PURPOSE
To show illustration of term loan fee amortisation.
OVERVIEW
i. Accounting for amortisation for debt issuance cost to generate a constant effective cost of funding.
TRANSACTION DETAILS
| Accounting Base Ccy |
| Trade ID |
| Pay/Rec |
| Category |
| Trade Date |
| Value Date |
| Currency |
| Amount |
| Accrual Method |
| USD |
| MAP1001 |
| Payables |
Fees |
03-Feb-03 |
03-Feb-03 |
SGD |
45,000.00 |
Act/365 |
TL Repayment Schedule
| From Date | To Date | Opening Loan Balance | Principal | Interest Rate | Interest Repayment | Fee | Net Cash Flow |
|---|---|---|---|---|---|---|---|
| 03-Feb-03 | 03-Feb-03 | 0.00 | 1,000,000.00 | 3.000000% | 0.00 | -45,000.00 | 955,000.00 |
| 03-Feb-03 | 03-Aug-03 | 1,000,000.00 | 0.00 | 3.000000% | -15,083.33 | 0.00 | -15,083.33 |
| 03-Aug-03 | 03-Feb-04 | 1,000,000.00 | 0.00 | 3.000000% | -15,333.33 | 0.00 | -15,333.33 |
| 03-Feb-04 | 03-Aug-04 | 1,000,000.00 | 0.00 | 3.000000% | -15,166.67 | 0.00 | -15,166.67 |
| 03-Aug-04 | 03-Feb-05 | 1,000,000.00 | 0.00 | 3.000000% | -15,333.33 | 0.00 | -15,333.33 |
| 03-Feb-05 | 03-Aug-05 | 1,000,000.00 | 0.00 | 3.000000% | -15,083.33 | 0.00 | -15,083.33 |
| 03-Aug-05 | 03-Feb-06 | 1,000,000.00 | -1,000,000.00 | 3.000000% | -15,333.33 | 0.00 | -1,015,333.33 |
Fee Amortisation Schedule
| From Date | To Date | Loan Balance | Fee Balance | Net | Interest | Amortisation | Total | Yield |
|---|---|---|---|---|---|---|---|---|
| 03-Feb-03 | 03-Aug-03 | 1,000,000.00 | 45,000.00 | 955,000.00 | 15,083.33 | 7,009.49 | 22,092.82 | 4.6651121% |
| 03-Aug-03 | 03-Feb-04 | 1,000,000.00 | 37,990.51 | 962,009.49 | 15,333.33 | 7,290.51 | 22,623.84 | 4.6651121% |
| 03-Feb-04 | 03-Aug-04 | 1,000,000.00 | 30,700.00 | 969,300.00 | 15,166.67 | 7,380.85 | 22,547.52 | 4.6651121% |
| 03-Aug-04 | 03-Feb-05 | 1,000,000.00 | 23,319.14 | 976,680.86 | 15,333.33 | 7,635.54 | 22,968.87 | 4.6651121% |
| 03-Feb-05 | 03-Aug-05 | 1,000,000.00 | 15,683.60 | 984,316.40 | 15,083.33 | 7,687.69 | 22,771.02 | 4.6651121% |
| 03-Aug-05 | 03-Feb-06 | 1,000,000.00 | 7,995.91 | 992,004.09 | 15,333.33 | 7,995.91 | 23,329.24 | 4.6651121% |
| 03-Feb-06 | 03-Feb-06 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 4.6651121% |
SUMMARY OF JOURNALS
| ID | Date | Description |
|---|---|---|
| J1 | 3-Feb-03 | Settlement of Fee |
| J2 | 28-Feb-03 | Month End Fee Amortisation |
| J3 | 1-Mar-03 | Reversal Month End Fee Amortisation |
| J4 | 31-Mar-03 | Month End Fee Amortisation |
| J5 | 1-Apr-03 | Reversal Month End Fee Amortisation |
J1 Settlement of Fee
| TradeID | PostDate | B/P | Account | Ccy | Ccy Amt D/(CR) | Rate | Base | Base Amt D/(CR) | Line |
|---|---|---|---|---|---|---|---|---|---|
| MAP1001 | 3-Feb-03 | P | MAP: Pay Fees/Charges | SGD | 45,000.00 | 0.567456 | USD | 25,535.54 | J1a |
| MAP1001 | 3-Feb-03 | B | Cash At Bank | SGD | -45,000.00 | 0.567456 | USD | -25,535.54 | J1b |
Note J1a: The multiplier rate on 3-Feb-2003 is 0.567456. See Exchange Rates below.
J2 Month End Fee Amortisation
| TradeID | PostDate | B/P | Account | Ccy | Ccy Amt D/(CR) | Rate | Base | Base Amt D/(CR) | Line |
|---|---|---|---|---|---|---|---|---|---|
| MAP1001 | 28-Feb-03 | B | MIS: Fee Prepaid | SGD | 44,041.19 | 0.568919 | USD | 25,055.86 | J2a |
| MAP1001 | 28-Feb-03 | P | MIS: Fee Expense | SGD | -44,041.19 | 0.567456 | USD | -24,991.45 | J2b |
| MAP1001 | 28-Feb-03 | P | FX - Monetary Asset - Gain | SGD | 0.00 | 0.000000 | USD | -64.41 | J2c |
Note J2a: The multiplier rate on 28-Feb-2003 is 0.568919. See Exchange Rates below.
