Amortization Schedule Mortgage

Stretched out period of amortization schedule mortgage means a lower tax write off, and thus potentially more tax revenue roughly $2 billion over five years, according to one estimate. Such a pile of cash from intangibles could prove too tempting for the deficit burdened government to ignore, particularly when a Ways and Means worksheet notes that President Bush beloved immunization program will cost about $2 billion. Chairman Dan Rostenkowski, D Ill., inserted the provision despite signals earlier that he would hold on such provisions until later this year.

A spokeswoman for the Mortgage Bankers Association was unhappy with the Ways and Means panels' decision. Under the guise of simplification, this is defying the reality of what the asset is worth and how it behaves, she said. This is not good for PMSRs, said one mortgage banking official. This really extends the write off substantively, to double or more than double current industry practice. Some mortgage banker representatives said they would support a 14 year uniform write off provision because it would reduce the amount of paperwork needed to justify amortization of identifiable intangibles in a merger or acquisition.

Current GAAP requires that any bond discount or premium be systematically amortized to income. While the APB expressed a clear preference for the effective interest method, the practitioner may use other methods if the results obtained are not materially different from those which would result from the interest method. The effective interest method enjoys the strongest theoretical foundation but is also the most computationally intensive, especially when the bondholder and issuer have different fiscal years. The program presented provides an easy method for evaluating the materiality impact using alternative methods of allocating bond discount or premium over the life of the bond.

The program, which is compatible with either Lotus 1-2-3, release 4 or higher, or Microsoft Excel, employs a simple macro to prompt the user for the 5 key facts about a bond. It then automatically calculates the required amounts and produces a table that compares the income statement effects of 3 common amortization methods. The program prepares amortization schedules for a bond of virtually any duration and payment frequency; it also presents the information in the form of a graph.

The spreadsheet demonstrates several techniques, such as computing a loan reduction schedule or comparing the effect of various depreciation methods. Current GAAP requires that any bond discount or premium be systematically amortized to income. While the APB expressed a clear preference for the effective interest method, the practitioner may use other methods if the results obtained are not materially different from those which would result from the interest method.

The effective interest method enjoys the strongest theoretical foundation but is also the most computationally intensive, especially when the bond holder and issuer have different fiscal years. The purpose of the program presented in this article is to provide an easy method for evaluating the materiality impact using alternative methods of allocating bond discount or premium over the life of the bond.