March 31, 2007

Primatics Systems releases Version 1.0 of Loan Accounting and Fair Value System

The engine provides capability for SFAS 91 and complex accounting functions such as unwind/replay, real-time updated P&L or daily closes.

Primatics Loan Accounting and Fair Value Engine is a patent pending real-time multi-threaded engine with the vision of processing business transactions as a result of loan purchases/originations, re-designations, sales, securitization, accounting for mortgage servicing rights, calculation of loan loss reserves and general receipt of principal and interest. Engine is capable of integration with outside fair values providers to foster fair value management of your accounting positions, which will support those firms looking to elect the new fair value option offered by FAS 159.

“The release of the Loan Accounting and Fair Value System comes through significant accounting experience gained as a result of accounting re-statements for the largest financial corporations in the country. The release of the first version of the product provides the core framework to develop new accounting functionality” according to Michael Therrien, Managing Director of Primatics Financial.

Primatics Loan Accounting and Fair Value System Functionality

Unwind and Replay Functionality

The Loan accounting engine has full back-end support for unwinding business and accounting events and to replay transactions due to changes such as data corrections or to process older accounting events received after month end close usually due to operational timing differences. A loan can be replayed individually based on any given date going forward while subsequently processing all changes with an “as of date” concept. The “as of date” concept allows a view of the past based on old data and a view of the past based on new data received. This allows full audit traceability in an event of a correction or loan modification and a resulting adjustment entry details the difference.

Data Timeliness and Dependency Data Management

Loan accounting engine has a patent pending algorithm for processing one of the hardest and the most needed functionality absent in commercial accounting platforms. Due to the quality and availability of data in most financial institutions (usually a result of archaic and non-integrated systems), new accounting rules for exception processing are introduced. These accounting rules are immediately under accounting audit microscope due to their deviance from GAAP and hence materiality questions are raised to management. Most commercial accounting systems are unable to either stop the transaction when critical supporting data is missing or even have the ability to catch-up when the correct information is received. More so, none of these systems have a “generic” way to solve this complex problem.

Primatics Loan Accounting Engine has this concept built into the core framework. The functionality is inherited when new accounting events and modules are introduced without any additional complex development. The design and architecture supports any transaction to wait for other transactions or for new correction events before proceeding for accounting. Results of open transactions are available on a real-time basis and can be corrected in operations for successful back-office processing. Once data correction events or new events are sent, the accounting engine will replay all pending events related to the loan and process the loan from the very beginning of the lifecycle until the current accounting period close.

Cost Basis Tracking and General Ledger Roll-forward

The Loan Accounting Engine tracks cost basis positions at any point through a loan lifecycle on a daily basis. Tracking of the loan positions and cost basis allows one central point for the organization to maintain book values for loans that are subsequently used for accounting entries. The results are stored at a transaction level, where any activity such as amortization would relieve the book value by a certain amount. The cost basis is simply computed using the initial book value and the subsequent changes to the book value at an activity level. Given the way cost basis is booked and how the change in cost basis is reflected, the positions by definition will always roll-forward.

Accounting Daily Close

The loan accounting engine supports a concept of the accounting close. Given the real-time nature of the engine, all transactions are processed on a daily basis. Any new loans or modifications to existing loans are processed. The resulting accounting entries provide management with the most precise accounting picture based on the data received to date by the system. Any operational timing difference will subsequently trigger the unwind and replay function but old accounting entries will not change since the books were closed for those periods, however, the resulting catch-up will be booked in the current period.

General Ledger

Loan accounting engine has the ability to book accounting entries to the General Ledger accounts by product type. There is also capability of the engine to perform immaterial monetary movements usually associated with changes in the GL Account and product type changes across a loan lifecycle.

Data Versioning

Loan accounting engine remembers all transactions and provides an “as of date” view of every accounting period close whether it is daily, monthly or quarterly. Hence, no records are either deleted or updated in the system to retain the audit trail required to re-produce any numbers that were run historically. In a case where numbers for the past period were incorrect and a data correction is identified this period, the engine will catch-up in the current period to account for the difference. Given the catch-up is a cumulative impact of a data issue over the past periods, the accounting engine can account for the break-up of the cumulative amount for each period when the data was incorrect. This provides full audit traceability on any data correction or operational timing difference when data is received.

If you’d like more information on this topic, please call Tracy Swensson at 703.342.0046 or e-mail Tracy at tswensson@primaticsfinancial.com.

About Primatics Financial

Primatics Financial was founded in 2004 to provide accounting compliance, analytics, valuation, and risk management to small, medium and large size financial institutions. A leading-edge consulting and product development firm, Primatics is widely recognized for its ability to combine innovation with extensive domain expertise – bridging the gap between data, analytics, accounting, and technology to deliver progressive, promising end-to-end solutions. For more information about Primatics, call 703.342.0040 or visit www.primaticsfinancial.com.

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