Add a Cash Basis Expense

A cash basis expense is a type of budgeted expense. It is particularly useful if a fund has unknown variables associated with its expense payments. For example, you can create a cash basis expense to accrue an expense payment for a fund that does not have a known fee amount or payment date.

To set up a cash basis expense, you set the Accrual Reset Frequency field on the Create Budgeted Expense panel to Cash and define values for the Expense Account Name, Accrual Beginning Date, Fee Currency, Payment Tolerance Percent (amount payment can differ from accrued balance as a percentage of Total Net Assets), and Trueup Spreading Methodology fields.

The following example shows a cash basis expense defined using the Create Budgeted Expense panel.

 The budgeted expense acts like a rule that the system matches to an incoming cash basis expense. The cash basis expense is matched to the rule based on the values in the Entity ID, Share Class, Expense Account Name, and Effective Date fields. If no budgeted expense is set up, the system sets the payment record to Failing and the system generates an error. If a valid row does exist, the system retrieves the Trueup Spreading Method from the fee rule and calculates the number of days until the end of the period. In the example above, the rule was set up October 1st and the Trueup Spreading Method was set to days in month.

Suppose the payment arrives today, October 12, a valid fee rule exists, and there are 19 calendar days remaining in the month of October. The system divides the payment amount by the number of days remaining in the month to determine the daily accrual (500.00/19 = $26.32). It then calculates the NAV impact by dividing the daily accrual value by the number of shares outstanding in the ESTAR_NAV table for the accounting date on the inbound payment file. In this example, the NAV impact is 26.32 / 10,000,000 or 0.000002632. This is well below the tolerance; therefore, the system finds a budgeted fee rule, sets the expense payment status to Full, and posts a daily accrual of $26.32 over the remainder of the month.