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FSC010 Risk Management Processes FSC010SAP SAPTreasury Treasuryand Processes

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SAP Treasury and Risk Management Processes

THE BEST-RUN BUSINESSES RUN SAP SAP AG 2005 ¤ SAP AG©2003

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mySAP ERP 2005 2006/Q2 50079501

Copyright

Copyright 2006 SAP AG. All rights reserved. No part of this publication may be reproduced or transmitted in any form or for any purpose without the express permission of SAP AG. The information contained herein may be changed without prior notice.

¤ SAP AG 2006

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SAP, R/3, mySAP, mySAP.com, xApps, xApp, SAP NetWeaver and other SAP products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of SAP AG in Germany and in several other countries all over the world. All other product and service names mentioned are the trademarks of their respective companies. Data contained in this document serves informational purposes only. National product specifications may vary. The information in this document is proprietary to SAP. No part of this document may be reproduced, copied, or transmitted in any form or for any purpose without the express prior written permission of SAP AG. This document is a preliminary version and not subject to your license agreement or any other agreement with SAP. This document contains only intended strategies, developments, and functionalities of the SAP® product and is not intended to be binding upon SAP to any particular course of business, product strategy, and/or development. Please note that this document is subject to change and may be changed by SAP at any time without notice. SAP assumes no responsibility for errors or omissions in this document. SAP does not warrant the accuracy or completeness of the information, text, graphics, links, or other items contained within this material. This document is provided without a warranty of any kind, either express or implied, including but not limited to the implied warranties of merchantability, fitness for a particular purpose, or noninfringement. SAP shall have no liability for damages of any kind including without limitation direct, special, indirect, or consequential damages that may result from the use of these materials. This limitation shall not apply in cases of intent or gross negligence. The statutory liability for personal injury and defective products is not affected. SAP has no control over the information that you may access through the use of hot links contained in these materials and does not endorse your use of thirdparty Web pages nor provide any warranty whatsoever relating to third-party Web pages.

Target Group

z Participant „

Project leaders

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Project team members

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Consultants

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Users

z Duration: 5 days

¤ SAP AG 2006

User notes „ The training materials are not intended for self-study but rather as a supplement to the information provided by the trainer. Therefore, you can use the ample space in the material for your own notes. „ The exercises are only a supplement to the examples used in this course. There may not be sufficient time to complete all the exercises during the course. If this is the case, you can use the exercises after the course to practice what you have learned.

Course Overview

Contents z Course Goals z Course Objectives z Contents and Course Overview z Main Business Scenario

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Course Goals

This course will prepare you to z Create and manage process-oriented transactions in

Transaction Manager, Market Risk and Credit Risk z Configure and carry out typical business processes

in these areas.

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Course Objectives

z At the conclusion of this course, you will be able to z Use the support tools for back office processing z Describe the interrelationships in SAP Transaction Manager z Set up the necessary structures for short, middle and long term liquidity management z Explain the different ways of monitoring and controlling market and credit risks

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Course Overview: Overview Diagram

Unit 1 Course Overview Unit 2 Treasury and Risk Management: Overview Unit 3 Transaction Manager: Money Market Unit 4 Transaction Manager: Forex, Derivatives Unit 5 Transaction Manager: Securities Management Unit 6 Market Risk Analyzer Unit 7 Credit Risk Analyzer

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Main Business Scenario

z You want to get an overview of the

components of Transaction Manager, Market Risk Analyzer and Credit Risk Analyzer. z You want to learn about the business processes

within the components. z You are currently using or have successfully

implemented the SAP FI module. You now want to activate short, medium and long term liquidity management and make use of risk management facilities.

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You are a member of a project team, which will make both basic and all other settings required for mapping financial transactions in corporate finance management.

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Treasury and Risk Management (TRM): Basic Overview Diagram

Unit 1 Course Overview Unit 2 Treasury and Risk Management: Overview Unit 3 Transaction Manager: Money Market Unit 4 Transaction Manager: Forex, Derivatives Unit 5 Transaction Manager: Securities Management Unit 6 Market Risk Analyzer Unit 7 Credit Risk Analyzer

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Unit 2: Treasury and Risk Management: Overview

Identifying processes in Treasury Treasury and Risk Management (TRM): Overview General functions (Treasury and Risk Management)

Transaction Manager

Market Risk Management Credit Risk Management Reporting

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Treasury and Risk Management - Basic Principles: Unit Objectives After completing this unit, you will be able to: z Provide an overview of SAP Treasury and Risk

Management z Explain the various processes within TRM and the z z z z z

standard functions Process your SAP business partner Explain the role categories defined in the business partner and create business partner relationships Set up standing instructions and authorize business partners Differentiate between banks in general, business partner banks and house banks Explain the reporting options

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Overview: Treasury and Risk Management Process

Analysis Reporting Simulation

Items Cash Currency Risk Limits

Trading By telephone On the marketplace Internal trade

Controlling Risk controlling Compliance

Accounting Parallel Valuation (Local GAAP, IFRS, FAS, Hedge accounting

Back office activities Data control Correspondence Netting and payments

)

Periodic Activities Corporate actions Interest accrual/deferral Position valuation

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From a strategic point of view, the analysis and trading process is the starting point for the various Treasury processes. For example, the risk positions of the risk objectives you have set are identified and analyzed. „ Once you have decided to complete certain financial transactions, you enter the trading processes for these transactions in Transaction Manager. Transaction Manager also supports the management of other transactions and the generated financial positions. „ A range of documentation and control functions are available for all Treasury activities. You can perform evaluations for specific instruments or across the whole system to ensure that the various documentary and control tasks of financial accounting and the treasury are conducted accurately. „

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Overview: Treasury and Risk Management Priority

Company Weighting

Objectiv e

1

Ensuring liquidity

95

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Optimizing finance costs

92

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Optimizing yields on financial assets

74

4 Securing costs (example: against possible exchange rate fluctuations)

61

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Securing turnovers (example: against possible exchange rate fluctuations)

52

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Profit contribution with active management of open positions

30

Risk Management

Transaction Manager

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SAP Treasury tasks and their distribution in both areas of Transaction Manager and Risk Management can collectively be derived from the company objectives: with Transaction Manager you can optimize yields and cost structures, and with Risk Management secure against market and credit risks. „ Transaction Manager supports financial transaction and financial position management. „ You can use Market Risk Analyzer to analyze interest rates, currency ands stock risks. „ Credit Risk Analyzer helps you assess credit risks and includes an Online Limit Check. „

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Overview - SAP Treasury & Risk Management mySAP™ ERP

Focus

tools •Results database •Manage-

MM

ment reports

Yield calculations

Der.

Sec.

Transaction Manager

•Middle

•Front - / Middle office

office

•Back office

•Data

•Accounting

export

SAP Business Partner

FX

Portfolio Analyzer

SAP In-House Cash

SAP Cash and Liquidity Management

Market data

•Reporting

•Utilization •Limit management

Market Risk Analyzer •Price calculator •Value at Risk •Simulate rates

WS Development systems

reporting

Credit Risk Analyzer

Trading platforms

•Ad hoc

House banks etc.

SAP Treasury & Risk Management Reporting

Financial Accounting

in mySAP ERP

SAP NetWeaver™ Portal, Security, Business Intelligence, Knowledge Management, eXchange Infrastructure ¤ SAP AG 2006

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As an integrated subledger, SAP Treasury and Risk Management is closely linked to the remaining product portfolio. It uses the central business partner so that it is not necessary to manage it in the system unnecessarily. It is not integrated with the In-House Cash and, if desired, you can use it to centrally manage payments. The liquidity effects can be evaluated in real time in Cash Management. The items of Cash Management can be evaluated in many standard reports of SAP Treasury and Risk Management together with the Treasury transactions. The relevant items and results are directly updated to Financial Accounting. Using SAP NetWeaver it is possible to integrate other external systems (for example trading platforms, house banks and market data information systems) into mySAP ERP SAP Treasury and Risk Management.

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Requirements of Different User Departments

Trading

Back office processing

Accounting

Cash flow analysis

Flexible process definition

Automatic posting

Information about risk/revenue

Process automation

Simple transaction entry

Reliability

Option of financial reporting according to different standards Hedge accounting – FAS133/138, IAS39

Extensive product categories

Integration Reporting - new logical databases, analysis functions Internet – Web access Security - role concept, authorization concept

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Comprehensive management of financial transactions and positions „ Trading and back office support „ Monitoring, checking, and releasing „ Data transfer to financial accounting̘ (including accruals/deferrals and valuations) Flexible configuration of company-specific transaction and position management processes Assignment of financial transactions to portfolios or management in securities accounts Flexible reporting and portfolio analysis Datafeed Interface

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Transaction Manager

Transaction Manager Asset Management Organization

Money market

Foreign exchange

Securities

Treasury Organization Front office

... HGB US GAAP

Middle office Back office

Derivatives

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Contracting financial transactions is one of the fundamental tasks of many financial departments. Depending on corporate policy, emphasis may be placed on providing an internal service for sibling companies or on actively investing liquid funds, financing planned investments, or hedging existing risks in the financial markets. „ Transaction Manager provides you with the necessary tools for all related transactions, from creating to transferring relevant finance accounting data. This supports both conventional treasury departments with a trading-related focus and asset management departments. This gives you the advantage of being able to execute all types of transactions - from short-term financing to strategic long-term investments - all on the same platform. „

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Transaction Manager: Functions Overview

z Comprehensive management of financial transactions and positions „

Trading and back office support

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Monitoring, checking, and releasing

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Data transfer to financial accounting! (including accruals/deferrals and valuations)

z Flexible configuration of company-specific transaction and position management processes z Assignment of financial transactions to portfolios or management in securities accounts z Flexible reporting and portfolio analysis z Datafeed Interface

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Transaction Manager: Basic Functions

Financial Transactions Structure FI

Financial accounting

Central Data example: business partner, banks

AM

Investment accounting CO

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Money market trading

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Forex

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Derivatives

Central Functions

Controlling

Examples: trader/user, currencies, correspondence, financial mathematics, posting logic, payment transactions, workflows, archiving, market data, information system

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The central functions of Transaction Manager are: Structuring financial transactions (example: the product categories Deposits, Overnight Money and so on) y Central data (example: business partner with all authorizations and the bank data for the business partner's payment details) y Central functions (see slide). „ Transaction Manager also supports standardized interfaces for Financial Accounting, Cash and Liquidity Management, Market Risk Analyzer, Credit Risk Analyzer, Market Data Binding. „

y

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Sample of a Range of Financial Instruments Product Types Investment/ Borrowing instruments

Money market trading „

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Fixed-term deposits Depositsat notice Commercial paper Interestrate instrument Cashflow transaction Facilities

Securities „ „

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Hedging instruments

Foreign exchange Derivatives

Stock Subscription rights Investment certificates Bonds Convertible bonds Warrant ! bonds Warrants ABS MBS

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Spot exchange transactions Forward exchange transactions Foreign exchange swaps

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Cap /Floor FRA Swaps - Interest rates - Cross currency interest OTCoptions rates - Currencies - Interestrates - Securities - Swaption Futures Listen options

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Within short-term transactions, money market or foreign exchange transactions provide the option of bridging liquidity deficits or surpluses. For mid- and long-term, investments and borrowings are represented by securities transactions. „ Derivative financial instruments, on the other hand, help you secure against interest rate and currency risks „

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Transaction Manager: Transaction and Position Management Process

e eas l e R Trading

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Create new order/contract Exercise/expiration Terminations Rollovers Exercising rights

Back office

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Settlement/control Interest rate adjustment Netting Referencing Confirmation letters Securities transfer postings Corporate actions

Accounting

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Postings Payment transactions Reversals Accrual/deferral Valuation

User authorization Limit management

¤ SAP AG 2006

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y y y „

In transaction and position management, the following areas are differentiated: In Trading, you create transactions and exercise rights. In Back Office, you settle transactions, that is, you check entered transactions and carry out position management-related processes, such as securities transfers. In Accounting, you carry out all bookkeeping for relevant activities in the subledger and transfer posting information to the Financial Accounting general ledger. This process actively support the principle of dual control, triple control or quadruple control.

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Mapping International Accounting Rules

Definition of several parallel valuation areas

Definition of Position Management procedures to prepare financial statements in the parallel valuation areas, on the basis of IAS and/or US GAAP, for example

Resets in the key date valuation enable year-end closings and end-of-quarter closings to be prepared

Lot accounting support for securities and listed derivatives

¤ SAP AG 2006

Position management procedure: defines how the position management is to be handled in the parallel area „ Evaluation class: indirect balance sheet layout - AFS, trading „

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Market Risk Analyzer

Currency risk

Interest rate risk

Market risk procedure

Stock risk

Organizational Elements

Cash flow analysis Value at Risk Sensitivities Mark-to-market Interest/Currency exposure

Reporting characteristics Structured products Flexible portfolio hierarchies Business areas

Decision support and simulation Fictitious transactions Market data scenarios ¤ SAP AG 2006

In addition to conventional financial management tasks, such as cash management, ensuring liquidity, and liquidity management, controlling market risk plays a crucial role in ensuring a company's competitiveness. The Market Risk Analyzer offers comprehensive position analysis functions, such as mark-to-market valuation for financial transactions, „ Additionally, risk or performance figures, such as exposure, future value, effective interest rate and effective rate, internal rate of return, sensitivity, and value at risk can be determined. When you run these reports, you can incorporate both contracted positions and fictitious financial transactions in the calculations, „ Valuations can be based on either real or simulated market prices. As well as a high level of flexibility for organizing reports, Market Risk Analyzer provides a reliable valuation basis for market risk controlling. „

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Credit Risk Analyzer

CFM Transaction Manager Limit check

Characteristics z

Integrated online limit check

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Analysis, measurement and control of credit and settlement risks

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Company-wide limit attribution

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Determining attributable amounts with flexible formulas

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Netting & collateral

OK

Transaction conclusions: updating limits

Credit Risk Analyzer

Reporting Partner Exposure Euro Bank 8.5 United Bank 632.3 688.1 Carlton 12.3 Brightline

Limit 10.5 700.7 716.7 4.8

Avail. Limit Util. in % 2.0 80.9% 68.4 90.3% 96.0% 28.6 256.3% -7.5

¤ SAP AG 2006

The tightening of regulations on risk control confirms the growing importance of analyzing and limiting insolvency risk (KonTraG - German Business Supervision and Transparency Act). System support is also necessary for measuring, analyzing, controlling and limiting counterparty default risk for other business considerations. „ Credit Risk Analyzer is designed to meet all of these requirements with the objective of providing you with comprehensive support for controlling counterparty default risks. The first release covers the specific risks related to your company's financial transactions. Further releases will concentrate on integrating the sales/accounts receivable area. This will enable company management to recognize credit risks when they arise and avoid them. „

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reports

100 80

Graphical reports

60 40 20 0

A

B

C

S

Classic drilldown report

Object list

A 18.234,97 29.932,07 ...

B 27.276,08 38.373,42 ...

C 87.751,84 32.756,44 ...

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Many evaluations offer a selection of different formats for data output.

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Business Partner: Standing Instructions

z Before you can conclude financial transactions with a

business partner, you must create the partner in the system. SAP Business Partner will help you do this. z In addition, you want to authorize specific business

partners for certain transactions only. z How can you automatically get suggestions for business

partner settings when creating transactions?

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You are a member of a project team, which will make both basic settings and all other settings required for mapping financial transactions in Treasury and Risk Management.

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Business Partner: Definition z A business partner is a person or legal entity with whom/which you have a business relationship. z There are three different business partner categories: Organization

Group Natural Person Organization ¤ SAP AG 2006

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A business partner is a person, organization or group of persons/organizations with which your company can have a variety of relationships. Business partners are divided into various categories, which each have different attributes. FM differentiates between Persons (examples: private individual, broker) Organizations (examples: bank, company) Groups (examples: non-trading partnership, shared apartment)

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Overview of Extracted Business Partner Data Business Partner

Role Company Code Data

General Data

Address overview Credit profile Identification/Branches Control Bank details Payment transactions/ transactions/ Valuations Role data

Legal data Fiscal year information Personal data Employment data Additional data Credit standing Fiscal data Reporting data

DescriptDescriptions

Account management Payment transactions Account interest Payment data Autom. Autom. payment transactions Dunning data Correspondence data

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In Treasury and Risk Management, you conclude financial transactions with a business partner. Typical partners include banks or a central treasury department. You create a master record for each business partner. The user interface for business partner data was fully revised as part of the Enjoy project. The screen layout has been restructured and you can now navigate between several tabs containing individual business partner views. The data you can maintain for a business partner is split into two areas: General role data is centrally stored for all roles. The amount of accessible data may vary according to role category, depending on the settings in Customizing. Company code-dependent data̘ is data which only applies for the role category in the respective company code.

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Process Business Partner

Characteristics for Processing a New Business Partner: • Person • Organization • Group • Grouping • BP Role

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To create a new business partner, you must enter a BP role, the business partner type and the grouping on the initial screen. „ The grouping is defined in Customizing and is used to classify business partners according to any criteria. „

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Business Partners: Relationships

Outgoing relationship

"subsidiary of"

Relationship Subsidiary

Parent company Dependent on classification

Relationsh.Cat. Rel. Type SUB2

Example:! Description Subsidiary V. important !subsidiary

Rel. Cat 0050

Description Subsidiary of

Relationship Types ¤ SAP AG 2006

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Relationships can exist between different business partners. You can map these relationships on the Relationships tab page. The relationship categories you can choose from are predefined in the system and depend on the business partner classification.̘Example: "Is subsidiary of" for an organization, or "Is married to" for a person. You can refine the relationship categories by defining different relationship types. The specific relationship type is dependent on the relationship category already chosen. Ingoing relationships of a business partner are all the relationships entered in the master data for the other partner. Outgoing relationships are all the relationships with other business partners entered in the master data for that particular business partner.

