Calculating Financial Component Amounts

After the required financial components have been identified, the amount and effective date must be determined for each one. The amount is determined by examining the period for which the financial component applies. For a ramp-up or ramp-down financial component, this will be the cover period of the financial component. For a recurring or open-ended financial component, this will be cover period of the first complete delivery cycle.

For example, if we take the three financial components identified above for nominee Linda, the periods specified would be:

From Wednesday 6th July 2011 to Sunday 10th July 2011.
From Monday 11th July 2011 to Sunday 24th July 2011.
From Monday 25th July 2011 to Friday 29th July 2011.

The amount used for each individual financial component depends on the case decision objective tags which have been specified in the rule set for the product. Each tag has an associated frequency. The available frequencies are daily, weekly, bi-monthly, monthly and yearly.

When calculating the amount for a recurring financial component typically the frequency will match one of the available tags. When calculating the amount for a ramp-up or ramp-down financial component the available tags are applied largest first.

For example, if the rule set for the product specified a 'daily' case decision objective tags with an amount of $10 (indicating that for a single day the amount of 10 should be paid) and a 'weekly' case decision objective tag with an amount of $65 (indicating that for a full week the amount of 65 should be paid), the amounts calculated for the three financial components would be as follows:

From Wednesday 6th July 2011 to Sunday 10th July 2011 the amount would be $50 (five days at $10 per day).
From Monday 11th July 2011 to Sunday 24th July 2011 the amount would be $65 (one full week at $65 per week).
From Monday 25th July 2011 to Friday 29th July 2011 the amount would be $50 (five days at $10 per day).

Consider this second example which explains how the tags are applied largest first. If the delivery frequency is monthly and a ramp-up financial component is required for the period from 8th June 2011 until 30th June 2011 (23 days in total), and the following case decision objective tags are specified:

A monthly tag at $250 per month
A weekly tag at $65 per week.
A daily tag at $10 per day.

Using these Tags to calculate the amount for the ramp-up financial component would give a total of $215 (three weekly tags plus two daily tags).

However, if no weekly tag had been specified then the amount calculated for the ramp-up financial component would be $230 (twenty three daily tags).