When a contract is placed on non-accrual it is due to the customer being past due (typically done at 90 days delinquent for most
finance companies). This stops the contract from earning in the system and can also stop any amortized expenses from being taken on a monthly basis.
ASPIRE has the ability to either create no GL activity at month end or to use CONTRA interest/expense accounts to hold the balance of earnings that would have been taken during the non-accrual period. If the customer becomes current a reversing journal entry will be created in either case that will debit the earned income account and credit whatever is set on the non-accrual interface for the contract and/or its associated Contract Items.
In order to establish the GL setup for non-accrual processing the Capital Lease interfaces below need to be set up to debit either the
deferred income account or a CONTRA interest account for shadow accounting purposes. If these interfaces are set to match the deferred account the net of the debit and credit at month end for a contract on non-accrual will equal zero which means the contract is not earning from a GL perspective.
The same methodology follows for any deferred Contract Items or expense Contract Items and these interfaces need to be set up on
each one based on the customer’s intention to either have all earnings/expense net out to zero for contracts on non-accrual or use a CONTRA account to hold the non-accrual earnings balance.
On an IDC item the following settings will drive the handling of expenses taken for a contract on non-accrual:
- Follow Contact Non-accrual – Determines whether expense continues to be taken when a contract is on non-accrual or if the expense stops when earnings are stopped
- Non-Accrual Expense interface
For all other Contract Items that are financed the Non-Accrual Earned Income interface will drive whether earnings are netted at
month end or if they will be taken to a CONTRA interest account