3. PROFIT VBox

Software for the simulation and reporting of IFRS compliant Profitability after all cost — ex ante or ex post as per single instrument. The objective is to report the Actual Performance as per Contract, Customer, Profit Centre, Product or Segment exactly as it will be recognized in the Statement of Comprehensive Income (P&L) so that there will be only one consistent version of the truth.

3.1. Return on Equity

The Basel Accords define minimum Capital Requirements for all Financial Assets and thus limit the Bank’s Exposure and Business Activities based on the available Capital. Thus Capital should be optimal allocated in profitable ventures only.

PROFIT VBox will calculate the Income and the Attributable Cost of any Financial Asset or Liability in order to calculate the Return on Equity after Compensation of the Share Holders.

Return on Equity Calculation

Return on Equity Calculation

3.2. Contract Modification

When a contract is restructured on behalf of a distressed customer in order to ease the debt service, then the P&L impact of this modification will need to be recognized as a cost (similar to a subsidy or a partial write off). This cost is the difference between the Book Value before modification and the Present Value of the modified Cash Flows (discounted at the original EIR before modification).

Interest Waiver

Interest Waiver

Interest Moratorium

Interest Moratorium

Liquidation

Liquidation

Profit VBox will:

  1. generate the Original Contracts and Cash Flow Schedules before Modification

  2. calculate the EIR and Amortised Cost (Book Value) of the Contract on Modification Date

  3. interactively simulate the Modification (e.g. Moratorium, Waiver)

  4. distribute the modified Cash Flows across the Original Contracts and

  5. discount the distributed Cash Flows down to the Present Value as per Original Contract

  6. print an Application with the Modification Details which can be authorized by the decision makers (alternatively, there is an Electronic Workflow)

Best practise is to Simulate the Modification before it is agreed on (ex-ante). Although Profit VBox also supports the Calculation ex-post after the Modification has been agreed.