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Company Code-Dependent Business Partner Data: Standing Instructions Transaction authorizations

Payment details

Business partner A

Derived flows

Correspondence

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y y y y

Standing Instructions are master agreements concluded with a business partner. Standing instructions for business partners concerning payment details, correspondence and derived flows are included in tab pages in the maintenance of business partners. By integrating standing instructions in the business partner data, they have also been linked to release workflow - business partner. You can also access the standing instructions with a separate menu path. Master agreements can be made according to: Authorizations Which types of financial transactions are permitted with a business partner? Payment details For transactions with business partner A => Payment details of BP A as default values for the transaction Correspondence For transactions with business partner A => predefined: For which transaction is which correspondence created? Derived flows For transactions with business partner A => predefined: If in the transaction with BP A, flow X is generated, tax/commission in the amount of y% is to be calculated

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Standing Instructions: Business Partner Authorizations

Partner authorizations Business partner A Assign

Transaction Manager

Authorization

Money market trading

X

FT deposit 51 A 100 200

Fixed-term deposit Investment Borrowing

Deposit at notice 52 A 100 200

Call money Investment Borrowing

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In order to make use of a business partner (BP), you must̘ Create the BP, Release the BP for use and Authorize the BP as a partner for specific financial transactions. You can only grant transaction authorizations if the business partner - once set up - is released and is not designated for deletion. Transaction authorizations control which financial transactions are permitted with a business partner. You can assign transaction authorizations at the following levels: Contract type Product category Product type Transaction type You have to assign authorization to each business partner and in each company code.

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Financial Transaction: Standing Instructions

Business partner A

Payment Details

Assign • House bank and corresp. bank account • Business partner bank details ¤ SAP AG 2006

Correspondence

Assign

Derived flows

Assign

• Confirmation ! • Derivation procedure - Print - Fax - SWIFT, IDoc! - E-mail - Counterconfirmation

Payment details include all information required to conclude payments, that is, your own (house bank) account data and, where applicable, business partner bank details. You can process different payments in different currencies for each business partner. You can assign any payment details as standing instructions for a transaction. You can assign your instructions on the contract type, product type up to transaction type levels. When concluding a transaction with BP A, the payment details assigned to the relevant transaction are drawn automatically from the standing instructions and proposed as default values. This saves you making many manual entries. „ Standing instructions for correspondence control how external correspondence, that is, correspondence with a (particular) business partner is to be handled. You can choose - by determining any level from contract type to transaction type - whether correspondence with the business partner for a particular transaction should be in print, by fax, e-mail, IDoc or Swift form. These details must be specified if correspondence is to be exchanged with a business partner. „ You can use derived flows in the money market, foreign exchange, derivatives and securities areas to simplify calculation of taxation amounts. To generate derived flows, you must assign a derivation procedure to the relevant partner. „

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Standing Instructions in SAP Business Partner Business Partner

Receivables

Standing Instructions

Details 1,000,000.00 EUR Investment 03.04.05 Payoff 03.05.05

Payment Information Curr., Curr., BANK, Account, … EUR, CHAS, ACC3, …

X

USD, CITI, ACC1, … Correspondence Printer Fax ee-mail IDoc

Payment Information UBS, Acct no. 3,

X

Correspondence E-mail confirmation to...

Derived Flows Rules Withholding tax 1

X

Withholding tax 2

X

Derived Flows Apply tax 1 Apply tax 2

¤ SAP AG 2006

For straight-through processing of financial transactions, it is important to maintain the standing instructions in the business partner. „ You can maintain standing instructions for payment details, correspondence, transaction authorizations and the derived flows. „ Standing instructions principally serve to minimize the effort required for entering data in the financial transaction. The information about payment details and correspondence serve as the default value and can be changed when entering the transaction. „

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Business Partner: Standing Instructions - Payment Details Business Partner: Standing Instructions - Payment Details Currency BP A

Pay. det. ID

House! Account! bank ID

......

......

......

......

......

......

......

EUR

01

Deuba

GIRUN

......

USD

01

Deuba

1050

......

Assign

Transaction M. Money Market

Payment details ID Incoming Outgoing

Fixed-term deposit 51 A 100 200

Fixed-term dep Investment Borrowing

x

01

x

01

¤ SAP AG 2006

The system uses the house bank and the account ID defined in the business partner payment details to determine the bank account to which the posting is being made. „ After creating the payment details, you must not forget to assign them. „ This allows you to control separate accounts for different products and payment directions. „ The system supports multiple payment methods levels. By entering a bank chain, you can process payments using several banks. Up to three intermediate banks are supported. „

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Transaction: Correspondence

Confirmation

Confirmation

Internal

External

Fax

Example: Confirmations by fax, e-mail, SWIFT

Example: Dealing slip

¤ SAP AG 2006

Correspondence serves to document and match concluded financial transactions. You can define correspondence as internal correspondence types (such as dealing slips) and external correspondence types (such as confirmations). By performing a correspondence run, you can confirm all the financial transactions you have concluded with a partner in a given period. You can print the generated data or have it sent directly from the system by fax. You can also use the correspondence media of e-mail and IDoc. To send e-mails, you must set up the communication interface SAPconnect. For money market and foreign exchange transactions, you can generate SWIFT files MT320 (fixed-term deposits) and MT300 (forex). A user exit allows you to use the FX Match function for outgoing confirmations (MT320 only). „ You can control external correspondence types with partner-specific standing instructions for correspondence. Control of internal correspondence types is not partner-specific. „ You can determine when correspondence is carried out with the Customizing settings for product and transaction types and activities. You can also specify whether correspondence should be generated automatically when a transaction is created, changed, or reversed (that is, as soon as the transaction is saved). Correspondence that has been generated is stored in the financial transaction data. „ „

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The system also keeps a record of the confirmation status in the transaction. This includes information about when the confirmation was sent/received, the relevant activity, the user, the form used, and the output type of incoming or outgoing confirmations.

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Business Partner: Standing Instructions Correspondence

BP A

Correspondence

Correspondence type: External

Counter- Print Fax SWIFT IDoc E-mail conf.

Transaction M. Assign

Money Market Fixed-term deposit 51 A 100 200

Fixed-term dep Investment Borrowing

Deposit at notice 51 B 100 200

Call money Investment Borrowing

¤ SAP AG 2006

You control the (external) correspondence with a business partner by defining standing instructions for correspondence. In the standing instructions for correspondence, you assign correspondence media and parameters to the external correspondence types for a business partner. You can make this assignment at several levels: contract type, product category up to transaction type. „ You can choose between different correspondence media. You can also print, send by fax or SWIFT external correspondence directly from the R/3 system. „ Correspondence parameters:̘ Correspondence is automatically sent to the business partner's standard address. If you want to use a different address for a business partner, save it in the Alternative address field. If you require counterconfirmation from your business partner, flag the Counterconf. field. (Prerequisite: Customizing is set up to allow automatic correspondence). „ Correspondence that has been generated is stored in the financial transaction data. „

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Transaction: Derived Flows

z Depending on certain flows, you can generate new flows by defining derivation rules z Flow 1200 Interest rate

Derivation Rule Interest income tax

EUR 1,000

Flow 1800 Tax 1

EUR 300

Flow 1801 Tax 2

EUR 16.50

¤ SAP AG 2006

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Derivation procedures enable you to automatically generate and calculate certain financial flows (which result from other financial flows). When you process the original flow, the system automatically generates the flows to be derived. Example: An interest income tax of 30% (tax 1) is deducted from the nominal interest (flow type), and a reunification tax of 5.5% (tax 2) is deducted from tax 1 (in other words, 1.65% of the nominal interest amount). The interest condition of the transaction generates an interest flow of type 1200. At the same time, due to the derivation procedure, the system adds other flows to the cash flow: Interest income tax (flow type 1800) Tax 2 (flow type 1801) You can then process all flow types (original and derived). For example, you could offset the appropriate amounts when you make the interest posting.

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Business Partners: Standing Instructions Derived Flows

BP A

Derivation procedure

Transaction M. Assign

Money Market Fixed-term deposit 51 A 100 200

Fixed-term deposit Investment Borrowing

Interest income tax

Deposit at notice 52 A Call money 100 Investment 200 Borrowing

¤ SAP AG 2006

In the application, you specify when a particular derivation procedure should apply for a certain business partner. You can assign the derivation procedure at different levels (from contract type to transaction type). „ If you create a transaction with a business partner, to which you have assigned a derivation procedure (at the corresponding level), the system generates additional flows on the basis of the derivation rules you have defined. „

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Banks – General: Master Data

Bank country Bank key Address

DE 200 500 00 Deutsche Bank Region Street City Branch

Bank Data

Control data SWIFT Bank group Post office Acct Bank number

Banks: General Information Bank country

DE

Bank key

200 500 00

Address Deutsche Bank C Region Street City

... Function:

Partner bank

(Account 889613262)

House Bank

(Account 12345678)

. ......

¤ SAP AG 2006

„ „

„ „

-

Bank details, which are required for your own and the business partner bank, are maintained centrally in a bank data pool. Entered bank data is maintained in the Financial Accounting bank directory, that is, automatically or manually stored and accessible throughout the system. The bank directory contains the bank master data. This includes bank address data and control data, such as swift codes and bank groups. The bank directory must contain the master data of all banks required for processing payments. These include your own house banks and the business partner banks. You can use entered bank data (name, address, bank code) as ““Partner bank”” to maintain business partner bank details and as ““House bank”” to maintain your own bank details with the appropriate link to Financial Accounting.

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Banks: Payment Details

BP Bank Details! Bank account

Bank Data

House bank H bank account

entered manually in transaction

Contract Financial trans. with business partner A + payment details Posting/Payment

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Business Partners: Central Data - Bank Details

Business partner A Central data

Bank Details Ctry

Bank Data

EN

Bank Key 600 501 01

Bank Account

Partn. bank

5214561

A1

18889

B1

889613262

C1

Bank A

EN

100 500 00 Bank B

EN

200 500 00 Deutsche Bank

¤ SAP AG 2006

The bank details of each business partner are maintained by entering the relevant bank details; such as the country, appropriate bank key and account. Each individual bank detail is identified with the partner bank key (Partn. bank). Example: Entering ““B1”” encodes that: Business partner A has account number 18889 with bank B with bank key 100 500 00. „ When maintaining business partner bank details, you can enter the bank country and key to draw the bank description from the bank data pool, if this data has already been created. „

If in bank details, a bank (country and bank key), which has not yet been created in the bank data pool, is entered, a dialog-box enabling the creation of general bank data appears automatically, so that the new bank can be added to the pool.

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House Banks: Master Data Bank Data

Bank Bank Data Data Company code

1000

House banks

Bank country Bank key Address Deutsche Region Street City Branch Control data SWIFT Bank group

DE 200 500 00 Dt. Bank

Corresponding bank accts: 12345678 ... ¤ SAP AG 2006

Banks, with which you have current accounts, should be entered as house banks. When maintaining business partner bank details, you can enter the bank country and key to draw the bank description from the bank data pool, if this data has already been created. If data (country and bank key) is entered for a bank, which is not in the bank data pool, a dialog box enabling the creation of general bank data appears automatically to add the bank to the bank data pool. „ House bank accounts are to be assigned accordingly. „

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House Banks: Create Master Data Company code

1000

House bank

DEUBA

Bank country

DE

Bank Key

200 500 00

Chart of Accts

Corresponding bank accounts

Bank account data Account! ID Currency

GIRUN 12345678 EUR

G/L account: 113100

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House banks identified with a specific house bank ID are maintained in the company code. Each account held at a house bank must be created. Each bank account is identified by a unique key of the account ID to be assigned. This account identification is unique to each each company code, house bank and account.

„

These short names help to simplify use of your own bank details in transactions. As a rule, an internal general ledger is kept in Financial Accounting for each house bank account. The link between the (external) house bank account and the (internal) general ledger is created by the appropriate assignment.

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House Banks: House Bank Accounts FIFI- General Ledger Company code

1000

G/L acct Chart of accounts Description : Account currency : : Bank/Financial data House Bank Account!ID Cash mgmt level

113100 EUR Dt. Bank EUR

Deuba 1000 F0

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Create the master data of the house bank general ledger in FI to maintain it. Here, you can set definitions, such as account currency and the cash management level on which the amounts posted to this account are displayed in Cash Management.

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Cash Management Account Name: Definition

IMG: Cash Management CoCd 1000 . . .

CM acc. name G/L Acct

Bank Account Description

DB Dollars

110113150

113150

Deuba Dollar account

Cash position/Group Account DB Dollars . . .

CoCd 1000

04.03.YY

04.04.YY

1.000.-

1.011.-

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In Cash Management, the amounts posted to general ledger accounts are displayed on the cash management levels assigned in the FI Accounts master data. The relevant account is indicated in CM either by the (general ledger) account number or - when maintaining a cash management account name for this account - with the cash management account name.

In cash management, the cash management account name replaces the account number with a proper name. It is used here in all transactions and reports, such as cash positions, instead of the account number. „ Example: Amounts in G/L account 113150 are displayed in Cash Management: a.) Without maintaining the cash management account name: Account Amount 113150 1.000,-b.) With maintaining the cash management account name Account Amount DB Dollars 1.000,--

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Transaction: Payment Details - Data Conclusion Financial trans. with business partner A + Payment details Example: Fixed-term deposit investment

Transaction: Payment Details Company Code Payment Product Type Transaction details Type

ID R 01 Crcy - EUR + 01 EUR

1000

Fixed-termPayment depositPayment Partner Creation method process !bank ID

51A Regu100 lar

Eff. FType

HBank Deuba Deuba

Account ID GIRUN GIRUN

House!Account! bank ID

DB Part. Checking Pmnt Regular Bank DB

USD

Posting ¤ SAP AG 2006

„

y y y y

„

In addition to business data entries, Transaction and Position Management also processes payment details, that is, data required for processing payments: R: Payment flow direction (““+””: incoming payment; "-": outgoing payment) HBank: Enter the house bank, with which the payments for this transaction are to be processed, in the form of the defined house bank ID Acct ID: Enter account of house bank, with which the payments for this transaction are to be processed, in the form of the defined account ID Partner bank: Enter bank account (bank key and account) of the business partner, with which the payments for this transaction are to be processed, in the form of the defined partner bank ID The system supports multiple payment methods levels. By entering a bank chain, you can process payments using several banks. Up to three intermediate banks are supported.

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SAP offers different reporting tools for different requirements Data Warehouse yes

no

SAP BW

"Tool-supported" no

yes

"individual"

Meta information, OLAP features 1

2

Drilldown Reporting

Query

z Defined report categories z Drilldown

z New logical database z Views and DB tables

z Maximum flexibility z "Anything is possible"

¤ SAP AG 2006

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A query with the SAP List Viewer (ALV) can, for example, also be exported for MS Excel

Display variants

Totals and subtotals

Report header

Values

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A Query Can Branch to Other Lists Basic list

Ranking list

Statistics

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Look and Feel: Drilldown Reporting

Drilldown characteristics Key figures

Expanded characteristic (here with characteristic hierarchy)

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Reporting using the SAP Business Warehouse Drag&Drop

Web Items

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Web Cockpits

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Exercises 1 Unit 2:

Transaction Manager – Overview

Topic

Master Files: Roles/Functions/Business Partner Standing Instructions

After completing these exercises, you will be able to: x Create a new business partner to which you can assign appropriate roles and functions. You want to create a new business partner with which you can conclude financial transactions. To do this, you must assign the role "Counterparty" to your partner.

1-1

In future, you want to conclude transactions in your company code FS## with business partner BP##. In order to do so, create a business partner called ““BP##”” (business partner ““BP##”” is an organization). Use the GPEX grouping (external number assignment) and select role ““TR0151 - Counterparty.”” Save the entry for your new business partner. Then enter the following data: Field Name or Data Type

Value

Name

as appropriate

Street, house number

as appropriate

Search Term 1

as appropriate

Postal Code, City

as appropriate

Country

DE

Select ““English”” as the language in the communication field. Then let the system check your entries. 1-2

You now want to navigate through the tab pages and get an overview of the other available fields for your business partner. Click the different tab pages to get an overview of the other fields. (Note: In the general data, you can also choose F7 to open the next tab page.)

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1-3

1-4

1-5 1-6

1-7

To add more data to the master data of business partner BP## take the following steps: 1-3-1 If your business partner has a second, official address in addition to its business address: Enter the additional address. Then define your first entered addresses as STANDARD/Default and your new address as BUSINESS. (Tab Address Overview). 1-3-2 Assign credit standing "Preferable Credit Standing”” to your business partner (Tab Credit Profile). 1-3-3 The legal form of your business partner is a joint-stock company. Enter this in your system. (Tab Identification/Organisation data). 1-3-4 Your business partner's legal HQ is in Germany. Record this in the master data (tab Legal Data). You have another business partner, BP##A. Repeat exercise step 1-1 to create this second business partner as an organisation, but this time use the General role (000000 –– General Business Partner). Your business partner BP## became a subsidiary of business partner BP##A at the beginning of the month. Enter this in the system. You can conduct all money market and foreign exchange transactions with business partner BP##. The derivatives area only permits interest rate swaps with BP##: Assign appropriate transaction authorizations to the BP in Applications under Special Functions ĺ Standing Instructions (Use your company code FS##). (Alternatively, you can also assign transaction authorizations in change/display mode using the ““Counterparty”” role (““Company Code”” button).) You want to print correspondence confirmations for all money market and foreign exchange transactions with business partner BP##, Assign the appropriate correspondence type ““PRINT”” to the BP in the application using Special Functions Æ Standing Instructions (correspondence type: confirmation).

