Covers accrual methods used for Investment Tax Credit (ITC) and Notes Payable accruals.
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:
ONE MONTH'S ITC INCOME =ORIGINAL ITC UNEARNED AMOUNT/ DEPRECIABLE LIFE IN MONTHS
RULE 12 78THS FRACTION =
REMAINING MONTHS / ((REMAINING MONTHS* (REMAINING MONTHS + 1)) / 2) ONE MONTH'S ITC INCOME
= CURRENT ITC UNEARNED AMOUNT
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.
Accrual methods OV, PX, LT, VT, VV, VL, IX, IF, AX, and AF (based on the second and third character of the accrual method code) cannot be used for notes payable. These methods also cannot be used for a lease that has a note attached to it. If you need a fixed rate method, use AAPR or RAPR.
The Notes Payable enhancement provides actual daily balance outstanding interest calculations under both fixed and floating rate methods. Three repayment plans are available:
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 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.
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.
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).
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 |
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. Lease payments are assumed to be received on their payment due dates; there are no variations of income accrued due to the early or late receipt of payment. 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 |
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 Documentation Suite
©
by NetSol Technologies Inc. All rights reserved.
The information contained in this document is the property of NetSol Technologies Inc. Use of the information contained herein is restricted. Conditions of use are subject to change without notice. NetSol Technologies Inc. assumes no liability for any inaccuracy that may appear in this document; the contents of this document do not constitute a promise or warranty.The software described in this document is furnished under license and may be used or copied only in accordance with the terms of said license. Unauthorized use, alteration, or reproduction of this document without the written consent of NetSol Technologies Inc. is prohibited.
This message should disappear within 5-15 seconds, depending on the size of the document and the speed of your connection to the Documentation Suite.
If you can still see this message after 20 seconds, try clicking the Refresh or Reload button on your Web browser.
If your document still does not load, refer to Document Load Troubleshooting for instructions on how to fix possible problems with either your Documentation Suite installation or Web browser setup.
If you do not have read access to the parent docsuite directory, you will not be able to load the Document Load Troubleshooting document. In this case, contact your network administrator for assistance.