Variable Rate: Catchup Cleanup: Rate Change Freq Of Billing Period Not Working As Expected
(Doc ID 1452515.1)
Last updated on MARCH 12, 2021
Applies to:Oracle Lease and Finance Management - Version 12.1.2 and later
Information in this document applies to any platform.
On : 12.1.2 version, Variable Interest Rate
In a Catchup Cleanup Variable Rate contract, when the Rate Change Freq is ‘Billing Date’, the CRVRI is still computing the interest in multiple tiers for a single billing period. This is noticed to happen in contracts where the Rate Change Start date is in the middle of the month.
The expectation for this RCF is that a single Interest rate will be applied for the full billing period.
The issue can be reproduced at will with the following steps:
1. Create a variable rate contract with following parameters:
Contract Start Date: 1-Jun-2011
Contract Term: 3
Rent Payment Freq: Monthly
Rent Payment: In Arrears
Number of Periods for Rent Payments: 3
2. Interest Rate Parameters:
Principal Basis: Actual
Base Rate: 3%
Rate Change Freq: Billing Date
Rate Change Start Date: 15-Jun-2011
Catchup Freq: Monthly
Catchup Start Date: 01-Jun-11
Catchup Settlement: Adjust
3. Book contract
4. Run Create Receivables Variable Rate Interest Program (CRVRI) for 30- Jun-10. Since Rate Change starts on 15-Jun, it uses the Base rate till 14-Jun and from 15-Jun to 30-Jun, it uses the rate as per index.
5. Run Billing for month 30-Jun-10. It creates an! invoice for the Catchup Invoice dated 01-Jul-11
6. Run Accruals for 30-Jun-10. Accrual is created for the Stream amount
7. Run Create Receivables Variable Rate Interest Program (CRVRI) for 31-Jul-11. It is calculating interest in 2 tiers:
a) Period 1 = 1-Jul-11 to 14-Jul-11 at June Index Rate plus adder rate
b) Period 2 = 15-Jul-11 to 31-Jul-11 at July Index Rate plus adder rate
8. The above interest calculation is wrong since the Rate Change Freq for this Contract is ‘Billing Date’.
9. Based on the understanding of ‘Billing Date’, the applicable interest rate will be applied for one full billing cycle. So, for Jul-11, the CRVRI should have only one tier – not 2 tiers as is currently occurring.
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