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Solutions 1 Unit 2:

Transaction Manager – Overview

Topic

1-1

Master Files: Roles/Functions/Business Partner Standing Instructions

In future, you want to conclude transactions in your company code FS## with business partner BP##. In order to do so, create a business partner called ““BP##”” (business partner ““BP##”” is an organization). Use the GPEX grouping (external number assignment) and select role ““TR0151.”” Save the entry for your new business partner. Then enter the following data: Field Name or Data Type

Value

Name

as appropriate

Search Term 1

as appropriate

Street, house number

as appropriate

Postal Code, City

as appropriate

Country

DE

Select English as the language in the communication field. Then let the system check your entries. On the SAP Easy Access screen, choose Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Business Partners Æ Maintain Business Partner (BP)

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In the standard toolbar, choose ““Organization””. Enter the following data: Field Name or Data Type

Value

Business Partner

BP## (## is your PC or Group Number)

Grouping

GPEX External Number Assignment

Create in GP Role

TR0151 Counterparty

You will be asked ““Do you want to save the business partner?”” Click YES to save the data. The message ““Business Partner BP## created”” will appear in the status bar. Now enter the remaining data for your new business partner: Field Name or Data Type

Value

Name

as appropriate

Street, house number

as appropriate

Search Term 1

as appropriate

Postal Code, City

as appropriate

Country

DE

Select English as the language in the communication field. Check your entries using the Check button (““scales”” symbol). The message, ““Data of business partner is error-free””, should appear in the status bar. Save your data. 1-2

You now want to navigate around the tab pages and get an overview of the other available fields for your business partner. Click the different tab pages to get an overview of the other fields. (Note: you can also open the next tab page by pressing F7 in General Data.)

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1-3

To add more data to the master data of business partner BP## take the following steps: 1-3-1 If your business partner has a second, official address in addition to its business address: Enter the additional address. Define the second address as BUSINESS. (Tab Address Overview). Go to the ““Address Overview”” tab page in change mode. You will see that an address has already been entered. Choose "Create" to call the dialog box Counterparty Change: Address. Enter a complete, new address with the appropriate data. Make sure that the country is DE Germany and the language is English. Confirm these settings with Enter (green checkmark). You return to the Address Overview tab. Assign the relevant address usage to the second address. This is available in the lower area of the screen (you may need to scroll down). Double-click the required address usage. This would be STANDARD for the first address. You will see all addresses entered so far. Select Address 1 and confirm the dialog box with Continue. The first address has now been assigned to the STANDARD address usage. Repeat the procedure for the second address, but this time assign it to the business address usage. Save business partner BP## by choosing the ““Disk”” button in the standard toolbar. The message, ““Changes have been saved””, will appear on the status bar. 1-3-2 Assign credit standing "Preferable Credit Standing”” to your business partner. Go to the Credit Profile tab page in change mode. Enter the following values: Field Name or Data Type

Value

Credit Standing

0 - VIP –– Preferable Credit Standing

Save business partner BP## by choosing the ““Disk”” button in the standard toolbar. 1-3-3 The legal form of your business partner is a joint-stock company. Enter this in your system. (Indentification tab, under Organisation). Go to the Identification tab page in change mode. © SAP AG

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Enter the following values: Field Name or Data Type

Value

Legal form

01 - Co- Joint-stock company

Save business partner BP## by choosing the ““Disk”” button in the standard toolbar. 1-3-4 Your business partner's legal HQ is in Germany. Record this in the master data. Go to the Legal Data tab page. Enter the following values: Field Name or Data Type

Value

Country

DE - Germany

Save business partner BP## by choosing the ““Disk”” button in the standard toolbar. 1-4

You have another business partner, BP##A. Repeat exercise step 1-1 to create this second business partner, but this time use the General role. (000000 –– General Business Partner). Follow the instructions of solutions 1-1. Fill in the required fields as usual and make sure to select the ““General”” role. Note 1: To get from one business partner to another, choose Goto o Initial Screen. Note 2: There is no credit data to be maintained for this business partner.

1-5

Your business partner BP## became a subsidiary of business partner BP##A at the beginning of the month. Enter this in the system. In change mode, choose Relationships in the application toolbar. No relationships are found. Enter the following values: Field Name or Data Type

Value

Relationship Cat.

FFSB002 ““Is subsidiary of””

Relationship to BP

BP##A

From

First of the current month

Choose Create on the right side of the screen. © SAP AG

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Confirm the dialog box with Continue (green checkmark). You return to the overview screen showing the connection between BP## and business partner BP##A. Save business partner BP## by choosing the ““Disk”” button in the standard toolbar.

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1-6

You can conduct all money market and foreign exchange transactions with business partner BP##. The derivatives area only permits interest rate swaps with BP##: Assign appropriate transaction authorizations to the BP in Applications under Special Functions ĺ Standing Instructions (Use your company code FS##). (Alternatively, you can also assign transaction authorizations in change mode using the ““Counterparty”” role (““Company Code”” button).) On the SAP Easy Access screen, choose Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Business Partners Æ Special Functions Æ Standing Instructions Æ Transaction Authorization (TBI6) Enter the following data: Field Name or Data Type

Value

Bus Partner

BP## (## is your PC or Group Number)

Company Code

FS##

Do not enter any further selections, instead choose ENTER. The available authorizations are displayed on the lower part of your screen. You can click each area and assign authorization separately or you can set up the same authorizations for all business contacts in this category at the upper level. Set the foreign exchange and derivatives indicator since all transactions of this type should normally be permitted. In the derivatives area, set only the indicator for interest rate swaps (IRS). Field Name or Data Type

Value

Money Market

X - select indicator

Foreign exchange

X - select indicator

Derivates CAP/FLOOR

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SWAP 62a Interest rate swap (IRS)

X –– Set indicator

Save business partner BP## by choosing the ““Disk”” button in the standard toolbar. The message ““Changes have been saved”” will appear in the status bar. 1-7

You want to print correspondence confirmations for all money market and foreign exchange transactions with business partner BP##, Assign the appropriate correspondence type ““PRINT”” to the BP in Applications under Special Functions ĺ Standing Instructions (correspondence type: confirmation). On the SAP Easy Access screen, choose Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Business Partner Æ Special Functions Æ Standing Instructions Æ Correspondence (TBI5) Do not enter any further selection options, instead choose ENTER. Enter the following data: Field Name or Data Type

Value

Company Code

FS##

Correspondence type

001 –– Confirmation

The SI Correspondence tab provides an overview of the possible transaction types. Field Name or Data Type

Value

Money Market

X –– select indicator for PRINT

Foreign exchange

X –– select indicator for PRINT

Derivates Interest rate swaps 62a interest rate swap (IRS)

Do not select indicator Do not select indicator X –– select indicator for PRINT

Save business partner BP## by choosing the ““Disk”” button in the standard toolbar. The message ““Changes have been saved”” will appear in the status bar.

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Transaction Manager: Money Market Overview Diagram

Unit 1 Course Overview Unit 2 Treasury and Risk Management: Overview Unit 3 Transaction Manager: Money Market Unit 4 Transaction Manager: Forex, Derivatives Unit 5 Transaction Manager: Securities Management Unit 6 Market Risk Analyzer Unit 7 Credit Risk Analyzer

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Unit 3 Transaction Manager: Money Market

1

Introduction to Money Market

2

Trading functions • • • • • •

3

Fixed-term deposit Deposit at notice Commercial Paper/master agreement Interest rate instrument Cash flow transaction Facility

Back-office functions (for example, fixed-term deposits)

Accounting functions

4 (for example, fixed-term deposits) 5

Special functions

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Money Market: Unit Objectives

After completing this unit, you will be able to: z Carry out money market trading and back office activities z Use the support tools for back office processing z Understand the integration with accounting

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Money Market: Business Scenario z After having familiarized yourself with the general

information and created business partners in the system, you want to get an overview of the functions in money market. z What do you require to enter the trading area to create

a financial transaction? z How can you map your back office department in the

SAP R/3 system? z What additional functions are there? z How can you ensure integration of the transactions in

Financial Accounting or in Cash and Liquidity Management?

¤ SAP AG 2006

„

You are a member of a project team that will make both basic settings and all other settings required for mapping financial transactions in Treasury and Risk Management.

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Money Market 1: Introduction

Product types in money market Definition/characteristics

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Money Market: Product Types Product Types Investment/borrowing instruments

Money market „

„

„

„

„

„

Hedging instruments

Securities

Foreign exchange

Derivatives

Fixed-term deposits Deposits at notice Commercial paper Interest rate instrument Cash flow transaction Facility

¤ SAP AG 2006

Money market transactions are for short- to medium-term investments or borrowing capital. You can make Cash and Liquidity Management decisions in the money market area based on the surpluses or deficits calculated in Cash Management. In Cash Management, you can see the immediate impact your transactions have on your company's liquidity (by value date at the time of the investment or borrowing and on the due date). „ Interest rate instruments are used to map money market transactions, which include different forms of interest payments and repayments. „ Cash flow transactions in money market enable you to represent a wide range of transactions. You enter the term manually and also the cash flow that results from the particular structure of the transaction. This includes position changes, expenses, revenues, and payments. „ Facilities enable you to map master credit lines between a lender and one or more fixed business partners for a series of withdrawals against credit. „

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Term Deposits

z Fixed-term deposits „

Due date arranged from the outset

„

Fixed interest for the whole term (at least 30 days)

„

Rollover facility

z Overnight money „

Term only lasts one day (current practice until further notice)

z Deposit at notice „

Concluded for an unspecified period

„

Due date depends on the period of notice

¤ SAP AG 2006

Fixed-term deposit trading (including overnight money and Euro money) incorporates the transaction types, fixed-term deposit investment and fixed-term deposit borrowing. If the authorized business partners and relevant payment details are already defined in the system, the only necessary entries are structure characteristics and conditions. „ When trading with deposits at notice, you make investments and borrow without defined due dates. The amounts, conditions, periods of notice, payment dates, and interest payment patterns are entered. „

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Commercial Paper

z Short-term, discounted bearer bond z No interest payments during the term z Term: 1 week to 1 year (on average 2 months) z Issuer and investor enter into a business relationship directly and agree on a repayment amount, which the debtor pays to the creditor at the end of the term. z This repayment amount is discounted to the start of the term using the required yield. The investor pays the amount calculated to the debtor at the start of the term. z Banks act as 'DEALERS' without assuming the placing risk.

¤ SAP AG 2006

Commercial Paper trading includes the purchase and sale of individual Commercial Paper tranches. A characteristic of commercial papers is that no interest payments arise during the term. By entering a nominal amount and the target yield, the payment amount that the investor has to pay to the debtor at the start of the term is determined by means of deducting accrued interest. Interest can also be determined on the basis of a given rate. „ At the start of the term, the cash flow shows the principal increase as the nominal amount together with the discounting amount. At the end of the term, the repayment of the nominal amount is displayed. As a second variant, you can show the discounted principal increase at the start of the term, and the repayment of the cash value and the interest rate flow at the end of the term „

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Money Market 2: Trading Functions

1

Fixed-term deposit

2

Deposit at notice

3 Commercial Paper/master agreement

4 Interest rate instrument 5 6

Cash flow transaction

Facility

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Transaction and Position Management Process: Fixed-Term Deposit Release

Trading Create order/contract Rollovers Reversals Transaction history

Back office Settlement/control Netting Confirmation letters Reversals Transaction history Interest rate adjustment

Accounting Postings Payment transactions Accrual/Deferral Valuation Reversals

User authorization Limit management

¤ SAP AG 2006

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The organizational processes of transaction management can be split up into several steps: y You can create a money market transaction as an offer (fixed-term deposit) or directly as a contract. y The activity sequence to be followed is dependent on the processing category you selected in Customizing (with or without settlement). y Status Management synchronizes the transaction statuses arising from the settlement, product or option category of a transaction. You can also define the user status which affects the transaction process.

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Trading: Entering a Fixed-Term Deposit

Financial transactions z Are assigned to the related organizational unit (company code) within your company „

Various organizational structures possible for corporate groups

z Are concluded with a business partner „

Internal and external (banks) business partners

z Are concluded for a specific product/transaction type „

Product and transaction types can be defined according to company

z Can be created with different processing methods

¤ SAP AG 2006

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In the Trading area, the main functions for entering and changing financial transaction data are consolidated. To map financial transactions efficiently, you first have to make basic settings: y In which organizational unit (company code) is the financial transaction concluded? This setting enables companies with complex organizational structures, such as those with central treasury divisions, to differentiate between the various company areas. y Which financial transaction is being concluded? Here, you specify the product and transaction types along with the relevant processing rules. y With whom are you concluding a certain financial transaction? Each financial transaction is linked to a business partner. By defining data for the business partner, you can speed up data entry for your transactions. For example, if the same business partner bank and payment details are always used, these details can be automatically linked to the financial transactions. You can also choose other options for a business partner, such as restricting the type of products which can be traded.

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Trading Support Partner

Standing Instructions

„ „

Business partner management

„ „

Market data

Transaction authorizations Payment details Correspondence Derived Flows

Market! database

Simulation Simulation Optional: Optional: Offer „

„

Contract Contract

Entry and processing aids! - Standing instructions - Copying functions - Abbreviations - Fast entry - Collective/Fast processing Field selection control

„

„

„ „

Automatic checks - Working day checks - Trader and partner! authorizations Valuation tools - NPV calculator! - Option price calculator etc. Dealing slips Change documents

¤ SAP AG 2006

Transaction Management offers various support tools. Using the Field selection control you can control many of the visible fields. This enables you to set up the appearance of the display screens for transaction management to suit your business. „ You group the visible fields into field groups according to different business criteria. Each of the field groups available can be assigned an attribute, which determines the appearance of the screen. This means that you can specify whether you want field groups to be suppressed, displayed, or to be defined as required entries. „ You make the assignment in Customizing. „ „

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Creating a Financial Transaction: Initial Screen

Company Code

1000

IDES AG

Product Type

51A

Fixed-term deposit EXTERNAL

Transaction Type 100

Investment

Business Partner Deuba

Deutsche Bank

ID number Specifications Currency

instead of currency of comp. code

MasterAgreement portfolio External number assignment Transaction

¤ SAP AG 2006

In the Money Market start menu, choose the path Accounting ĺ Financial Supply Chain Management ĺ Treasury and Risk Management ĺ Transaction Manager ĺ Money Market. „ When you create a Money Market transaction, you represent a contract for investing or borrowing short term funds. You enter which trading object (product type) should be invested or borrowed with which partner in which currency. „

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Creating a Fixed-Term Deposit: Structure Company Code

1000

IDES AG

Product Type

51A

Fixed-term deposit EXTERNAL Investment

Transaction Type 100 Structure

Administration Other Flows

Payment Details

Tabs for navigation

Cash Flow

Notes

Status

Business partner Term

Investment Flow Type Amount

1100 1M

Investment/Increase EURO -

Start

08/10/YY

End

++2

Interest structure Percentage 2,6 ... Int.calc.method Act/360 ...

¤ SAP AG 2006

When you create a financial transaction, flows are automatically generated, such as the flows for principle increase, nominal interest and final repayment. „ The structure contains only product type-specific information, such as the amount, term and interest structure. Here, you can use various key codes for entering amounts and dates (for example, M = million, T = thousand, 0 = today, ++2 = 2 months). „ From here, you can branch to the entry screens of general transaction management. Tabstrips help you navigate between the screens Administration: Information about portfolio assignment, account assignment references for position bookings, general valuation classes Other Flows: You can add other flows to the automatically generated flows manually (charges, commission and so on). Status: Information about correspondence, process, release status ... „ Under Payment Details, you enter the relevant payment details for this transaction. If the payment methods are maintained as standing instructions for a specific business partner, they appear as default values and can be modified manually. „

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„

You can also activate the date check to establish whether a particular due date falls on a working day or not.

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Interest structure

360E/360 Act/360 : 360 / 360

Interest structure Percentage Rate

2,6000

Int. calc. method

Act/360

Frequency

Monthly

;

At end of term At end of month Monthly Daily

Every

Day/Month

… Capitalize interest

Shift due date to end of term

Trans. due date

Calc. trans. due date

Calc. period

Rounding

With rollover Customizing

¤ SAP AG 2006

„ „ „ „ „

„ „ „

The SAP system includes the most widely used international interest rate calculation methods for trading. When defining the product type, you can make a relevant Customizing entry for the interest rate calculation method. The frequency specifies the time of the interest payment. When you choose "Daily" or "Monthly" frequencies, you must also specify the frequency in days or months (example: monthly frequency = every three months). You can capitalize interest by checking the appropriate field. However, this checkbox is only displayed if a condition of the type "interest capitalization" has been assigned to the relevant transaction type. You have the option of suppressing and displaying detailed information as necessary. (Suppress or display interest structure) You can also calculate interest amounts exponentially. The payment rate describes a percentage rate that is applied to the calculated condition amount. The cash flow, therefore, does not show the calculated condition amount, but rather the condition amount multiplied by the payment rate and shown as a percentage.

