FASB
91
Effective Interest Method
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Excel
Import
Paste Worksheet Data
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| Financial
Data Support Systems, Inc.
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For
PC, laptop,
workstation and
shared devices
running Windows®
7,
Vista, XP, ME, NT and
other network versions |
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Monthly
amortization and recognition of
Deferred
Income, Revenue, Fees, Prepaid Assets, Expenses, Deferred Charges
determined as the GREATER of
Straight line amortization
or
Balance remaining, monthly
takedown, running consumption of
• Time
- Hours
- Days
- Other increments
• Tangibles
- Inventory
- Products
- Supplies, office or otherwise
- Other physical count or takedown usage
• Dollars
- Remaining balance
• Virtually any
type of item with a declining life expressible in units |
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Example: Consumption and Amortization by HOURS
A
$24,000.00 prepaid fee covering 1200 hours of service over a 12 month term.
Payer capitalizes the
$24,000.00 deferral to a prepaid asset/expense.
(a prepaid amount could just as easily represent the cost of inventoried
physical goods)
Provider credits the
$24,000.00 deferral to an unearned liability.
Amortizing the fee on a straight line basis presumes
a monthly consumption rate of 100 hours.
Payer expenses $2,000.00
per month.
Provider recognizes
the same monthly amount as income.
However, what if hours (or any underlying value
type) are reduced at a completely different rate?
What if 312 hours are
used the first month, followed by 228, then 367?
What should the deferred
balance be after three months when 907 hours have been used?
$18,000.00?
75% of the original deferral?
When only 293 hours (less than 25%) remain outstanding?
What if only one six hours remained? Or none?
This software
• Rectifies any disparity between anticipated
and actual amortization
• Maintains an equitable relationship between
a deferral and its underlying basis
In the above example,
the software would have
recognized 78.58% (907/1200) of the $12,000.00 by the third month.
If less than 300 hours, including zero hours,
had been used,
the software would have
recognized 25%, 3 months of 12 under a straight line basis. |
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How
it works
How
it works
On a monthly basis, the software imports an Excel
file and
• Calculates accumulated
amortization of deferred dollars using a straight line basis.
• Determines which
of the following is provided in the file:
- Units consumed to date (hours in the above example) or
- Units consumed for that month or
- Units remaining.
• Calculates the
percentage of units consumed to date compared to total beginning units.
• Recognized the
greater of the two calculation results as accumulated.
• Reads a history
file it created "as of" the previous month.
• Establishes
the amount to book to the general ledger this month:
Difference between last month's history accumulated and this month's new
accumulated. |
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......Excel allocation software to distribute one
or more amounts of any type to multiple recipients such as branches, department
heads, projects, funds and virtually any other entity using one or multiple
methods. |
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