Relying on access to a core system for income recognition calculations may not result in accurate calculations. Using spreadsheets also creates a risk of errors. Furthermore, given how many financial institutions recognize accretion on purchase marks, they can spend a lot of time performing calculations over and over each period. That can be an efficiency burden for organizations—especially when they have other issues requiring their focus.

Other accurate, more efficient options for calculating accelerated and base accretion exist.

One option is to use income recognition software, which increases efficiency through automated processes while ensuring compliance with accrual accounting principles. Another is to work with purchase accounting advisors, who can analyze monthly results of base and accelerated accretion, provide monthly income recognition projections, and provide ongoing calculations for remaining discounts and premiums.

Financial institutions that take time to understand their options regarding Day 2 accounting will avoid making assumptions that could become a burden – either operationally or in the form of audit scrutiny – in the long run.

Improving the income recognition process may seem like a small decision or an optional one because of access to a core operating system. History tells us differently.