Allocation Areas

The allocation areas show the model's progress through the entire allocation process.

The allocation areas are:

Interest Income/Expense

This area allocates interest income and expense independently of balance sheet balances. You can create rules and methods that consider the yield differentials that can exist in an institution's branches. This consideration provides a more accurate picture of each branch's profitability or value.

Assets & Liabilities

This area moves the balance sheet values to the correct unit before calculating the Funds Transfer Pricing (FTP) charge. In some instances, you can move interest-earning or interest-bearing accounts from a centralized unit to an organizational unit. In other instances, you can move non-rate-bearing accounts, such as fixed assets or accounts payable, from an organizational unit to an overhead unit because departments are not charged for non-rate-bearing accounts.

When you allocate a rate-bearing account, the application checks to see if an Interest Income/Expense allocation was already performed for the account in question. If so, then no additional allocation of the account's interest income or expenses occurs. If not, then the interest income/expense associated with that account is also allocated using the same method as the balance sheet. For example, assume that 10 percent of the New Auto Loan balance is allocated to Branch A and 20 percent to Branch B. Then, Branch A also receives 10 percent of the New Auto Loan interest income and Branch B receives 20 percent.

Equity

This area segregates capital accounts from other balance sheet allocations. You can address allocating capital to dimensional units separately from the other balance sheet accounts. Some users can choose not to allocate any balance sheet accounts but choose to allocate capital. Other users can allocate both types of accounts. You can allocate capital accounts using methods that are not available to the other balance sheet accounts.

Non-Interest Income/Expense

This area performs most of the allocations. The reason for these allocations is to move the income/expense into the unit that requested or caused the activity that created the charge.