Financial calculation testing

What financial calculation testing covers

A calculation defect repeats on every record that uses the formula, so one wrong rounding point becomes a customer overcharge, a disclosure error, or a loss on every loan, invoice, payroll, or transfer. We test the arithmetic behind fees, interest, FX, accruals, rewards, and tax against reference values that the system under test did not produce.

Interest accrual and day count conventions

A day count convention decides the interest on the same balance. On 100,000.00 at 5.00% for 1 March to 1 April, Actual/360 gives 430.56, Actual/365 Fixed gives 424.66, and 30/360 gives 416.67. We check that each product uses the convention in its contract, including leap years: on the same balance and rate, Actual/365 Fixed over the 366 days of 2028 accrues 5,013.70, and Actual/Actual (ISDA) accrues 5,000.00.

The rounding point matters as much as the convention. Daily interest on the same balance under Actual/365 Fixed is 13.69863. An engine that rounds each day to 13.70 accrues 5,000.50 over a 365-day year instead of 5,000.00. The interest accrual and day count testing guide shows the test data for these cases.

APR and amortisation schedules

For US consumer credit, we recalculate the APR under appendix J to 12 CFR Part 1026, which treats all months as equal (paragraph (b)(3)(iv)). We compare it with the disclosed APR against the 1/8 of 1 percentage point tolerance for regular transactions in 1026.22(a)(2) and the 1/4 of 1 percentage point tolerance for irregular transactions in 1026.22(a)(3) (eCFR, checked on 2026-09-16). The Regulation Z page lists the related disclosure findings.

Amortisation tests check invariants on every schedule: principal components add up to the amount financed, and the final payment carries the residual cent. A 1,000.00 purchase in three instalments at 0% is 333.33, 333.33, and 333.34; three instalments of 333.33 leave 0.01 uncollected. We also cover long first periods, due dates on the 29th to 31st, and early repayment.

Fees, rewards, tax, and proration

Fee schedules fail at their edges. We test amounts on both sides of each tier threshold, whole-amount against marginal tiering, and minimum and maximum fees applied before or after rounding. Reward accrual is tested the same way: 1.5% cashback on 19.99 is 0.29985, which is 0.30 when rounded and 0.29 when truncated.

Tax rounding depends on where the rule rounds. Three invoice lines of 0.35 at 7% give 0.06 of tax when each line is rounded half up, and 0.07 when the invoice total is rounded. The specification records which rule applies, and the suite tests both paths. Proration tests use 28, 29, 30, and 31-day months as the divisor.

FX conversion and ISO 4217 minor units

ISO 4217 sets 0 minor units for JPY and KRW, 3 for KWD and BHD, and 4 for CLF (SIX list published 2026-01-01). A conversion that always rounds to two decimals produces amounts that a JPY or KWD account cannot hold.

For US remittance transfers, 12 CFR 1005.31(b)(1)(iv) requires the disclosed exchange rate to be rounded consistently for each currency to no fewer than two and no more than four decimal places. Paragraph (b)(1)(vii) states that the exchange rate used to calculate the Total to Recipient is the rate prior to any rounding. On 1,000.00 at 17.23456, the correct amount is 17,234.56, and the rounded rate 17.2346 gives 17,234.60. The Regulation E page covers the rest of the disclosure.

Rounding modes and number representation

We confirm the rounding mode per formula: half-even, half-up, or truncation. Binary floats hide defects: Python's round(2.675, 2) returns 2.67 because the float stores slightly less than 2.675 (Python documentation). The banker's rounding testing guide gives the tie cases we generate.

Reference models and property-based testing

The reference model is built from the calculation specification, never from the system's code, in decimal arithmetic. Python's decimal module defaults to 28 digits of precision with ROUND_HALF_EVEN (Python documentation). Property-based tests with Hypothesis or fast-check generate amounts, rates, dates, and currencies, and assert properties: instalments add up to the total, rounding a rounded amount changes nothing, and a converted amount has exactly the minor units of its currency. Each failing case shrinks to a minimal input and becomes a fixed regression case.