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Payment Details Business Partner: Standing Instructions - Payment Details Currency Pay. det. ID

House!Acct! Payment bank ID process

Payer

Partner Pmnt !bank ID meth

EURO

01

DB

GIRUN

......

USD

02

DB

1050

......

......

Fixed-Term Deposit: Payment Details Company Code Product type Trans. type

R + -

Crcy. Eff. EURO EUR

Flow

HBank DB DB

Account ID Payment. Pmnt. req. GIRUN GIRUN

¤ SAP AG 2006

The bank or bank clearing account to be posted to is determined using the house bank and the account ID stored in the business partner's payment details. „ The system supports multiple payment methods levels. By entering a bank chain, you can process payments using several banks. „ There is a Repetitive Code column in the transaction payment details and the Standing Instructions. This is used (primarily in the USA) for simplification of recurring payments. „

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Financial Transaction Conditions

Example: Fixed-Term Deposit Nominal int.

4% Interest / Frequency: 6 months

Final repayment

Changing conditions: Payt. date Nominal int. Nominal interest

31.10.YY 30.04.YY+1

Int.

Amnt

4% 5%

3.333,33 4.166,67

¤ SAP AG 2006

Financial transactions are mapped on the basis of the of the flow and condition concept. Conditions are contractually agreed components of a financial transaction. Condition types include different interest, dividend or repayment terms, which ensure that each product type is assigned its appropriate structure characteristics. Condition types therefore control which structure characteristics are displayed when you create transactions of a specific product type. „ Depending on its type, a condition position is characterized by amounts or percentages and calculation bases, as well as calendar data and date updates. „ The principal task of conditions is the automated generation of flows. Therefore, the flow types that you assign to condition types should show changes in the payment flows and should be elements of the cash flow. „

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Fixed-Term Deposit Cash Flow Variant

Name

1SAP01

Basic view

1SAP02

Due date view

1SAP03

Calculation view

1SAP04

Local currency view

1SAP05

Payment view

1SAP06

Posting view

(1SAP07

Interest rate adjustment view)

Select layout

Example: Example Fixed-term deposit 1M 4% interest

Pmnt. date

Pmnt. amount Dir

Crcy

Flow type

10/01/YY 11/31.12/YY 11/31.12/YY 11/31.12/YY 11/31.12/YY

1.000.000,00 225,00 3.000,00 10.000,00 1.000.000,00

EURO EURO EURO EURO EURO

1100 1801 1800 1200 1120

+ +

Principal increase Tax 2 Interest income tax Nominal int. Final repayment

¤ SAP AG 2006

„

The cash flow provides the basis for y Postings y Effective interest rate calculations y Accrual/deferral of expenses and revenues

„

Displaying the cash flow: y Flow direction y Sorting flows according to preferred criteria y Search and selection functions y Totaling y Export functions y Direct selection of the preferred view y Facility to save layouts y Direct editing of flows in the cash flows

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Financial Transactions: Cash Flow

Amount invested/ borrowed

Transaction

Basis for „

ACTUAL „

Condition PLAN

Cash Flow (example) Investmt.

1.4.YY EUR 1M invested

Interest

1.7./YY EUR 10T expected

Repmnt..

1.7.YY EUR 1M expected

Updating Cash and Liquidity Management Updating Financial Accounting using flexible account determination

„

Triggering payment

„

Updating positions

„

Accruing/deferring interest

„

Valuating foreign currency

„

Calculating yield

¤ SAP AG 2006

„ „ „ „ „

The cash flow of financial transactions forms the basis for all trading, transaction and position management processes as well as evaluation activities. Financial mathematics are used to determine the cash flows in Treasury and Risk Management. The system provides a set of formulas, which put into practice the "building block principle" of the free and flexible CFM structure. In Transaction Manager, application-specific control programs call up financial mathematics building blocks, which are stored centrally, to calculate interest and repayment schedules etc. These FiMa building blocks generate or calculate a series of activities known as cash flows (payment flows) for a financial transaction in the application (such as a stock purchase or swap). Flows are generated for a specified calculation period on the basis of the conditions assigned to the financial transaction.

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Other Flows

z Flow Type

1901

Charges

z Name

1902

Commission

z Direction

...

z Payment amount z Currency z Payment date z Posting status and description

¤ SAP AG 2006

„

Flow types allow you to define additional flows, such as charges and commissions (as absolutes or percentages) for individual product types. These are then recorded for the individual transactions.

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Note: Cashflows in Cash and Liquidity Management Cash Flow in Transaction Manager Sep 04 Oct 04 Oct 04

1000- Fixed-term deposit 1120+ Final repayment 1200+ Nominal interest

Planning groups

Business partner/transaction Payment details and house banks

E2 Domestic custustomers

Subledger accounts RS Time deposit pers.

+ EUR - EUR

Sep 04 - 1000

1.000 1.000 200

Oct 04 + 1200

E2 Dom. customers

DB DB

GIRUN GIRUN

Bank accounts TB Time deposit bank DBGIRUNI

Alternative 1

Alternative 2

Payment Details unknown

Payment Details known

¤ SAP AG 2006

Even if the payment details of a business partner are unknown when you create a transaction, and are only entered in Back Office, for example, the transaction data remains stored in Cash and Liquidity Management. „ It is, however, prerequisite that an entry is made in the business partner master data (Cash Management group). The transaction then appears under the grouping "Person" and not "Bank". „

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Note: Transfer to Financial Accounting Logical Sequence Assigning Planning Levels 1000

IDES AG

51A

Fixed-term deposit

TB

Banks - Time dep.

10

Contract

Cash and Liquidity Management: Display Levels Banks Lev.

Description

10/02 10/03 03.10. 10/03 04.10. 10/05 05.10. later Later 02.10.

Time deposits

150.000 xxx.xxx xxx.xxx xxx.xxx xxx.xxx

TB ...

...

B5 ...

...

F0

Banks

Settlement

Balance

...

...

...

...

...

150.000 xxx.xxx xxx.xxx xxx.xxx xxx.xxx

...

...

...

...

...

150.000 xxx.xxx xxx.xxx xxx.xxx xxx.xxx xxx.xxx xxx.xxx xxx.xxx xxx.xxx xxx.xxx

¤ SAP AG 2006

Each activity within a business transaction (contract, settlement, and so on) is displayed in Cash Management. You can view and analyze the activity using a separate level. „ Cash flows resulting from the transactions - whether already posted or not - can be viewed in Cash Management as soon as the transactions are entered. „ For each product type and activity category, you can maintain the planning levels of G/L accounts or G/L and subledger accounts, where the information is to be displayed, in Customizing. „ Example: Concluded time deposit transaction: Level TB - Time deposit „

(Pre-)posted time deposit transaction:

Level B5 - Bank clearing account

After receipt of bank statement:

Level F0 - Bank account

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Note: Transaction Manager and Cash and Liquidity Management

Fixed-term deposit

Posting flows to a clearing account

TM

With activity on fixed-term deposit level

TM

Change to clearing accounts

Clearing postings with account statement

Change to bank account level

¤ SAP AG 2006

Here, you can see a typical process describing the interaction between Transaction Manager and Cash and Liquidity Management and also the posting in Financial Accounting. „ Payments are generally triggered by the business partner (bank) and processed further with the automatic bank statement in Cash and Liquidity Management. „

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Collective Processing: Money Market z Overview of money market transactions which correspond to the relevant selection criteria z Conducting relevant transactions „ Creation „ Change „ Display „ Roll Over „ Give Notice „ Settlement „ Reversal „ History z Branching directly to the specific transaction z Link to the SAP List Viewer

¤ SAP AG 2006

Collective Processing enables systematic transaction management. This facility displays all the business activities you select on the basis of shared criteria in a list with brief descriptions of each transaction and provides the necessary processing functions. „ From the processing list, you can branch directly to an individual transaction at any time. „ The connection to the SAP List Viewer provides you with a range of display options. You can determine the columns or rows to be displayed, sorted and consolidated and save these layouts for later use. „

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Offers for Fixed-Term Deposits and Foreign Exchange

Offer No.1 2,4%

Offer No.2 2,7%

Offer No.3 2,5%

Sorting according to quality

Contract

Offer No.2 2,7%

¤ SAP AG 2006

„ „ „

„ „ „

Using the "Offer" activity category, you can group and store quotations from different banks with a reference. This sorts offers according to quality. You can create a contract directly from an offer entry. You have to create a separate number range for transactions in the "Offer" activity category. The number range for the relevant transaction type is allocated in the Number range for offers field in Customizing for transaction types. You can use this function in the money market area for fixed-term deposits and in the Foreign Exchange area for forex spot transactions and forward exchange transactions. A special Evaluation Report for Offers, which you can configure individually, tells you how many offers were submitted, and how many resulted in a contract. You can display simulations using the Journal.

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Simulation of Fixed-Term Deposits/Foreign Exchange Transactions z Creating simulated financial transactions z A business partner is not required for simulation z Management with a separate number range z Creating a contract from a simulation

Add a business partner

¤ SAP AG 2006

You can simulate foreign exchange transactions and fixed-term deposits with the Simulation activity category. „ You can create a contract from a simulated transaction using the change function. Before you can do this, you must add a business partner, as you are simulating a transaction without a business partner. „ You manage simulations using a separate number range.̘ You assign the number range to the relevant transaction type in the simulations number range field in Customizing for the transaction types. „ You can display simulations using the Journal. „

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Foreign Exchange 2: Trading Functions

1

Fixed-term deposit

2

Deposit at notice

3 Commercial Paper/master agreement

4 Interest rate instrument 5 6

Cash flow transaction

Facility

¤ SAP AG 2006

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Giving Notice (Deposit at Notice) Notive

Investment

Term

Flow Type

Start

Amount

Termination 11/30.06/YY

06/07/YY

Interest structure

...

Conclusion

... Termination notice period

... 3

Days

¤ SAP AG 2006

For deposits at notice, there are functions for giving notice or rolling over deposited funds. Rolling over means an increase or decrease in the amount of the original deposit at notice with, where applicable, different conditions under the same transaction number. „ With deposits at notice, the cash flow can only be generated for a set period, since the end of term is only fixed when notice is given. For deposits at notice for which no notice has been given, it is therefore necessary to update the cash flow periodically. „

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Money Market 2: Trading Functions

1

Fixed-term deposit

2

Deposit at notice

3 Commercial Paper/master agreement

4 Interest rate instrument 5 6

Cash flow transaction

Facility

¤ SAP AG 2006

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MasterAgreement Setting agreements and conditions effective for all transactions under the master agreement

z Term of contract

Example: Master agreement

z Permitted company codes

1.1.YYYY to 31.12.YYYY

z Permitted business partners

1000

z Permitted transaction types

IDES AG; Deuba; FUXX

z Minimum and maximum transaction terms

Investment EUR

z Currencies „

Tranche

„

Minimum amount

„

Total volume

1M 10M 500M Commercial Paper program from 12/31/Y-1

¤ SAP AG 2006

„

„

„ „ „ „

You can store master agreements in the system and use these to define company standards for concluding Money Market transactions. These contain specific information about company codes, business partners, terms, as well as minimum and maximum volumes by currency. You either specify the master agreement when you create a transaction, or you can subsequently assign a transaction to a master agreement. The system checks the following master agreement restrictions: zIs the transaction amount a complete multiple of the tranche? zChecking the minimum amount Determination and evaluation of the degree of usage of the master agreement limits by the assigned transactions. For each specific master agreement, you can determine to what degree transactions are utilized in terms of assets and liabilities. You can use the relevant tabstrips to navigate between the different displays of master agreement data. While processing, you can directly call up an overview of the degree of usage of the master agreement limits.

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Money Market 2: Trading Functions

1

Fixed-term deposit

2

Deposit at notice

3 Commercial Paper/master agreement

4 Interest rate instrument 5 6

Cash flow transaction

Facility

¤ SAP AG 2006

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Interest rate instruments

Interest rate instruments are used to map money market transactions, which include different forms of interest payments and repayments.

Int rate instruments Repmnt. schedule

Interest forms fixed

Variable

Installment repayment

With interest rate adj

Final Repayments

Annual repayment

¤ SAP AG 2006

The interest rate instrument supports the entry and calculations of forms of fixed and variable interest as well as installment-based and 'full payment on maturity' repayment schedules. „ The instrument supports the entry and processing of these transactions in the Front Office, Back Office and Accounting. „

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Example: Interest Structure  Repayment Structure

Interest structure Int. rate instr. Perc. Int. calc. method Freq. Every

Condition Type 1200

fixed 4,0 360/360 End of month 1

Months

Repayment Structure Repmnt.. form Repmnt.. amount Freq. Every

Installment repayment Condition Type 1130 10.000,00

EUR

On first day of month 1

Months

¤ SAP AG 2006

„

To enable the different interest and repayment calculation procedures, you must describe the financial mathematical structure of the interest rate instrument. Descriptions of interest rate instruments must include the following: - Transaction amount, currency, and flow type - Term - Interest rate structure: Interest form, interest calculation method, frequency, interest period update etc. In interest structure, some of the described attributes are dependent on the selected interest form. For example, you can enter an interest reference for variable interest or a percentage rate for a fixed interest form. - Repayment structure: In Repayment structure, some entires are dependent on the selected repayment form. No additional details are required for final repayments.

„

To process an interest transaction, you must particularly specify details of the interest and repayment structures, which constitute the basis of the financial mathematical calculation of the cash flow.

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Money Market 2: Trading Functions

1

Fixed-term deposit

2

Deposit at notice

3 Commercial Paper/master agreement

4 Interest rate instrument 5 6

Cash flow transaction

Facility

¤ SAP AG 2006

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Cash Flow Transactions

z Flexible representation of a wide range of transactions z Manual entry of „ Term „ Cash flow from position changes, expenses, revenues, payments etc. z The following are supported: „Entering and processing cash flow transactions and „Subsequent management in back office and accounting

¤ SAP AG 2006

„

Note that flow types must be assigned to the appropriate product type/transaction type.

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Money Market 2: Trading Functions

1

Fixed-term deposit

2

Deposit at notice

3 Commercial Paper/master agreement

4 Interest rate instrument 5 6

Cash flow transaction

Facility

¤ SAP AG 2006

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Facility: Definition and Objective

Definition Facilities enable you to map master credit lines between a lender and a fixed business partner for a series of withdrawals against credit (drawings).

Objective Facilities management and processing

Facility Confirmed facility

Unconfirmed facility

¤ SAP AG 2006

A facility is used by a lender and one or more borrowers to agree general terms (= credit line) for a series of drawings against credit. The lender can name more than one borrowing party entitled to draw on the credit line. These borrowers may have variable drawing rights as far as time limits and amounts are concerned, right up to the agreed credit limit. „ Any utilization of this credit facility is called a drawing. „

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Facility Creating and Settling a Facility

Assigning Financial Transactions • Checking that a facility adheres to the master agreement • Manual exchange rates for foreign currency transactions • Checking that credit lines are not exceeded • Updating facility usage • Updating facility charges

Assignable Financial Transactions • Fixed-term deposit • Deposit at notice • Interest rate instrument • Cash flow transaction ¤ SAP AG 2006

If you use a certain portion of a facility's credit line, this is represented by a financial transaction in Transaction Management. „ The financial transaction is assigned to the facility as it is entered or processed. „ During the assignment process, the system checks that the transaction characteristics correspond with the master agreement stored for the facility. „

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Money Market 3: Back Office Functions (FixedTerm Deposit) Business process Settlement = Checking

Correspondence

Netting

Reference Interest Rate Adjustment ¤ SAP AG 2006

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Transaction and Position Management: Fixed-Term Deposit Release

Trading Create order/contract Rollovers Reversals Transaction history

Back office Settlement/control Netting Confirmation letters Reversals Transaction history Interest rate adjustment

Accounting Account management Payment transactions Accrual/deferral Valuation Reversals

User authorization Limit management

¤ SAP AG 2006

Depending on the way in which your company is organized, financial transactions can be forwarded to the Back Office area once they have been created in Trading. Back-office processing contains control and change functions, so that any entries made can be checked here and changed as necessary. Post-processing includes the following functions: y Enhancing transaction data, for example, adding information that is relevant for the back office. y Preparing postings and payments, for example, checking the accounts to be used later in the automated processes. If you have not already done so, you must now assign an account assignment reference and payment details to the financial transaction. Without this information, the CFM flow cannot be posted in Financial Accounting (see account assignment reference). y Generating correspondence in the form of dealing slips, letters of confirmation, or confirmation files. „ By saving the settlement activity, the system changes the activity category of the transaction in order to document that it has been checked and processed in Back Office-processing. „ If a transaction has activity category "WITH settlement activities", the contract can be posted only after the settlement. „

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Settling/Checking Transactions and Position Indicators

Assigning position indicators: Account assignment reference DB000001 Deutsche Bank FT deposit

Transaction: Payment Details Company Code Payment Product Type details Type Transaction

ID

R 01 Crcy - Eur + 01 Eur

1000 51A Regu100

lar

Eff. FType

HBank Deuba Deuba

Payment Payment Fixed-term deposit Partner method process Creation !bank ID

House!Account! bank ID

DBreq. Checking Account ID Payment. Pmnt. GIRUN GIRUN DB USD

¤ SAP AG 2006

Just as in Trading, you can call up and correct information about entered transactions. You can check, change, or add information that is relevant for posting and payment. If you have not already done so, you must now assign an account assignment reference and payment details to the financial transaction. Without this information, the flow cannot be posted in Financial Accounting (see account assignment reference). „ You can have the account assignment reference or the payment details of the particular business partner appear as default values. You can add to or change these default values. Account assignment references are created independently of valuation area. You can assign account assignment references to positions variably and independently of valuation area, or control account determination variably according to valuation area and account assignment reference. „ „

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Controlling with Position Indicators

¤ SAP AG 2006

This indicator specifies the position management and valuation parameters at company code level, and allocates the account assignment reference to a position. „ The position indicator can be created manually or automatically by the system. „

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Transaction history History: History: Activity Sequence

Transaction Activity Cat.

