PURPOSE
This document explains how Term Loan interest is computed in the CS Lucas system.
WHY IS THIS IMPORTANT?
Term Loan interest computation has implications for the accounting instrument. It is important so that interest accruals can be generated correctly by the system at month end.
PROCEDURE
The following examples show how the system computes the interest amount based on 3 different scenarios.
Scenario 1: Multiple Drawdowns
When there are multiple drawdowns in the Term Loan repayment schedule, the system will calculate the next interest repayment amount between different periods based on the different outstanding principals. For example, there are 3 loan drawdowns on 12-May-2014, 12-Jun-2014, and 12-Aug-2014, the interest repayment amount on 12-Nov-2014 is calculated as below.
Analysis of the Computation:
Scenario 2: Interest Paid
When there is interest paid, the next interest amount is calculated from the last periodic end date when the interest is paid to the next periodic end date. See below example on how the system calculates the interest amount on 12-Nov-2014.
Analysis of the Computation:
Scenario 3: Interest Capitalization
When there is interest capitalization, the system will treat interest capitalization as though it is paid and the next interest repayment amount will calculate from the last periodic end date when the interest is capitalized to the next periodic end date, based on total of outstanding principal and interest capitalized amount. See example below: interest is capitalized on 15-Jan-2015, the next interest repayment on 12-May-2015 is calculated as below.
Analysis of the computation:
FREQUENTLY ASKED QUESTIONS
FAQ01. How does the system determine the day count used for interest computation?
The day count used for interest computation follows the accrual method set up for the currency by default. However, user may change the accrual methods at the Term Loan transaction booking screen. See Accrual methods for more details.
RELATED INFORMATION
CHANGE HISTORY
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