE Floating rate Arrears; 30 over 360
  • RPX0 Fixed rate Arrears; actual over 360
  • RPX5 Fixed rate Arrears; actual over 365
  • RPX6 Fixed rate Arrears; actual over actual
  • RPXE Fixed rate Arrears; 30 over 360

    •  

    The scheduled principal amount of the payment only is entered into the payment schedule during Book New Note [U0901]. Step, skip, and zero (interest-only) payments are entered as normal. The actual amount due is the scheduled principal amount plus the calculated interest (including the effects of early or late receipt of payments due). No payment – principal or interest – is due for a skip payment.

    The following is a sample amortization schedule using Principal plus Interest fixed rate actual/365 (RPX5) accrual method.

    Outstanding Principal Balance = $10,000
    Rate = 12% (fixed)
    Payment Schedule = 11 principal payments of $833.33 (arrears)
    1 principal payment of $833.37 (arrears)
    Commencement = December 30, 1989

     

    Date # Int Rate Prin Bal Int Prin Pmt Due Date Pmt Recd Date Intr Paid Prin Paid New Prin Bal
    01/90 31 12.0 10,000.00 101.92 833.33 01/30 01/30 101.92 833.33 9,166.67
    02/90 29 12.0 9,166.67 87.40 833.33 02/28 02/28 87.40 833.33 8,333.34
    03/90 30 12.0 8,333.34 82.19 833.33 03/30 03/30 82.19 833.33 7,500.01
    04/90 31 12.0 7,500.01 76.44 833.33 04/30 04/30 76.44 833.33 6,669.15
    05/90 30 12.0 6,669.15 65.75 833.33 05/30 05/30 65.75 833.33 5,833.35
    06/90 31 12.0 5,833.35 59.45 833.33 06/30 06/30 59.45 833.33 5,000.02
    07/90 30 12.0 5,000.02 49.32 833.33 07/30 07/30 49.32 833.33 4,166.69
    08/90 31 12.0 4,166.69 42.47 833.33 08/30 08/30 42.47 833.33 3,333.36
    09/90 31 12.0 3,333.36 33.97 833.33 09/30 09/30 33.97 833.33 2,500.03
    10/90 30 12.0 2,500.03 24.66 833.33 10/30 10/30 24.66 833.33 1,666.70
    11/90 31 12.0 1,666.70 16.99 833.33 11/30 11/30 16.99 833.33 833.37
    12/90 30 12.0 833.37 8.22 833.37 12/30 12/30 8.22 833.37 0

    		    648.77 10000.00     648.77 10000.00  

     

    Notes Payable Accrual Methods: Interest Only

     

    This plan calls for the periodic repayment of accrued interest. The payment schedule consists of zero payment amounts only. Payments due include only the accrued interest.

    The following is a sample amortization schedule using Interest Only floating actual over actual (RIF6) accrual method.

    Outstanding Principal Balance = $10,000
    Rate = 12% (floating)
    Payment Schedule = 12 monthly payments (arrears)
    Commencement = December 30, 1989

     

    Date # Days Int Rate Principal Balance Int Pmt Due Date Pmt Recd Date Int Paid
    01/90 31 12.0% 10,000.00 101.92 01/30 01/30 101.92
    02/90 29 12.0% 10,000.00 95.43 02/28 02/28 95.43
    03/90 30 12.0% 10,000.00 98.63 03/30 03/30 98.63
    04/90 31 12.0% 10,000.00 101.92 04/30 04/30 101.92
    05/90 30 12.0% 10,000.00 98.63 05/30 05/30 98.63
    06/90 31 12.0% 10,000.00 101.92 06/30 06/30 101.92
    07/90 30 12.5% 10,000.00 102.74 07/30 07/30 102.74
    08/90 31 12.5% 10,000.00 106.16 08/30 08/30 106.16
    09/90 31 12.5% 10,000.00 106.16 09/30 09/30 106.16
    10/90 30 12.5% 10,000.00 102.74 10/30 10/30 102.74
    11/90 31 12.5% 10,000.00 106.16 11/30 11/30 106.16
    12/90 30 12.5% 10,000.00 102.74 12/30 12/30 102.74
            1225.07     1225.07

     

    LeasePak  Reference Guide

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