Order Administrat.Data 4711 CoCd0001 SAP AGTransaction Activity 1 PType51a Basic Data Act. cat Order TType100 4711 CoCd 0001 SAP AG Transaction PType51a Activity 1 TType100 Act. cat. Order

Date

Active Status

1

Order

10/01/YY replaced

2

Contract

10/02/YY replaced

3

Settlement

10/02/YY replaced

4

Rollover

5

Settlement

...

...

11/31.10 replaced /YY 11/30/YY Activ ... . e. .

Contract Administrat.Data 4711 CoCd 0001SAP AG Transaction 51a Activity 1 PType Basic Data Act. Cat. Cont. TType100 4711 CoCd 0001SAP AG Transaction PType51a Activity 1 TType100 Act. Cat. Cont.

Settlement Administrat.Data 4711 CoCd 0001 SAP AGTransaction Activity 1 PType Basic51a Data Act. Cat. Settlement TType 100 4711 CoCd 0001 SAP AGTransaction PType51a Activity 1 TType 100 Act. Cat. Settlement

Rollover Administrat.Data 4711 CoCd 0001 SAP AG Transaction 51a Activity 1 PTypeData Basic Act. Cat. Roll. TType 100 4711 CoCd 0001 SAP AG Transaction PType51a Activity 1 TType 100 Act. Cat. Roll.

Settlement Administrat.Data 4711 CoCd 0001 SAP AGTransaction Activity 1 PType Basic51a Data Act. Cat. Settlement TType 100 4711 CoCd 0001 SAP AGTransaction PType51a Activity 1 TType 100 Act. Cat. Settlement

¤ SAP AG 2006

The History function enables you to view the previous activity sequence for a selected transaction. You can call up a list of the activities and these are either active, reversed, or have been replaced by a subsequent activity. „ The transaction history allows you to trace each activity and its relevant details. „ The system also stores significant changes to transactions in change documents. This provides a record of how and when a user corrected or changed the structure characteristics of any transaction. „

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Correspondence

Confirmation

Confirmation

Internal

External

Fax

Example: Confirmations by fax, e-mail, SWIFT, IDoc

Example: Dealing slip

¤ SAP AG 2006

Correspondence serves to document and match concluded financial transactions. You can define correspondence as internal correspondence types (such as dealing slips) and external correspondence types (such as confirmations). By performing a correspondence run, you can confirm all the financial transactions you have concluded with a partner in a given period. You can print the generated data or have it sent directly from the system by fax. You can also use e-mail and IDoc. To send e-mails, you must set up the communication interface SAPconnect. For money market and foreign exchange transactions, you can generate SWIFT files MT320 (fixed-term deposits) and MT300 (forex). „ You can control external correspondence types with partner-specific standing instructions for correspondence. Control of internal correspondence types is independent of the business partner. „ The system also keeps a record of the confirmation status in the transaction. This includes information about when the confirmation was sent/received, the relevant activity, the user, the form used, and the output type of incoming or outgoing confirmations. „ „

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Confirmation Management z Difference between outgoing confirmation and counterconfirmation z Viewing confirmation status for transaction correspondence under Status z Status management for counterconfirmation can be controlled according to the business partner – in the Standing Instructions + Customizing z Monitoring overdue counterconfirmations z Optical archiving of correspondence z Correspondence overview and correspondence monitor ¤ SAP AG 2006

You can determine whether or not counterconfirmation is required for external correspondence for each business partner (in the Standing Instructions). „ The system updates the confirmation status of the business transaction on the Status tab page: Ö executed, reconciled (counterconfirmation has been received and matched). „ You can archive correspondence optically. To do this, you must set the Optical Archiving indicator in Customizing (choose Define Correspondence Types) for the correspondence type you require. However, you must use an external optical archiving for this. You can access archived correspondence from the transaction display. If you are in display/change mode for a transaction, you can display correspondence activities by choosing Goto. By double-clicking a line, you can activate the Archive Link monitor and display the document. „ The Correspondence Monitor provides the following additional processing and monitoring functions, which build on existing correspondence overviews: ̘ •• Overview of the current processing status ̘ •• Setting the counterconfirmation status to matched directly from the (manual match) monitor •• Option to execute planned correspondence directly from the monitor •• Option to repeat previously generated correspondence ... „

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References Between Transactions

Receivable 1

BID CON EUR KMP MIR OPT PRL REF SWP

Receivable 2

Offer Swift-confirmation files Euro transaction currency conversion Netting Mirror deal link Option reference derivatives Rollover of foreign exchange transaction General reference Forex swap

¤ SAP AG 2006

„

„ „

„ „

To document the connections between Treasury transactions or objects, you can define links in the administrative data of a transaction. To do this, you use fields in which you can enter any reference terms or numbers and then select these for subsequent evaluations. A reference between transactions documents a relationship between "n" transactions. A reference category provides the purpose of a reference. Some references are formed automatically. These include relationships between transactions resulting from processing activities (rollover) or which are elements of a transaction (currency swap). There are also references which are created by the user (netting). You can set up and process all references under Reference - Collective Processing. Using the SAP List Viewer, you can flexibly modify the layout and sorting and, if necessary, store it as your own layout.

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Back Office: Interest Rate Adjustment

Interest Rate Adjustment Manual

Automatic Prerequisites: Ref interest rate must be maintained

Int. Fx. Dte.

Ref. Int.

Int. rate

Valid From

30.11.YY

EURIBORD03

3,00

11.30.YY

3.03.YY

EURIBORD03

0,00

03.01.YY

Status

¤ SAP AG 2006

„ „

„ „ „

„

For financial transactions with variable interest, you carry out an interest rate adjustment periodically. You fix the interest rate to the current value of a reference interest rate. The interest rate adjustment can be done either manually or automatically. With manual interest rate adjustment, use the reference rate to enter the interest rate value for each transaction. With automatic adjustment, the system checks in a table whether the current interest value is available for a reference interest rate. Use the Interest Rate Adjustment tab page to get an overview of all the adjustment data that has been entered for the transaction. A function is available for reversing interest-fixing. For variable interest rates, you can enter the interest rate for the first period as soon as you enter interest conditions. This means that the interest rate need not be adjusted for the first interest period. The Information System provides a Money Market Interest Rate Adjustment Plan to monitor deadlines.

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Money Market 4: Accounting Functions (Fixed-Term Deposit) Business process Posting logic Note: Cash and Liquidity Management integration

Posting overview/posting journal

¤ SAP AG 2006

© SAP AG

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Transaction and Position Management: Fixed-Term Deposit Release

Trading Create order/contract Rollovers Reversals Transaction history

Back office Settlement/control Netting Confirmation letters Reversals Transaction history Interest rate adjustment

Accounting Postings Payment transactions Accrual/deferral Valuation Reversals

User authorization Limit management

¤ SAP AG 2006

After the transactions have been entered in Trading, checked and completed in back office processing, they are accounted. Functions for the transfer to Financial accounting - such as posting reports or posting in position management are brought together here. The Treasury subledger relies on some Financial accounting functions. Financial transactions and positions must be handled accurately to guarantee the correctness of the final processes. Accounting, therefore, incorporates tasks, such as the periodic accrual/deferral of expenses and revenue and valuation activities. „ You can only post transactions which have reached contract or settlement status (depending on the processing category) at the internal level (system level). „ If you do not wish to post certain financial transaction flows yet, you can block the posting of these flows. „

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Accounting Fixed-term deposit 1 month 4.5% Sep 04

1100 -

Fixed-term deposit

1.000.000

Oct 04

1120 +

Final repayment

1.000.000

Oct 04

1200 +

Nominal interest

3.750

Selection of transactions and flows to be posted

FI interface

Financial Accounting

¤ SAP AG 2006

The information required for posting is transferred to Financial Accounting with an interface. The posting logic is based on the flow types generated, the account assignment reference of the financial transaction, and the account determination defined by the user. „ You can post individual flows either to G/L accounts or to customer accounts. Payment transactions are generally posted to relevant clearing accounts. You can then process the items on these clearing accounts using the functions provided by Cash and Liquidity Management (account statements) or Financial Accounting (payment program). For Money Market, Foreign Exchange and Derivatives, you have the option of using an extended payment program (payment requests). In this case, Treasury first generates payment requests which are then paid individually or jointly using the payment program. The following four combinations are possible: y G/L accounts without payment requests y G/L accounts with payment requests y Customers without payment requests y Customers with payment requests „

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Transferring Data to Financial Accounting using the Posting Report Application Forex Money market Derivatives Securities

POSTING LOG

General selections

Company code Transaction Product type Transaction type Portfolio Currency Flow classification Up to and incl. due date Only post flow acc. to currency

...

Posting control Posting date Document date Test run Only post operatively Post all valuation areas ¤ SAP AG 2006

„

„

„ „ „ „

Posting transfers the settled financial transactions to Financial Accounting. You can only post transactions which have reached contract or settlement status (depending on the processing category) at the internal level (system level). Prior to posting, the transaction flows and/or positions to be posted are selected. You can have the system carry out a test run in order to check the accuracy of the posting entries in the posting log. When you execute the posting, flows and related documents are transferred to Financial Accounting. Postings to the SAP Financial Accounting module take place online. The FI document numbers are displayed. When you post a transaction, the system generates a posting log. If you double-click a posting line you can access the relevant posting document. If you do not wish to post certain financial transaction flows yet, you can block the posting of these flows.

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Posting a Transaction: Summary FT deposit 1 month 4.5% Sep 01 Oct 01 Oct 01

1100 1120 + 1200 +

Fixed-term deposit Final repayment Nominal interest

Position indicator: Acct assignm.ref. DB000001

1.000.000 1.000.000 3.750

Balance sheet account acc. to account assignment ref.

Assigning update types to posting specifications Assigning flow types to update types

FT dep. acct. 113113 Investment

D 1.000.000

Final Repayment

MM1100- Debit pos.

Credit bank

MM1120 +Debit bank

Credit pos.

MM1120 +Debit bank

Credit int. earned

Interest earned 273100

Bank clearing acct. 113105 H

1.000.000

D FT dep. inv. Nom. int. Final Repayment

N 1.000.000 3.750

D Nominal interest

H 3.750

1.000.000

¤ SAP AG 2006

Back office processing of financial transactions (money market, foreign exchange, derivatives, securities) generate transaction processes which must be entered in Accounting. These automatic postings and the relevant offsetting postings to FI accounts may be carried out online. The accounts to which the flows are to be booked are set in accounts by the account determination. „ The posting specifications control how the individual business transactions are posted. These specifications contain the rules for posting and account determination for update type. You make the relevant settings within system configuration. „ The appropriate posting specifications for each flow to be booked are determined by applying the update type. Each update type is assigned exact posting specifications. „ The document type and the posting keys for the debit and credit sides of the posting included in the posting specifications contains control information which is passed on directly to Financial Accounting. In addition, the posting specifications with the posting category and the account symbols include the relevant information for determining the actual G/L and subledger accounts with the Treasury posting interface. „

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Money Market 5: Special Functions Alterations of capital Effective interest rate Archiving Rollover Reversal Accrual/deferral Workflow Mirror transactions BAPIs ¤ SAP AG 2006

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Other Alterations of Capital

Alterations of capital at the start of term

during rollovers

during the term

z Advantage

- More flexibility in representing transactions (for example, creating repayment schedules) z Button behind amount field z Automatically incorporated in cash flow

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„

In addition to the main flows at the start of term or during rollovers, you can enter other capital increases and decreases during the term. This enables you to represent repayment schedules, for example.

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Roll Over Contract: Fixed-Term Deposit

Transaction created Roll over

...

1100 Investment/Increase

1110 Decrease Change in Capital

Term

Flow Type

Start

08/10/YYYY

Amount

Rollover

10/10/YYYY

End

?

Interest structure

... ...

¤ SAP AG 2006

You can rollover existing transactions using the same transaction number, and, where applicable, change some of the conditions. „ You can display the transaction activity in its present status or display its history with all the related details. „ You can specify additional information for each activity using the memo function. „ You can view a list showing the capital and interest flows due before or on the relevant key date for each transaction and sorted according to amounts by choosing Extras ĺ Amount overview. „

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Roll Over Contract: Interest Payment Example: Fixed-Term Deposit Investment 1) Payment

t1

Interest from original transaction

t2

Interest from rollover

t3

2) Capitalization

t1

Interest from rollover

t2

t3 Interest from original transaction

3) Deferral

t1

Compound interest from original transaction

Interest from rollover

t2

t3

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„

Example for fixed-term deposits: y Deposit in t1 y Rollover in t2 y Repayment in t3

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Reversing a Contract: Fixed-Term Deposit

Reversal = Resetting the last activity change made to a transaction

Reason for Reversal

Process. error Custom. error Capital transfer Cond. adjustm. Other reasons

Customizing ¤ SAP AG 2006

„

A reversal involves resetting the last change made to the transaction, that is, resetting the last transaction activity recorded by the system. If there are postings associated with the reversed activity, these are cancelled with reverse postings (see also "Reverse Documents"). You must enter a reason for the reversal in the relevant field in order to execute the reversal. The reversal function reverses the most recent activity and reactivates the previous one.

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Reversing a Contract: Fixed-Term Deposit (1) Case 1:

z

Posting has not yet been made

z

Possible reasons for a reversal: business partner, currency, product type, transaction type was incorrect

a) Status contract

Contract file

b) Status contract settlement

Contract file

Contract reversed

Reversal

Contract settlement

Reversal 1

Reversal 2

Time

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„

If only the conditions or any other data were incorrect, you can correct this directly without having to reverse the activity.

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Reversing a Contract: Fixed-Term Deposit (2) Case 2:

z

Posting already executed

z

Possible reasons for reversal: a) Business partner, currency, prod. type, trans. type b) Condition data, nominal amount, payment details Post offsetting flow

a)

Contract Contract file contract

Contract accounts

Reversal 1

Reversal 2

Reversal 3

Generate offsetting flow Post offsetting flow b)

Contract Contract file contract

Contract accounts

Reversal 1

Generate offsetting flow

Reversal 2

Changes to data in initial screen ‹ Settle contract ‹ Post contract ‹

Time

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Accrual/Deferral Processes and Methods

Acc/ Acc/def. def. procedure Difference Procedure Reset procedures

Accrual/ Accrual/Deferral Methods pro rata temporis pro rata temporis with linear discounting

¤ SAP AG 2006

To determine the earnings of a given period, you must assign expenses and revenue to the period in which they were incurred/generated, irrespective of the date on which they are paid. You use the accrual/deferral function to calculate the expenses and revenue for a certain date or period-end closing (for example, at the end of a fiscal year). „ The accrual/deferral method describes how the amount to be accrued/deferred is calculated. „ The accrual/deferral procedure, on the other hand, describes how the expense and revenue accounts are updated. y The difference procedure is used to transfer income and expenses arising since the last accrual/deferral run from accrual/deferral accounts to the relevant income statement accounts. y The reset or accumulation procedure is used to adjust the income statement accounts by the accrual/deferral date in the accrual/deferral amounts that have been determined, and then to reset them. „

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Interest Accrual/Deferral

Accrual/Deferral of Expenses and Revenues

Due dt. FType D P Flow type ... Company code 1000

Transaction 9

Product type 51A

05.06.YYYY 1200 +

Nominal interest

05.06.YYYY 2100 +

Accrued interest: Anticip.

4.546,66 EUR 139,03 EUR

¤ SAP AG 2006

When you execute the accrual/deferral, the accrual/deferral amounts for user-defined transactions/positions and time periods are generated. The accrual/deferral amounts and the relevant accrual/deferral flows are generated for each flow. The accrual/deferral flows can be posted immediately in Financial Accounting with an update run or they can be processed later using the posting function. „ You can also execute a test run in advance. „ When you reverse accruals/deferrals with the reset procedure, only the accruals/deferrals made on the key date are reversed. „ Since accruals/deferrals made with the difference procedure follow on from each other in the order of accrual/deferral key dates, when you reverse accruals/deferrals with the difference procedure for one key date, all chronologically subsequent accruals/deferral flows of the same transaction (in so far as they exist) are also reversed. „

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Mirror Transactions: Current Situation and Objective

Current situation Management of a mirrored mapping of transactions within a group, that is, identical cash flow with reversed signs

Objective one-off processing of the original transaction (no duplicate entry) + automatic execution of the relevant processing step for the mirrored transaction

¤ SAP AG 2006

„ „

„ „ „

The mirror transaction function enables you to create a mirror transaction within a system. The create function is supported for the following products:̘ y Spot exchange and forward transactions y Currency swaps y Fixed-term deposits and deposits at notice y Cash flow transactions The linked transactions reference each other. A message is also displayed saying that a mirror transaction exists. Additional flows are not mirrored. Mirror transactions cannot be created for existing transactions at a later date.

