Linear Amortization (Time-Based)

Overview

Calculate the schedule of journal entries required to amortize the amount of a Leapfin data object linearly over a specified time period where the consideration is contingent on a time based condition (ex. subscription)

Configuration

Required Parameters

Accounts

Description

Deferral Event Debit Account

ex. A/R

Deferral Event Credit Account

ex. Deferred Revenue

Recognition Event Debit Account

ex. Revenue

Recognition Event Credit Account

ex. Deferred Revenue

Fields

Description

start_date

Field to use as start date to amortize from

end_date

Field to use as end date to amortize from

amount

Amount to amortize

date

Date object event occurred (ex. invoice date)

Deferral Output

Full object amount is deferred on date. Credit Deferred Revenue / Debit A/R

Account

DR

CR

Deferral Debit Account (A/R)

120

Deferral Credit Account (Deferred Revenue)

120

Recognition Output

Leapfin calculates revenue distributions on a daily basis between the provided start_date and end_date, linearly, using the following steps:

  • Calculate the average amount per day of the net amount of the line item divided by total number of days (inclusive of both the start and end dates)
  • Round the amount per day down to the nearest penny so there is no fractional penny amount
  • Iterate through each day during the term (start date to end date) and add an extra cent to a given day each time the accumulated rounding difference calculated above exceeds 1 cent.
  • If there is any remainder from rounding after iterating through all of the days, the difference is added to the first day of the term.
  • Aggregate all the days by month for the recognition for that month
  • Debit Deferred Revenue / Credit Recognized From Deferred for the total recognized amount each day

Every day between the start and end dates a JE will be created:

Account

DR

CR

Recognition Debit Account (Deferred Revenue)

10

Recognition Credit Account (Recognized from Deferred)

10

Locked Periods

If Month A is locked, and a transaction is invoiced on Month A + 1 with a start date in Month A, any revenue that should be recognized in the locked month will be pushed to the nearest unlocked month.

Should a date change and a recalculation of amortization is necessary for recognized revenue, the difference in a locked month will be pushed to the nearest unlocked month.


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