Apply & Adjust Portion Off Hire Calculation
When it comes to reporting hire in the month-end accruals, there are four ways in which the system accounts and adjusts for off hire. Depending on the P&L Calculation Options chosen for off hire related calculations, the following are the four scenarios:
No Options Selected
Apply Off Hire / Waiting to Period Selected
Adjust Portion Off Hire Selected
Both Apply and Adjust Portion Off Hire Selected
Assumptions:
Accrual is run for July 2020 Month End.
This is an ongoing voyage where off hire occurred entirely in the month of July 2020.
No Options Selected
By default, the system will take the total net hire and prorate it.
The general formula for prorating is,
Voyage Days Performed / Total Voyage Days,
where Voyage Days Performed = No. of days sailed from Voyage Commencement to Accrual Month End Date (e.g. 31 July 2020).
When no option is selected, the system calculates based on the following logic,
(Total Hire - Off Hire) * (Voyage Days Performed / Total Voyage Days),
where Total Hire = expected hire for the entire duration of the voyage.
Apply Off Hire to Period
Apply Off Hire to Period builds upon the earlier option. Instead of prorating net hire, the system will now allocate the full off hire deduction to the period in which it occurred. Since the off hire occurred in July, the full amount will be deducted from the accrued hire.
When Apply Off Hire to Period option is selected, the system calculates based on the following logic,
[Total Hire * (Voyage Days Performed / Total Voyage Days)] - Off Hire
Note:
In the event you have an off hire which crosses 2 months, the system will apply the amounts to each month according to the proportion in which they occured.
If the off hire took place outside of the period in which the accrual is run, there will be no off hire deducted. The formula will be as follows:
[Total Hire * (Voyage Days Performed / Total Voyage Days)] - 0
Adjust Portion Off Hire
For this option, the system will exclude the off hire entirely when performing accruals.
Hence, it follows a different prorating logic.
Adjusted Prorate % = (Voyage Days Performed - Off Hire Days) / (Total Voyage Days - Off Hire Days)
With the above logic for Adjusted Prorate %, the system deducts the off hire from the total hire and then prorate it based on the following logic:
(Total Hire - Off Hire) * Adjusted Prorate %
Adjust Portion & Apply Off Hire
When you have both options checked, the system will first perform an adjusted prorate and then deducts the off hire.
The logic is as follows:
(Total Hire * Adjusted Prorate %) - Off Hire
Note:
If the off hire took place outside of the period in which the accrual is run, there will be no off hire deducted. The formula will be as follows:
(Total Hire * Adjusted Prorate %) - 0