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Mirror Transactions: How They Function Head office view

Company code head office

corresponds to

Partner head office

Fixed-term dep investment

The mirror transaction is created automatically

Fixed-term dep borrowing

Partner A

corresponds to

Company code A View of subsidiary A

¤ SAP AG 2006

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Exercises 2 Unit 3: Transaction Manager: Money Market Topic: Trading - Fixed-Term Deposit Investment 1 After completing these exercises, you will be able to: x Set up a time deposit in Transaction Manager

You want to take advantage of the favorable conditions at your house bank to invest in a fixed-term deposit.

2-1

Create an external fixed-term deposit (investment) as a contract in your company code (FS##). Choose the Deutsche Bank (1000) as your business partner. This is your house bank, that is, you have at least one current account here. Choose the following transaction data: Amount: EUR 50 M, Interest rate: 2.6 %, Term: 3 months starting from today Int calculation method: Act/360 (Interest) frequency: "At end of term" Then check - The conditions (button), - The cash flow (tab page), - The payment details (tab page). Save the financial transaction and note the transaction number for later settlement and posting activities. Transaction number:_______________________

2-2

Check your entries in the cash position (Grouping: "ACBANKEN"). At which level is the fixed-term deposit displayed? To which account has the transaction been posted?

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Solutions 2 Unit 3: Transaction Manager – Money Market Topic: Trading - Fixed-Term Deposit Investment 1

2-1

Create an external fixed-term deposit (investment) as a contract in your company code (FS##). Choose the Deutsche Bank (1000) as your business partner. This is your house bank, that is, you have at least one current account here. Choose the following transaction data: Amount: EUR 50 M, Int rate: 2.6 %, Term: 3 months starting from today Interest calculation method: Act/360 (Interest) frequency: "At end of term" Then check - conditions (button), - cash flow (tab page), - payment details (tab page).

Save the financial transaction and note the transaction number for later settlement and posting activities. Transaction number:_______________________ On the SAP Easy Access screen, choose Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Money Market Æ Trading Æ Create Financial Transaction (FTR_CREATE)

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Enter the following data: Field Name or Data Type

Value

Company Code

FS##

Product Type

51A –– Fixed-term deposit: External

Transaction Type

51A –– 100 ––

Partner

1000

Set the Contract indicator. Choose ENTER. Enter the following values on the Structure tab page: Field Name or Data Type

Value

Flow Type

Accept the default value ““1100””

Amount

50 M (EUR 50 million)

Start of term

+0 (current date)

End of term

++3 (3 months calculated from today)

Percentage Rate

2,6 (%)

Int.calc.method

Act/360

Frequency

At end of term

Choose Check in the application toolbar to check the entered data. You should receive the following message in the status bar: ““Check carried out successfully”” Now check the conditions. Get an overview of the details of the chosen condition types. Choose Conditions in the application toolbar. You can view the entered data by double-clicking the condition type. Choose the green arrow (twice) to return to the Structural Data. Now get an overview of the cash flow. Choose the Cash flow tab page. Choose Select layout ĺ Calculation view. Find out the payment details. Choose the Payment Details tab page. Double-click a line to display the details for the relevant payment details. Save your fixed-term deposit.

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Save your fixed-term deposit by choosing the ““Disk”” button in the standard tool bar. The message ““Fixed-term deposit XY created in company code FS##”” is displayed in the status bar. Transaction number:_______________________

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2-2

Check your entries in the cash position (Grouping: "ACBANKEN"). In SAP Easy Access select: Æ Accounting Æ Financial Supply Chain Management Æ Cash and Liquidity Management Æ Cash Management Æ Information System Æ Reports for Cash Management Æ Liquidity Analyses Æ Cash Position (FF7A) After you enter the grouping ““ACBANKEN””, you can display all input fields by choosing All Selections (+) in the application toolbar. Enter the following data: Field Name or Data Type

Value

Company Code

FS##

Cash Position

X - select indicator

Grouping

ACBANKEN

Display as of

Today's date

Display in

EUR

Delta Display with Balances

Select (Use button: All selections)

Account Instead of AccountName

X - select indicator

Display currency view

Do not select indicator

Choose Execute (““Clock““ or F8) At which level is the fixed-term deposit displayed? Place the cursor on the amount field and choose Levels in the application toolbar. The entered fixed-term deposit is displayed at the TB (time deposit) level. To which account has the transaction been posted? Place the cursor on the amount field and select Accounts in the application toolbar. The amount is now posted to account 113100.

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Exercises 3 Unit 3: Transaction Manager Money Market Topic: Trading - Fixed-Term Deposit Investment 2 After completing these exercises, you will be able to: Create a fixed-term deposit using fast entry

Use the favorable conditions to invest in another fixed-term deposit.

3-1

Create another fixed-term deposit as a contract (external fixed-term deposit: 51A) in your company code (FS##). Use the fast entry and the input help for the amount field and the term. Choose the Deutsche Bank (1000) as your business partner. Choose the following transaction data: Amount: EUR 30 M, Interest rate: 3% End of term: 25.12.JJ (Caution: For entry in December, enter 21.01.YY+1) Interest Calculation Method: Act/360 (Interest) frequency: Monthly Check the financial transaction. If the working day check is active, use the selected date. Save the financial transaction and note the transaction number for later settlement and posting activities. Transaction number:_______________________

3-2

Check your entries in the cash position (Grouping: ““ACBANKEN””).

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Solutions 3 Unit 3: Transaction Manager – Money Market Topic: Trading - Fixed-Term Deposit Investment 2

3-1

Create another fixed-term deposit as a contract (external fixed-term deposit: 51A) in your company code (FS##). Use the fast entry and the input help for the amount field and the term. Choose the Deutsche Bank (1000) as your business partner. Choose the following transaction data: Amount: Interest rate: End of term: Interest calculation method: (Interest) frequency:

EUR 30 M, 3% 25.12.YY Act/360 Monthly

Check the financial transaction. If the working day check is active, use the selected date. Save the financial transaction and note the transaction number for later settlement and posting activities. Transaction number:_______________________ In SAP Easy Access select Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Money Market Æ Trading Æ Fxd Term Dep. Fast Entry (TM0F)

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Enter the following data: Field Name or Data Type

Value

Company Code

FS##

Product Type

51A

Transaction Type

100 –– Investment

Partner

1000

Structural data

Value

StartTerm

+0 (as of today)

End of Term

25.12.YY (for entry in December, enter 25.01.YY+1)

Amount/Currency

30m –– EUR 30 million

Interest rate

3

Int.calc.method

Act/360 (2)

Frequency

Monthly (3)

With rollover

Payment (0)

Calculation period

Start inclusive

The system performs a working day check and lets you choose from a dialog box. Confirm the selected date by choosing Copy (green checkmark). Save your data by choosing the ““Disk”” icon.

Note: Select Details in the application toolbar to view additional information about this transaction and enter more data. Transaction number:_______________________

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3-2

Check your entries in the cash position (Grouping: ““ACBANKEN””). Follow the menu path Æ Accounting Æ Financial Supply Chain Management Æ Cash and Liquidity Management Æ Cash Management Æ Information System Æ Reports for Cash Management Æ Liquidity Analyses Æ Cash Position (FF7A) Enter the following data: Field Name or Data Type

Value

Company Code

FS##

Cash Position

select

Grouping

BANKEN

Display as of

Today's date

Display in

EUR

Select All Selections in the application toolbar. You can now enter additional data. Field Name or Data Type

Value

Delta Display with Balances

Select (Use button: All selections)

Account Instead of AccountName

X - select indicator

Display Currency Overview

Do not select indicator

Choose Execute (““Clock““ icon in the application toolbar or F8). You can see your created transaction under the abbreviated term ““CITIBANK”” (Citibank). The cash flow of this transaction generates a planned record, which flows via the TB-Time Deposit level into liquidity management (cash position) for Cash © SAP AG

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Manager. Place the cursor on ““CITIBANK”” and select Levels in the application toolbar. If you want to view the posted account in Financial Accounting, place the cursor on the Time Deposit line and choose Accounts in the application toolbar.

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Exercises 4 Unit 3: Transaction Manager: Money Market Topic: Trading - Interest Rate Instrument After completing these exercises, you will be able to: x Create an interest rate instrument with variable interest form x Execute an interest rate adjustment x Create an interest rate instrument with fixed interest form and repayment in installments. You want to create both an interest rate instrument with variable interest form and an interest rate instrument with fixed interest form.

4-1

Create an external interest rate instrument (investment) with variable interest form as a contract in your company code (FS##). Choose the Deutsche Bank (1000) as your business partner. This is your house bank, that is, you have at least one current account here. Choose the following transaction data: Amount: EUR 10 M Term: 1 year calculated from today Reference interest rate: EUREUR01YM With variable interest, the interest rate for the first period is already known in many cases, so that a fixing or an interest rate adjustment is made only for the following periods. You can enter the known interest rate in field 1. Interest rate. 1. Interest rate: Interest calculation method: (Interest) frequency: All: Then check the following: - The conditions (button),

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4% Act/360 Monthly 1 months Final repayment

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- The cash flow (tab page), - The payment details (tab page). Save the financial transaction and note the transaction number for later settlement and posting activities. Transaction number:_______________________

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4-2 4-2-1 Settle the created interest transaction (choose Settle from the menu). 4-2-2 Carry out a manual interest rate adjustment for the 2nd interest rate fixing date. Choose an interest rate (for example, 5%). Alternative: You can also view the interest rate adjustments for the relevant transaction on the Interest rate adjustment tab. (Note: You can individually determine the planned record update strategy and perspective of the interest cash flow in Customizing. 4-2-3 Display the created interest rate instrument and view the cash flow and interest rate adjustment tab pages.

4-3

© SAP AG

Create another interest rate instrument (investment) with fixed interest form and installment repayment as a contract in your company code (FS##). Choose the Deutsche Bank (1000) as your business partner. Enter the following transaction data: Amount: EUR 12 M Term: 1 year from today Percentage rate: 4% Interest calculation method: 360/360 (Interest) frequency: Monthly All: 1 months Repayment form: Installment repayment Repayment amount: EUR 1 M Frequency: Monthly All: 1 months Then check - the condition details, - the cash flow, - the payment details. Save the financial transaction and note the transaction number for later settlement and posting activities. Transaction number:_______________________

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Solutions 4 Unit 3: Transaction Manager – Money Market Topic: Trading - Interest Rate Instrument

4-1

Create an external interest rate instrument (investment; interest rate instrument: external) with variable interest form as a contract in your company code (FS##). Choose the Deutsche Bank (1000) as your business partner. This is your house bank, that is, you have at least one current account here. Choose the following transaction data: Amount: Term: Reference interest rate:

EUR 10 M 1 year calculated from today EUREUR01YM

With variable interest, the interest rate for the first period is already known in many cases, so that a fixing or an interest rate adjustment is made only for the following periods. You can enter the known interest rate in field 1. Interest rate. 1. Interest rate: 4% Interest calculation method: Act/360 (Interest) frequency: Monthly All: 1 Months Repayment form: Final repayment Then check the following: - The conditions (button), - The cash flow (tab page), - The payment details (tab page). Save the financial transaction and note the transaction number for later settlement and posting activities. Transaction number:_______________________

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Select: Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Money Market Æ Trading Æ Create Financial Transaction (FTR_CREATE) Enter the following data: Field Name or Data Type

Value

Company Code

FS##

Product Type

55A

Transaction Type

100 –– Investment

Partner

1000

Set the Contract indicator. Select ENTER. Enter the following values on the Structure tab page: Field Name or Data Type

Value

Fixed Asset Flow Type

Accept the default value ““1100””

Start of Term

+0 (as of today)

End of Term

++12

Amount

10m –– EUR 10 million

Interest Structure

© SAP AG

Interest form

variable (2)

Condition Type

Accept the default value ““1200””

Ref. Int. Rate

EUREUR01YM

1st. Interest rate

5

Int.calc.method

Act/360 (2)

Frequency

Monthly (3)

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Every

1 - months (2)

Repayment Structure Repayment form:

““1120”” - Final repayment

Contract Date

Is proposed

Choose ““Check”” in the application toolbar to check the entered data. The message ““Check carried out successfully”” is displayed in the status bar. Choose Conditions in the application toolbar to display a list of all condition types for this transaction. You can view detailed information about any of the displayed condition types by double-clicking the condition type. Select Back twice in the standard tool bar to return to your interest rate instrument (tab page: Structure). You can change the layout on the Cash flow tab page. Choose the layout ““Calculation view”” by clicking the appropriate icon. This displays all conditions, that is, cash flows valid for this transaction. You can also create other layouts if necessary. Your house bank and account ID data is automatically transferred to the Payment Details tab page from Business Partner (Standing Instructions). Save your transaction by choosing Save (disk icon) in the standard tool bar. Transaction number:_______________________ 4-2 4-2-1 Settle the created interest transaction (choose Settle from the menu). Select: o Accounting o Financial Supply Chain Management o Treasury and Risk Management o Transaction Manager o Money Market o Trading o Edit Financial Transaction (FTR_EDIT)

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Enter the following data: Field Name or Data Type

Value

Company Code

FS##

Transaction

Enter your transaction code from exercise 4-1.

Choose Settle. Briefly check the trader’’s data and save the transaction by choosing the ““Disk”” button in the standard toolbar. The status bar displays the message ““Interest rate instrument …… in company code FS## is changed””. 4-2-2 Carry out a manual interest rate adjustment for the second interest rate fixing date. Choose an interest rate (for example, 5%). Alternative: You can also view the interest rate adjustments for the relevant transaction on the ““Interest rate adjustment”” tab. (Note: You can individually determine the planned record update strategy and perspective of the interest cash flow in Customizing.) Select: o Accounting o Financial Supply Chain Management o Treasury and Risk Management o Transaction Manager o Money Market o Back Office o Variable Interest Calculation o Interest Rate Adjustment o Create (TI10) Enter the following data:

© SAP AG

Field Name or Data Type

Value

Company Code

FS##

Transaction

Enter your transaction code from exercise 4-1.

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Select enter. Details of the interest rate adjustment are displayed on the lower part of your screen. You can also enter an interest rate for the proposed date here. Enter the following data: Field Name or Data Type

Value

Interest rate

As appropriate (or 5%)

Save your interest rate adjustment by choosing the ““Disk/Save”” button in the standard tool bar. The message ““Manual interest rate adjustment created”” appears in the status bar. 4-2-3 Display the created interest rate instrument and view the cash flow and interest rate adjustment tab pages. Select: Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Money Market Æ Back Office Æ Edit Financial Transaction (FTR_EDIT) Enter the company code and transaction number as usual. Choose Display. View your transaction data by using the Cash flow and Int.rate.adj. tab pages. During the interest rate adjustment, the status bar displays the message ““Interest rate adjustment displayed as saved and not determined again””. You determine the planned record update strategy in Customizing. This determines with which values any interest rate flows that are not yet fixed are to be displayed, for example, in the cash flow. 4-3

© SAP AG

Create another interest rate instrument (investment) with fixed interest form and installment repayment as a contract in your company code.###

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Choose the Deutsche Bank (1000) as your business partner. Choose the following transaction data: Amount: Term: Percentage rate: Interest calculation method: (Interest) frequency: All: Repayment form: Repayment amount: Frequency: All:

EUR 12 M 1 year calculated from today 4% 360/360 Monthly 1 month Installment repayment EUR 1 M Monthly 1 month

Then check - the condition details, - the cash flow, - the payment details. Save the financial transaction and note the transaction number for later settlement and posting activities. Transaction number:_______________________ Select: Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Money Market Æ Trading Æ Create Financial Transaction (FTR_CREATE) Enter the following data:

© SAP AG

Field Name or Data Type

Value

Company Code

FS##

Product Type

55A

Transaction Type

100 –– Investment

Business Partner

1000

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Set the Contract indicator. Select enter. Enter the following values on the Structure tab page: Field Name or Data Type

Value

Fixed Asset Flow Type

Accept the default value ““1100””

Start of Term

+0 (as of today)

End of Term

++12

Amount

12m –– EUR 12 million

Interest Structure Interest form

fixed

Condition Type

Accept the default value ““1200””

Interest Rate/Percentage Rate

4

Int.calc.method

Act/360 (2)

Repayment Structure Repayment form:

Instalment repayment (2)

Repayment amount

EUR 1 M

Frequency

Monthly (3)

Every

1 month (2)

Choose Check in the application toolbar to verify the entered data. The status bar displays the message ““Check carried out successfully””. The application toolbar includes the Conditions button. Choose this button to display a list of all condition types for this transaction. You can view detailed information about the displayed condition type by double-clicking the condition type. Choose Back in the standard tool bar to return to your interest rate instrument (tab page: Structure). You can change the layout on the Cash flow tab page. Choose the layout ““Calculation view”” by clicking the appropriate icon. This displays all conditions, that is, cash flows valid for this transaction. You can also create other layouts if necessary. Your house bank and account ID data is automatically transferred to the Payment Details tab page from Business Partner (Standing Instructions). © SAP AG

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Save your transaction by choosing Save (disk icon) in the standard tool bar. (If this system displays a dialog box indicating a transaction limit check, continue by choosing ENTER.) Transaction number:_______________________

Exercises 5 Unit 3: Transaction Manager – Money Market Topic: Back Office: Settlement and Correspondence After completing these exercises, you will be able to: x Perform a confirmation (OPTIONAL) x Settle the transaction After you create the fixed-term deposit, back office processing occurs. Confirmation letters are written here and the transaction is settled and checked. 5-1

Optional: Using the function Create Correspondence on Basis of Planned Records, display a preview of the confirmation letter for the fixed-term deposit from exercise ““Trading: Fixed-Term Deposit Investment 1”” (exercise 2).