Calculation of Unamortised Fee
Unamortised fee is interpolated using cubic spline. No computation is available.
The following calculation is using linear intra interest payment date as approximation for illustration.
| Fee Amount | 45,000.00 | A |
| Unamortised Amount (Feb) | 44,041.19 | B |
| Period Charge (Feb) | 958.81 | C = A - B |
Note J2c: The unrealised gain/loss on the revaluation of the fee is analysed as follows:
| SGD | Rate+ | USD |
|
| At Closing Rate | 44,041.19 | 0.568919 | 25,055.86 |
| At Start Date | 44,041.19 | 0.567456 | 24,991.45 |
| Gain in exchange | 64.41 |
+ Rates used for calculation are in full precision. Illustrated rates are rounded to 6dp.
J3 Reversal Month End Fee Amortisation
| TradeID | PostDate | B/P | Account | Ccy | Ccy Amt D/(CR) | Rate | Base | Base Amt D/(CR) | Line |
|---|---|---|---|---|---|---|---|---|---|
| MAP1001 | 1-Mar-03 | B | MIS: Fee Prepaid | SGD | -44,041.19 | 0.568919 | USD | -25,055.86 | J3a |
| MAP1001 | 1-Mar-03 | P | MIS: Fee Expense | SGD | 44,041.19 | 0.567456 | USD | 24,991.45 | J3b |
| MAP1001 | 1-Mar-03 | P | FX - Monetary Asset - Gain | SGD | 0.00 | 0.000000 | USD | 64.41 | J3c |
J4 Month End Fee Amortisation
| TradeID | PostDate | B/P | Account | Ccy | Ccy Amt D/(CR) | Rate | Base | Base Amt D/(CR) | Line |
|---|---|---|---|---|---|---|---|---|---|
| MAP1001 | 31-Mar-03 | B | MIS: Fee Prepaid | SGD | 42,848.14 | 0.577434 | USD | 24,741.97 | J4a |
| MAP1001 | 31-Mar-03 | P | MIS: Fee Expense | SGD | -42,848.14 | 0.567456 | USD | -24,314.45 | J4b |
| MAP1001 | 31-Mar-03 | P | FX - Monetary Asset - Gain | SGD | 0.00 | 0.000000 | USD | -427.52 | J4c |
Note J4a: The multiplier rate on 31-Mar-2003 is 0.577434. See Exchange Rates below.
Calculation of Unamortised Fee
Unamortised fee is interpolated using cubic spline. No computation is available.
The following calculation is using linear intra interest payment date as approximation for illustration.
| Unamortised Amount (Feb) | 44,041.19 | A |
| Unamortised Amount (Mar) | 42,848.14 | B |
| Period Charge (Mar) | 1,193.05 | C = A - B |
Note J4c: The unrealised gain/loss on the revaluation of the fee is analysed as follows:
| SGD | Rate+ | USD |
|
| At Closing Rate | 42,848.14 | 0.577434 | 24,741.97 |
| At Start Date | 42,848.14 | 0.567456 | 24,314.45 |
| Gain in exchange | 427.52 |
+ Rates used for calculation are in full precision. Illustrated rates are rounded to 6dp.
J5 Reversal Month End Fee Amortisation
| TradeID | PostDate | B/P | Account | Ccy | Ccy Amt D/(CR) | Rate | Base | Base Amt D/(CR) | Line |
|---|---|---|---|---|---|---|---|---|---|
| MAP1001 | 1-Apr-03 | B | MIS: Fee Prepaid | SGD | -42,848.14 | 0.577434 | USD | -24,741.97 | J5a |
| MAP1001 | 1-Apr-03 | P | MIS: Fee Expense | SGD | 42,848.14 | 0.567456 | USD | 24,314.45 | J5b |
| MAP1001 | 1-Apr-03 | P | FX - Monetary Asset - Gain | SGD | 0.00 | 0.000000 | USD | 427.52 | J5c |
EXCHANGE RATES
Our illustration assumes the company uses different daily exchange rates for accounting.
The following rates were used for this illustration.
Spot Rate
| Date | USD/SGD | SGD/USD |
| 3-Feb-03 | 1.762250 | 0.567456 |
| 28-Feb-03 | 1.757720 | 0.568919 |
| 31-Mar-03 | 1.731800 | 0.577434 |
FREQUENTLY ASKED QUESTIONS
RELATED INFORMATION
CHANGE HISTORY
| Date | By | Changes |
|---|---|---|
| 1-Nov-2016 | CS | Creation. |
| 15-Nov-2016 | TS | Rewritten. Reformatted. |
| 07-May-2020 | LT | Re-formatting. |
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