Amortization pattern check

reconciliation

Andreea Lungu-Tranole 18th of September

Alexandra-Elena Druga 2020
 Content

Amortization GL accounts included The structure of Check list for Blackline upload
The impact of
Reconciliation – in Amortization Amortization Amortization amortization
main information Reconciliation Reconciliation Reconciliation
 Amortization Pattern Check Reconciliation –
main information

 It is performed quarterly;
 It is a medium risk reconciliation;
 Purpose: to reconcile all the prepayment accounts as per GRF and to identify amortization
rules and set it up in Blackline;
 Goods and services may be prepaid. If they have not been received by the end of the
financial year, the amount prepaid will appear in the balance sheet as prepayments and not
as costs in the profit and loss account.
 Amortization Pattern Check Reconciliation –
main information
 it can be made for the entire
 examples:
balance of a liability or for an
 the settlement of a rent, early
upcoming payment that is
debt or installment loan
paid in advance of the date
payment before its repayments,
for which the borrower is
official due date insurances
contractually obligated to pay

Prepayment
 prepaid expenses are paid in full, in one  when the asset is consumed, the
accounting period, for an asset that will prepayment is reclassed as
be consumed in a future period normal expense
 Amortization Pattern Check Reconciliation –
main information

 to amortize =>  amortization schedule =>

 accounting technique
establishing a series used to reduce the
used to periodically
of equal monthly current balance on a loan, for
lower the book value
payments, over a set example, a mortgage or car
of a loan or intangible
period loan, through installment
asset over a set
payments
period

Amortization
 amortization schedule => the amount of  loan => amortization focuses on spreading
a common accrual, such as prepaid rent, out loan payments over time
 asset => amortization is like depreciation
is gradually reduced to zero
 1600101000 PREPAYMENTS -
INSURANCE

GL accounts included in
1600102000 PREPAYMENTS -
FACILITIES

1600103000 PREPAYMENTS -
RETIREMENT BENEFIT CONTRIBUTION Amortization Pattern Check
1600104000 PREPAYMENTS - PRIMARY
SUPPLY CHAIN FREIGHT
Reconciliation
1600110000 PREPAYMENTS -
1600105000 PREPAYMENTS - IMPORT DUTY LEAF
SECONDARY SUPPLY CHAIN
1600111000 PREPAYMENTS -
1600106000 PREPAYMENTS - DOWN IMPORT DUTY WRAPPING MATERIAL
PAYMENTS ON MACHINERY

1600107000 PREPAYMENTS -
1600112000 PREPAYMENTS - OTHER
<1YR
•The GL analyst’s role is to ensure that the
MERCHANDISING UNITS reconciliation has been prepared correctly and on
1354115000 PREPAYMENT - TPD UID
1600108000 PREPAYMENTS -
COSTS time, as per Global Reconciliation Framework:
DEPOSITS TO EXTERNAL PARTIES

1600109000 PREPAYMENTS - RENTAL 1601101000 ACCRUED INCOME - H:\Group\Process\R2R\0.GL\01. Knowledge

DEPOSITS EXTERNAL
management_231\2020\01.Global Files\02. GRF
1610101000 PREPAYMENTS - OTHER
>1YR

2252141000 DEFERRED INCOME -

OPERATING

2252142000 DEFERRED INCOME -

NON-OPERATING

2262102000 DEFERRED INCOME

 The structure of Amortization Pattern Check
Reconciliation

Amortization Pattern Check reconciliation includes 5 sheets per total:

 Accounts to be reconciled: we can find here all the GL accounts that can be included in this
reconciliation, as per GRF;
 Instructions - this sheet contains the steps to be followed in order to manually generate the
reconciliation;
 Raw Data – it is the part where we analyze the items and identify the amortizable items;
 Amortizable Items – this sheet contains the identified amortization rules;
 Summary – here we will find the pivot, containing the GL’s analyzed in Raw data sheet.
RO10
Amortization Pattern Check Rec
 Raw data sheet

• Columns A, B – must be grouped and contain

accurate data and formulas until the last raw;
• Columns F, G, J, K, M – must be converted to
number (Account, Assignment, User, Document
Number, Clearing Document);
• Columns including amounts – format
Check list for Accounting;
• Columns which include dates – format Short
Amortization Date;
Pattern Check • Column V – the category of prepayment –
specific for each Company Code.
• Column W (Item Type) – can be either
Amortizable Item or Supporting Item;
• Column X (Balance) – items from the previous
years are Opening Balance, the rest of the items
– according to the analyzed Quarter;

Checklist
Amortization
 Raw Data

 Category:
 Balance:
 it is specific for each Company Code;
 Opening Balance – for the items
 there does not exist a predefined list of categories;
posted during the past years;
 it can be established using the text of the item (e.g. Fee
 Q1 Movement, Q2 Movement, Q3
Jan-10 Sep 2016 => Category “Fees”) or the description
Movement, Q4 Movement –
of the prepayment account (1600101000 –
depending on the analyzed quarter.
Prepayments – Insurance => Category “Insurance”);

 Item type:
 Amortizable item – if the GL analyst could
identify an amortizable rule (using the text,
the posting date);
 Supporting item – the items for which the
GL analyst could not identify an
amortization rule;
 Amortizable Items sheet

 Columns A,D, H, K – must include formulas (Item sub-

type, Monthly released amount, Period and Remaining
Balance);
 Columns C, D, K – must be type accounting (Transactional
amount, Monthly released amount, Remaining balance);
Check list for  Start date – the date of the first release / when the
Amortization prepayments starts to be amortized;
Pattern Check  End date – last date of the release / when the prepayment
will be amortized;
 Cell L2 – first day of the current month (the month when
the reconciliation is prepared).
 Summary

 2 sections:
 Amortizable Items;
 Supporting Items;
Check list for  Amortizable Items:
Amortization  Comment: “Amortizable rule identified and set up
in Blackline. Last follow up was made with … on …”;
Pattern Check  Comment: “Amortizable rule identified and set up
in Blackline. The items are now amortized”.
 Supporting Items:
 Comment: “Items related to … . No amortizable
rule was identified. Last follow up was made with …
on … to offer more information about this
prepayment.”
 Comment: “Items related to … . No amortizable
rule was identified, but the items are offset during
the current quarter.”
The impact of amortization as
accounting process
 Impact on the Balance Sheet Statement – the annual
amortization expense of an intangible asset reduces its
value on the balance sheet, which reduces the amount
of total assets in the assets section of the balance
sheet. 

 Impact on the Income (P&L) Statement – amortization,

like depreciation, is expensed on the income statement,
which artificially lowers net income.

 Impact on the Cash Flow Statement – amortization falls

in the cash flow operations section; because
amortization is a non-cash expense, it is added back to
net income for a true cash position.
Blackline upload
 Show – Transactional/Account;
 Amortizable Items – set up the
amortization rule based on
“Amortizable items” sheet;
 Supporting items – upload the
lines from section “Supporting
Items”, using sheet
“Summary”;
 Supporting documents –
upload the reconciliation and
the follow up (Excel file which
contains the Cherwell link);
 Comments – the link of follow
up via Cherwell Service Line.