5-2

Optional: First, check the correspondence status of the transaction (on the Status tab page). The confirmation should still be required. Generate an actual version. Confirmation status is now Executed. Display the letter using Spool. Note: The Correspondence Monitor (TBZ11) is very helpful in this area, since it is clearly laid out and easy to use.

5-3

Optional: Assume that the counterconfirmation has been received from the counterparty. Save this in the system and check the correspondence status again. By choosing Goto in the financial transaction, you access information about the confirmation and counterconfirmation letters.

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5-4

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Settle the transaction from the exercise, ““Trading: Fixed-Term Deposit Investment 1”” (2-1). Note the change in activity category. Make sure to check the payment details and the position indicator in Menu ĺ Environment by entering the account assignment reference.

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Solutions 5 Unit 3: Transaction Manager – Money Market Topic: Back Office: Settlement and Correspondence

5-1

Optional: Using the function ““Create Correspondence on Basis of Planned Records””, display a preview of the confirmation letter for the fixed-term deposit from exercise ““Trading: Fixed-Term Deposit Investment 1”” (exercise 2). Select:

Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Money Market Æ Back Office Æ Correspondence Æ Outgoing Correspondence (TBZ1) Enter the following values: Field Name or Data Type

Value

Company Code

FS##

Transaction

Transaction number from exercise 2-1

Correspondence type

001 Confirmation

All other required fields are predefined. Make sure that the Printer and Preview indicators are selected in the Output control area. Choose Execute (““Clock”” icon or F8) to start the report. (You can now compare this data with your transaction values in a second session - see exercise 5-2.)

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Make sure that the letter was only previewed and not actually generated. No print request was made. You need to follow further steps to do this. See exercise 5-2.

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5-2

Optional: First, check the correspondence status of the transaction (on the Status tab page). The confirmation should still be required. Generate an actual version. Confirmation status is now Executed. Display the letter using Spool. Note: The Correspondence Monitor (TBZ11) is very helpful in this area, since it is clearly laid out and easy to use. Select:

Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Money Market Æ Trading Æ Edit Financial Transaction (FTR_EDIT) Enter the following data: Field Name or Data Type

Value

Company Code

FS##

Transaction

Transaction number from exercise 2-1

Choose Display. The Status tab page displays the message ““Confirmation required””. To execute the confirmation after the check, the Output immediately indicator must be selected in the Output Control area. Printing is started when the report is executed anew. You can find the confirmation letter in Spool. The procedure is as follows: Call up the report for creating correspondence based on planned records again and select the following values: the Output immediately indicator must be selected in the Output Control. Printing is started when the report is executed anew. You can find the confirmation letter in Spool. Using the menu, choose System o Own Spool Requests (select and choose Display/glasses). If you check the confirmation status in your transaction once more, you will see that it is Executed.

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5-3

Optional: Assume that the counterconfirmation has been received from the counterparty. Save this in the system and check the correspondence status again. By choosing Goto in the financial transaction, you access information about the confirmation and counterconfirmation letters. The Counterconfirmation field is in the correspondence status of your transaction. This is required for your transaction. Choose the following path: Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Money Market Æ Back Office Æ Correspondence Æ Incoming Confirmations (Manual) –– (TBZ3) Enter the following data: Field Name or Data Type

Value

Company Code

FS##

Partner

1000

Currency

EUR

Amount

50m –– EUR 50 million

Direction

- (Outflow)

Start of Term

See exercise 2-1 (+0; current date)

End of Term

See exercise 2-1 (+3; 3 months calculated from today)

Int. rate

See exercise 2-1 (2,6)

Select Enter. The assigned transaction is called up automatically and shown in the lower part of the screen. Select SAVE to counterconfirm the transaction. The system displays the message ““Transaction xxxx counterconfirmed!””

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Note: In practice Entry: Exact data, which you can take from your business partner's counterconfirmation letter. View the correspondence status of the counterconfirmation in your transaction. It is now defined as Matched (status 3).

5-4

Settle the transaction from the exercise, ““Trading: Fixed-Term Deposit Investment 1”” (2-1). Note the change in activity category. Make sure to check the payment details and the position indicator in Menu Æ Environment by entering the account assignment reference. Select: Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Money Market Æ Trading Æ Edit Financial Transaction (FTR_EDIT) Display the transaction and choose Settle. You can see the change in activity type in the upper right hand part of the screen.

Check the entries on the Payment Details tab page and generate the position indicator using MenuÆ Environment.

(Account assignment reference MM510VC01) Choose the green arrow to return to the transaction data. Choose Save to save the transaction. The status bar displays the message ““Fixed-term deposit …… changed in company code FS##””.

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Exercises 6 Unit 3: Transaction Manager – Money Market Topic: Accounting After completing these exercises, you will be able to: x Process the fixed-term deposit in accounting

In Treasury Accounting, you have to take certain steps to transfer the transaction flows to FI (Financial Accounting).

6-1

Post the transaction from the exercise, ““Trading: Fixed-Term Deposit Investment 1”” (2-1). Your first posting should only relate to the fixed-term deposit (position posting). (In the Application area, choose Money Market) Carry out a test run prior to the update run. Note: Prior to posting, the transaction must be settled and monitored in the back office (see exercise 5-4).

6-2

Check the posting log and the posting document in Financial Accounting.

6-3

Do you see a change in Cash Management after posting? Show the cash position to reveal that levels have been changed.

6-4

In the second step - at the end of the term - you should also post the interest payment and repayment amounts.

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Solutions 6 Unit 3: Transaction Manager – Money Market Topic: Accounting

6-1

Post the transaction from the exercise ““Trading: Fixed-Term Deposit Investment 1”” (see exercise 5-4). Your first posting should only relate to the fixed-term deposit (position posting). (In the application area, choose Money Market) Carry out a test run prior to the update run. Note: Prior to posting, the transaction must be settled and monitored in the back office. Select:

Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Money Market Æ Accounting Æ Posting Æ Post Flows (TBB1) Enter the following values: Field Name or Data Type

Value

Company Code

FS##

Transaction

Transaction number from exercise 2

Up To And Including Due Date

Today

Before executing, make sure that the Test run indicator is selected in the Posting control area and that Post All Valuation Areas is activated. Field Name or Data Type © SAP AG

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Test Run

X - select indicator

Post all Valuation Areas

X - select indicator

Choose Execute. A dialog box appears containing a link, double-click this to go to the posting log. If the data is correct, perform an update run. Field Name or Data Type

Value

Test Run

Do not select indicator

Post all Valuation Areas

X - select indicator

Choose Execute. The system displays the data for the different valuation areas. Remain at this location within the system.

6-2

Check the posting log and the posting document in Financial Accounting. In the posting log, you will see update type MM1100- relevant for posting. Debit and credit postings have been generated for this. The posted accounts are also displayed. Now check the financial accounting document by double-clicking the FI reference number in the top right corner of the screen (second row). The system displays the Document in Financial Accounting dialog box. Double-click Accounting Document. You will see the standard document overview of the Financial Accounting area. You can display information about the origin of the data in the document header (choose Display Document Header).

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6-3

Do you see a change in Cash Management after posting? Show the cash position to reveal that levels have been changed. Yes, there were changes in Cash Management. Choose the following:

Æ Æ Æ Æ Æ Æ Æ Æ

Accounting Financial Supply Chain Management Cash and Liquidity Management Cash Management Information System Reports for Cash Management Liquidity Analyses Cash Position (FF7A)

Enter the following values: Field Name or Data Type

Value

Company Code

FS##

Cash Position

select

Grouping

ACBANKEN

Display as of

Day transaction was created

Display in

EUR

Select All Selections in the application toolbar. You can now enter additional data. Field Name or Data Type

Value

Delta Display with Balances

X –– select indicator

Account Instead of AccountName

X - select indicator

Display Currency Overview

Do not select indicator

Choose Execute (““Clock““ icon in the application toolbar or F8).

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You can see your created transaction under the abbreviated term DEUTSCHE (Deutsche Bank). Your financial transaction can no longer be found at level TB (Time Deposit), but at level B5 (Interim Postings). You can navigate to the levels and to the account view as usual (see exercise 3).

6-4

In a second step - at the end of the term - you also want to post the interest payment and repayment amounts. Proceed as described in steps 6-1 to 6-2. Ensure that the due date is correct. When posting flows (TBB1), enter the due date or a later date in the Up To And Including Due Date field. Select:

Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Money Market Æ Accounting Æ Posting Æ Post Flows (TBB1) Enter the following values: Field Name or Data Type

Value

Company Code

FS##

Transaction

Transaction number from exercise 2

Up To And Including Due Date

Due date

The cash position reports the cash flows of interest and repayments at a later time (see last column).

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Exercises 7 Unit 3: Transaction Manager – Money Market Topic : Rollover, Reversal After completing these exercises, you will be able to: x Rollover a money market transaction x Perform a reversal Due to rising interest rates, you decide to extend the transaction for another three months. At the same time, the interest rate increases by 0.5%. Consequently, you have to carry out a reversal.

7-1

Settle the contract (financial transaction) from exercise 3, ““Trading: FixedTerm Deposit Investment 2””, and post the flows from principal increase.

7-2

In December, you decide to extend the transaction for an additional three months due to rising interest rates. At the same time, the interest rate increases by 0.5%. Roll over your transaction. Use fast processing (Collective Processing –– TM20).

7-3

Take a look at the transaction history. (If you also had to change the interest payment method for the above transaction, how would you do this in the system?)

7-4

Reverse the rollover. Now take a look at the new transaction history. Which procedure is now active after the reversal?

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Solutions 7 Unit 3: Transaction Manager – Money Market Topic: Rollover, Reversal

7-1

Settle the contract (financial transaction) from exercise 3, ““Trading: FixedTerm Deposit Investment 2””, and post the flows from the principal increase. To settle the transaction, select: Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Money Market Æ Trading Æ Edit Financial Transaction (FTR_EDIT) Call your transaction and choose Settle. Choose Save in the standard toolbar (disk symbol). The transaction is settled. The status bar displays the message ““Fixed-term deposit …… changed in company code FS##””.

To post the principal increase of fixed-term deposit 2, select:

Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Money Market Æ Accounting Æ Posting Æ Post Flows (TBB1) Enter the data as usual (see exercise 6). In the Up To And Including Due Date field, enter Today. Perform a test run and then an update run.

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7-2

In December, you decide to extend the transaction for an additional three months due to rising interest rates. At the same time, the interest rate increases by 0.5%. Roll over your transaction. Use Time Deposit - Fast Processing (Collective Processing –– TM20). For rollovers with fast processing, choose the following path:

Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Money Market Æ Trading Æ Collective Processing Æ Time Deposit - Fast Processing (TM20) Enter the following data: Field Name or Data Type

Value

Company Code

FS##

Transaction

Transaction number from exercise 3

End of Term

Is proposed

Choose Execute. You are now in ““Time Deposit - Fast Processing””: Enter the following data: Field Name or Data Type

Value

Interest rate –– new

3,1

Term End - new

++3

Save your data. The message ““1 transaction(s) have been changed”” appears in the status toolbar.

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(Note - if the amount is to be changed: Enter the total amount for amount change when entering the rollover dates using fast processing.)

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Alternatively, choose: Æ Money Market Æ Trading Æ Edit Financial Transaction (FTR_EDIT) (Note - if the amount were to change: The delta amount would be entered when the amount is changed when entering the rollover dates.)

7-3

Take a look at the transaction history. (If you also had to change the interest payment method for the above transaction - how would you do this in the system?)

To view the transaction history, select: Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Money Market Æ Trading Æ Edit Financial Transaction (FTR_EDIT) Enter your company code and transaction number. Select History. Doubleclick an individual row to view the transaction details. This transaction has recorded procedures. The rollover is the active procedure and is therefore current and valid. (If the interest payment method must be changed (for example payment, capitalization or deferral), the new interest payment method are entered at the same time as entering the rollover dates). 7-4

Reverse the rollover. Now take a look at the revised transaction history. Which procedure is now active after the reversal? To reverse the rollover Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager

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Æ Money Market Æ Trading Æ Edit Financial Transaction (FTR_EDIT)

Choose your financial transaction and your company code and choose Reverse. Enter a reason for the reversal (for example, 01- Reversal due to processing error by clerk). Save your data. The message ““Fixed-term deposit....reversed”” appears in the status bar. View the history in the same manner as previously described. (See exercise 73). Activity 2 –– Contract settlement is active.

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Exercises 8 Unit 3: Transaction Manager – Money Market Topic: Interest Accrual/Deferral After completing these exercises, you will be able to: x Perform an interest accrual/deferral on a key date.

You have to accrue/defer interest at the end of the quarter/year. To do this, use the accrual/deferral run.

8-1

Create a new fixed-term deposit with a term that goes beyond the end of the next quarter/year. Settle this fixed-term deposit. Then post only the principal increase and not the interest that is due at the end of the term.

8-2

Carry out an interest accrual/deferral at the end of the next quarter or 31.12.YY. Carry out the postings immediately.

8-3

Take a look at the cash flow in the transaction. Note that you can select classification 1 to 2 (structure characteristics, accrual/deferral, valuation, transfer posting) by choosing ““Set Filter””.

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Solutions 8 Unit 3: Transaction Manager – Money Market Topic: Interest Accrual/Deferral

8-1

Create a new fixed-term deposit with a term that goes beyond the end of the next quarter/year. Settle this fixed-term deposit. Then post only the principal increase and not the interest that is due at the end of the term. Solution Create fixed-term deposit –– see exercise 2 (Term end: example ++5) Settle and post fixed-term deposit - see exercise 6 Adjust the term of the financial transaction according to the exercise requirements.

8-2

Carry out an interest accrual/deferral at the end of the next quarter or 31.12.YY. Carry out the postings immediately. To perform Interest Accrual/Deferral, choose Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Money Market Æ Accounting Æ Accrual/Deferral Æ Execute (TBB4) Enter the following data:

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Field Name or Data Type

Value

Company Code

FS##

Transaction

Transaction number

Key date

to the end of the quarter

Postg date of accrual/deferral

End of Quarter

Posting Date of Reset

End of Quarter +1

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Post immediately

X –– select indicator

Post All Valuation Areas

X –– select indicator

Test Run

X –– select indicator

Accruals/deferrals are reset methods. Therefore, you must also enter the reset posting date for the next day when selecting the accrual/deferral report. Also enter the posting date for the accrual/deferral. Note that all valuation areas must be posted (select indicator). Choose Execute in the application tool bar. Perform a test run and then an update run. You will receive a log, in which you can view the planned accruals/deferrals. You can also check these by choosing ““Logs and Messages”” (in the application tool bar). 8-3

Take a look at the cash flow in the transaction. Note that you can select classification 1 to 2 (structure characteristics, accrual/deferral, valuation, transfer posting) by choosing ““Set Filter””. To calculate the cash flow as usual, choose Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Money Market Æ Trading Æ Edit Financial Transaction (FTR_EDIT) Display the transaction. Go to the Cash flow tab page. The Set Filter icon is on the upper bar on the Cash Flow tab. Select the Flow Type column. Choose the Set Filter icon and enlarge the classification from 1 to 2 (that is, interval 1 to 2). Choose ENTER; the accrual/deferral flows will appear in the cash flow. The accrual/deferral flows are already posted! Note that you can select the classification (structure characteristics, accrual/deferral, valuation, transfer posting) by choosing Set Filter.

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Transaction Manager: Foreign Exchange, Derivatives: Overview

Unit 1 Course Overview Unit 2 Treasury and Risk Management: Overview Unit 3 Transaction Manager: Money Market Unit 4 Transaction Manager: Forex, Derivatives Unit 5 Transaction Manager: Securities Management Unit 6 Market Risk Analyzer Unit 7 Credit Risk Analyzer

¤ SAP AG 2006

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Unit 4 Transaction Manager: Foreign Exchange

1

Introduction to foreign exchange trading

2 Trading functions 3

Accounting functions

4 Additional informaiton: parallel position management 5

Valuation functions

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Transaction Manager: Foreign Exchange Unit Objectives By the end of this unit, you will be able to: z Minimize currency risks using the example of forward

exchange transactions z Perform back-office processing for spot transactions

or forward transactions and currency swaps z Use the tools to monitor and speed up back-office

processing z Explain the valuation area

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Foreign Exchange 1: Introduction to Foreign Exchange Trading

Foreign exchange product types

Transaction and position management process

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Foreign Exchange Product Types

Product Types Investment/borrowing instruments

Money market

Hedging instruments

Securities

Foreign exchange „

„

„

Derivatives

Spot exchange transactions Forward exchange transactions Foreign exchange swaps

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Forex trading incorporates the following product types: Spot exchange transactions and forward exchange transactions Forex swap transactions OTC currency options „ The currency options are covered in the "Derivatives" unit. „

y y y

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Transaction and Position Management Process: Example - Foreign Exchange Transaction Release

Trading Create new order/contract Exercise/expiration Rollovers Reversals Transaction history

Back office Settlement/control Netting Confirmation letters Reversals Transaction history

Accounting Postings Payment transactions Reversals Accrual/deferral Valuation

User authorization

¤ SAP AG 2006

The standard basic structure of the trading and transaction management processes forms the basis for integrating and processing transactions within the SAP system and provides the framework for adapting the way transactions are represented in the system to meet specific company requirements. „ You can grant user authorizations for the various activities in the transaction and position management process. The authorization concept is specifically designed to allow you to assign different authorization profiles to employees in different organizational areas. This enables you to separate trading, back office and accounting functions. „ For each product or transaction type, you determine whether a special posting release is required. „ You can create user authorizations for activity combinations. „

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Unit 4 Transaction Manager: Foreign Exchange

1

Introduction to foreign exchange trading

2 Trading functions 3

Accounting functions

4 5

Additional information: parallel position management

Valuation functions

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Foreign Exchange: 2 – Trading Functions Spot exchange/forward exchange transaction Forex swap Rollover/premature back-office processing

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Note: Customizing - Foreign Exchange Master Data 1 Product Category 600 Forex

Activity Cat

Transaction Cat 100 Spot transaction 100 Forward trans :

Contract Settlement :

Processing Cat 1 Order – Contract Settlement 2 Contract 3 Contract-settlement :

SYSTEM LEVEL Product Type - Forex - external :

Transaction Type - Spot transaction - Forward transaction :

APPLICATION LEVEL ¤ SAP AG 2006

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Addendum: Customizing – Foreign Exchange Master Data 2 Product Category

Transaction Category

Flow Category

600 Forex

100 Spot transaction 100 Forward trans. :

10 Principal increase 90 Other flow

Calculation Category ET - Inflow

SYSTEM LEVEL Product Type - Forex - external :

Flow Type

Transaction Type - Spot transaction - Forward transaction :

1000 -Buy foreign exchange 2000 -Sale forex

USER LEVEL ¤ SAP AG 2003

„

Unlike in money market, condition types are not necessary in foreign exchange trading.

