Case study
Book value accounting was a basic part of Indecs. Our client approached us saying that they wanted this to be fully automated, they didn’t want to keep any manual errors in this process as it was an important basis for accounting. They wanted to see all transaction movements, whether it be a deposit, a cancellation, etc. To do this, they envisioned an interface to track this from month to month.
First, we started to develop the interface together, and then we were given the accounting logic to display the different transactions on the interface, and of course to decrease or increase the book value in parallel. All this was implemented in an automated process which carries out the purchase price operations on a monthly basis.
Thanks to the joint cooperation and continuous testing, the final form of the BV recording interface was achieved within a few months, including the complete log of the purchase price recovery and the related depreciation. In addition, and more importantly, a basic logic has been built into the system which allows changes in book value to be easily adapted to each individual requirement based on the title of the various transactions, thus ensuring a stable and up-to-date general ledger.
ROLE of the BV
When recording receivables, the book value (BVL) should also play an important role. It is a fundamental requirement for companies involved in the purchase of receivables that the receivable should be recorded in parallel at two values: alongside the total receivable, the books should show the most approximate value, based on the purchase price for which the receivable was purchased. This is the so-called ‘book value’. In the case of cancelled loans, the purchase price is almost always lower than the receivable itself, but the company must be able to show at any time not only how much is outstanding but also how much of the purchase price has already been recovered. The Indecs system is perfectly suited for this purpose, as it provides a separate interface to show the changes in the book value, which can be hidden from the administrator.
TREATMENT OF KBV
In the case of incoming transactions, the BV is reduced according to the general accounting rules or according to the logic defined individually by the partner.
In the course of the Indecs implementations, a wide variety of specific calculation rules laid down in accounting policies have been encountered, but all of them have been feasible to implement as the calculation logic is sufficiently flexible. In this way, Indecs is able to provide an appropriate and accurate analytical approach to the general ledger, but this will be dealt with in another chapter.
extensive storage of receivables
In addition to incomes, the impact of expenses and interest requirements on book value is also dealt with: the accounting policies of companies also determine which of these increase book value and which do not. There are rarely two accounting policies that are the same, but thanks to flexible calculation logic, we have been able to implement all of our partners’ calculation methods to date.
As with all assets, companies need to expect an impairment loss on cancelled receivables. Thus, we have also implemented the calculation of impairment on the book value. The amount of the impairment can be determined individually (e.g. for high value cases), but general rules can also be formulated for mass application. A mixture of these is the most common.
Indecs therefore ensures that the claims’
✔ Value
✔ Book value
✔ Book value reduced by an impairment loss
are all fully stored and their changes are recorded in the software.