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Position Monitor

¤ SAP AG 2006

„

y y „

„

„

The Position Monitor: Enables you to summarize information from Cash and Liquidity Management and Transaction Manager in one report Gives you a clear view of the individual currencies of the foreign exchange position of your company You can use the Position Monitor function in foreign exchange trading to get a quick, up-todate overview of the current foreign currency risk from all transactions that you have created in the Transaction Manager. You can include foreign currency bank accounts. With the Position Monitor, you can combine the cash flows from Cash and Liquidity Management and the financial transactions (funds and foreign exchange transactions, securities, and derivatives) from Transaction Manager. This gives you a complete view of the foreign exchange position in all relevant currencies in your company. You can select the data that should be taken from Cash and Liquidity Management and you also decide the transactions that should be displayed in combination with this data. You can divide time in the report into convenient segments. In addition, the net present value is calculated for payment flows on the basis of the latest fair values.

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Create Order/Contract: Forward Exchange Transaction y Company code 1000 IDES AG y Product type 60A Forex EXTERNAL y Transaction type 102 Forward transaction y Partner Deuba ...

... Purchase Currency

Sales USD

Purchase amount 1.000.000,00

Currency

EUR

Sale amount

Rate/value date Price (Un. quote) Spot Swap

Inverse

2,07 0,00975-

Current rate !!

Liquidity Value date

++3 Cash settlement

Conclusion Contract Date

05/29.09/YYYY

Contact person

Trader External Ref.

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„ „ „

„ „

On the entry screen, you enter further transaction data for contract conclusion, currencies, payment amounts, rate, value date, etc. For transactions with two foreign currencies, you can calculate the rate using the cross-rate calculator. You can call this up under Extras ĺ Cross-rates. From here, you can branch to the entry screens of general transaction management. Tab strips help you navigate between the screens. Administration Information about portfolio assignment, account assignment references for position posting. Other Flows You can add other flows to the automatically generated flows manually (charges, commission an so on). Payment Details Entry of payment details that are relevant for this transaction. If the payment details are maintained as standing instructions for a business partner, they appear as default values. Using Memos, you can store additional information for each activity. Other available functions include fast processing, collective processing, rollover, premature settlement, reversal, transaction history and deadline monitoring.

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Cash Settlement - Foreign Exchange 1 Physical exercise

Settlement Cash settl.

2 Cash settlement!

Settlement Cash settl.

Rate

Proposal from rates table

Date -

Pmnt Crcy

Amount

Flow is not relevant for posting

* Not yet defined

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The Cash Settlement function enables you to enter cash settlements for foreign currency transactions. The main flows are then locked for posting. „ For the cash settlement, the current rate is drawn from the rates table. However, the values can be changed manually. „ If you wish to use the cash settlement function, you must check the appropriate indicator when making the Customizing settings for the product type. „

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Additional Information About Customizing: Value Date Input in Forex Transaction Entry

Dom. Curr. For. Curr. L-Währ. F-Währ.

EUR EUR USD USD USD USD

Spot days Spot-Valutatage

USD USD CHF CHF FRF FRF

Number of working days between conclusion of contract and spot value date

M T WDC REC Trader String Benutzername M T GTP KEP Händler Date Dat.str. User Name

Date string from !spot value date

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In the field Spot days (see Define Leading Currency), you can store the number of days between the conclusion of the contract and the value date of the forex transaction. „ As a rule, the number of working days is two. Depending on the particular currency pair, this number can vary. You should only make an entry here if a rule other than two days commonly applies to a particular currency pair in the international foreign exchange market. „ If the flag Date string is checked (see Define User Data), the date strings you enter (for example, ++1 for one month) in the value date fields in forex and currency option entry are interpreted and calculated from the spot day and not from the date of conclusion of the contract. „ Example Conclusion of the contract 08.03.YYYY. The flag Date string is not set. An entry of +2 determines the date 10.03.YYYY for the currency pair EUR/USD. If the flag is checked, the system determines the date 12.03.YYYY. „

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Create Order/Contract: Foreign Exchange Swap Transaction

... Product type Transaction type

1st Transaction

2nd Transaction

60A Forex EXTERN 101 Spot transaction

60A Forex EXTERN 102 Forward transaction

Transaction Currency pair Purchase Sale

In.

USD 1.000.000,00 EUR

Price Spot

1,88

Swap

0,01287-

Liquid. Value date

++4

Ext.Reference Finance Project

... ¤ SAP AG 2006

Foreign exchange swap transactions are an important part of foreign exchange management. When a foreign exchange swap is created, a spot transaction and a forward transaction are created simultaneously in the SAP system. The foreign currency bought today is sold at a later date, or the foreign currency sold today is bought back at a later date. „ The entry of foreign exchange swaps enables combined entry of a foreign exchange spot transaction and a forward exchange transaction. „ The forward rate is automatically determined using a premium or discount which has been entered. The criteria for the authorized business partners just as for the payment details correspond to those of spot and forward transactions. To speed up entry, there are convenient copy functions available. You can use these to copy data from the first transaction (spot and/or forward) to the relevant field of the second transaction (forward and/or swap). „

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“Internal Foreign Exchange” Function

z Process for entering foreign exchange transactions locally from the view of the company code entering the transactions z Automatic exchange rate z Automatic creation of mirror transactions z Course overview for internal foreign exchange transactions

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Internal Forex Trading is a process for entering foreign exchange transactions locally from the view of the company code entering the transactions. „ A subsidiary company can use the Transaction Close function to request an exchange rate for a foreign exchange transaction (spot exchange, forward exchange, foreign exchange swap) from the head office. You can accept this exchange rate and close the transaction. „ In transaction closing, the rate is automatically created from the view of the head office in the company code of the head office. You can also create this transaction in the company code of the subsidiary as a mirror transaction. „ In addition to entering internal foreign exchange transactions, you can also use the report Exchange Rate Overview for Internal Foreign Exchange Transactions. This gives you an overview of the current exchange rates for each currency. You can also use this report to check that Customizing and the market data are complete. „

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Rollover/Premature Back-Office Processing

Rollover/ Rollover/Premature BackBack-Office Processing -Forward Exchange Transaction

Finance project

System generates two new transactions

Finance project

Netting transaction

New forward transaction

Swap unit Adjusting the term

Offsetting

¤ SAP AG 2006

With the functions Premature Back Office Processing or Rollover, the system generates two individual transactions that are linked by a swap unit. One transaction serves to offset the original forward exchange transaction (with identical, reversed conditions so as to avoid exchange rate gains/losses), the other transaction (as a new transaction) enables the desired adjustment of the term while retaining the same amounts. The relationship of the swap to the original forward transaction is documented through the assignment of the individual transactions to a common finance project with an identical project number. This project number is stored in the administrative data. Whenever a part of the swap is to be changed, the system displays a warning message to refer to the relationship with the second swap component. „ With this change in transaction data, you can use premature back-office processing or back order processing and a rollover to split a forward exchange transaction into separate transactions. With the liquidity effect, financial income and expenditure from rollovers can be generated on the old rate basis and included in the extended transaction as a premium. In this case also, the pairing of the swap components is done by means of the finance project. „ If the flag New base is checked for the forex attributes, you can enter a current rate for those transactions that are using the function. If the field has the initial value, then the rate of the rolled over or prematurely processed original transaction is used as the forward rate for the „

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netting transaction. You cannot change the rate for this rolled over/prematurely processed transaction that is based on the old rate.

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Unit 4 Transaction Manager: Foreign Exchange

1

Introduction to foreign exchange trading

2 Trading functions 3 4

Accounting functions Additional information: parallel position management

5 Valuation functions 6

¤ SAP AG 2006

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Accounting Functions: Transferring Data to Financial Accounting using the Posting Report Application Forex Money market Derivatives Securities

POSTING LOG

General selections

Company code Transaction Product type Transaction type Portfolio Currency Flow classification Up to and incl. due date Only post flow acc. to currency

...

Posting control Posting date Document date Test run Only post operatively Post all valuation areas ¤ SAP AG 2006

„

„

„ „ „ „

Posting transfers the settled financial transactions to Financial Accounting. You can only post transactions which have reached contract or settlement status (depending on the processing category) at the internal level (system level). Prior to posting, the transaction flows and/or positions to be posted are selected. You can have the system carry out a test run in order to check the accuracy of the posting entries in the posting log. When you execute the posting, flows and related documents are transferred to Financial Accounting. Postings to the SAP Financial Accounting module take place online. The FI document numbers are displayed. When you post a transaction, the system generates a posting log. If you double-click a posting line you can access the relevant posting document. If you do not wish to post certain financial transaction flows yet, you can block the posting of these flows.

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Unit 4 Transaction Manager: Foreign Exchange

1

Introduction to foreign exchange trading

2 Trading functions 3 4

Accounting functions Additional information: parallel position management

5 Valuation Functions

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Reasons for Parallel Financial Reporting ...

z Legal requirements z Comparability Standard accounting principles enable benchmark comparisons between companies „

Within corporate groups Comparison of several subsidiaries from various countries

„

Group-external Comparison of different companies (in the same industry)

z Consolidation z Globalization

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Parallel Position Management

N – parallel valuation areas

Transaction Management

Portfolio mgmt

Loans Management

Securities Account Management

Distributor

local accounting principles

Valuation Portfolio Mgmt . US GAAP . Rate Gains Portfolio Mgmt IFAS

¤ SAP AG 2006

The architecture of Parallel Position Management was created to manage positions simultaneously (in parallel) on the basis of several generally accepted accounting principles. This allows you to create various valuation areas. „ Valuation and posting rules that are required to comply with the legal requirements of the relevant accounting rule can be defined in these valuation areas. „ Transactions that are entered in Transaction Management of the various Treasury modules are then distributed to the various parallel valuation areas with a distributor from parallel position management. „

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Parallel Position Management n – parallel valuation areas

Transaction Management

D i s t r i b u t o r

Position mgmt local accounting principles Position mgmt US GAAP

Parallel Valuation Rate Gains

. . .

Position mgmt IAS

¤ SAP AG 2006

The architecture of Parallel Position Management was created to manage positions simultaneously (in parallel) on the basis of several generally accepted accounting principles. This allows you to create various valuation areas. „ Valuation and posting rules that are required to comply with the legal requirements of the relevant accounting rule can be defined in these valuation areas. „

„

Transactions that are entered in Transaction Management of the various Treasury modules are then distributed to the various parallel valuation areas with a distributor from parallel position management.

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Transaction entry

Administration

General Valuation Class

EXAMPLES: IFRS/US-GAAP: Held for Trading / HGB: UV IFRS/US-GAAP: Designated Trading / HGB: UV IFRS/US-GAAP: Designated Trading / HGB: AV IFRS/US-GAAP: Available for Sale / HGB: UV IFRS/US-GAAP: Available for Sale / HGB: AV IFRS/US-GAAP: Held to Maturity / HGB: UV IFRS/US-GAAP: Held to Maturity / HGB: AV IFRS/US-GAAP: Loans and Receivables / HGB: UV IFRS/US-GAAP: Loans and Receivables / HGB: AV IFRS/US-GAAP: Other Liabilities

¤ SAP AG 2006

When entering a transaction, you can use the general valuation class to determine the investment horizon as short-term, medium-term, or long-term. Then, if you make the appropriate entry in Customizing, the general valuation class is assigned for each valuation area to the valuation class (fixed assets, current assets, trading, available for sale, held to maturity). „ You enter the general valuation class when you enter a contract. It is an important link in the procedure chain for assigning transactions to the correct positions. „

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Additional information about Customizing: Parallel Valuations: Organization

TR accounting code

Transaction Manager

FI

!

Company code

Valuation class

Valuation area ¤ SAP AG 2006

As general settings, you define the organizational units required for position management. These units include the valuation areas, company codes and accounting codes. „ One of these relevant entities relating to parallel position management is the Treasury Accounting Code (TAC). „ You define various valuation areas in order to manage parallel valuation according to US GAAP or/and IAS, for example. For each valuation view (accounting rule) supported by the system, you have to set up a parallel valuation area in addition to the operative valuation area in Customizing. „ You define the valuation classes for the parallel valuation areas in three steps: First you define the general valuation classes. These are independent of the valuation areas. Then you define the valuation classes for each valuation area. You then assign the general valuation class to the relevant valuation class for each valuation area. The advantage of this procedure is that you can use a common, general term (such as "trading" in the interface for entering the operative transaction. In the background, this term is then mapped to the specific valuation classes used for accounting purposes. „

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Additional Information About Customizing: Valuation Area and Accounting Code

Define valuation areas

003 US-GAAP

Ex am pl

002 IFRS

es !

001 Operative valuation area

Define accounting codes TRXX

TRxx

¤ SAP AG 2006

For each valuation view (accounting rule) supported by the system, you have to set up a parallel valuation area in addition to the operative valuation area in Customizing. „ Note: The parallel valuation area 001 has a special role. „

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Additional Information About Customizing: Accounting Codes and Valuation Areas

001 Operative valuation area

CFxx

002 IFRS 003 US-GAAP

TR accounting code

Valuation areas

Post to z

General Ledger

z

Special Ledger

¤ SAP AG 2006

„ „

y

y

„

The relevant valuation areas are assigned to the TR accounting codes. In this way, the valuation areas are defined implicitly for each company code. There are two alternatives for the update to FI: Posting to the general ledger The business transactions are posted in separate account intervals for each valuation area. For this, you have to define a separate account interval in FI for each valuation area. Here the business transactions are updated for each valuation area. Posting to a special ledger You need not set up parallel accounts in the general ledger if you set up a separate special ledger per valuation area, in which all business transactions for this valuation area are posted. In the parallel valuation areas, you can explicitly exclude product categories from the update in position management.

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Additional information about Customizing: Parallel Valuations: Valuation Classes

Tasks: • General Valuation Class IFRS/US-GAAP: Held for Trading / HGB: UV IFRS/US-GAAP: Designated Trading / HGB: UV IFRS/US-GAAP: Designated Trading / HGB: AV IFRS/US-GAAP: Available for Sale / HGB: UV IFRS/US-GAAP: Available for Sale / HGB: AV IFRS/US-GAAP: Held to Maturity / HGB: UV IFRS/US-GAAP: Held to Maturity / HGB: AV IFRS/US-GAAP: Loans and Receivables / HGB: UV IFRS/US-GAAP: Loans and Receivables / HGB: AV IFRS/US-GAAP: Other Liabilities

Valuation class

• Valuation class

Define and assign valuation classes General valuation class

Balance Sheet

Valuation class

Valuation area

¤ SAP AG 2006

The valuation class has two characteristics: The general valuation class serves as an indicator for the trader as to where the position is to be assigned. y The balance sheet for the relevant parallel valuation area is structured based on the valuation class. „ The valuation classes are dependent on the valuation area since different accounting rules allow different classifications. Examples of valuation classes include fixed assets, current assets (HGB-German Commercial Code), or also held-for-trading or available-for-sale (IAS). „

y

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Additional information About Customizing: Position Management Procedure z Define valuation procedures (for example, rate valuation procedure for forward exchange transactions)

z Define position management procedure

z Assign position management procedure

¤ SAP AG 2006

The position management procedure determines how positions are managed and valued in the parallel valuation areas. „ In order to comply with the legal requirements of the relevant accounting rules, you have to first define the necessary procedures to be carried out as part of a key date valuation. „ You then set the sequence of the key date valuation procedures within the position management procedures. In this way, you can combine the relevant procedures for amortizations, one-step price valuations, security price valuations and foreign currency valuations according to the relevant accounting rules. „ You can assign position management procedures dependent on different factors (for example, valuation area, valuation class, product type). „

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Additional Information About Customizing: Define Valuation Procedure

Example rate valuation procedure for FX spot rate on the market against spot rate in the transaction Write-down rule: (Unrealized losses): - Write-down to market value Or - Write-down to purchase value or - No write-down Write-up rule: Unrealized gains): - No write-up Or - Write-up to market value Or - Write-up to purchase value

¤ SAP AG 2006

Write-down rule „ The write-down rule decides how a negative difference between market and book value for a valuation step:is dealt with in a key date valuation. „ No Write-Down: No flows are generated. „ Write Down to Market Value: A write down is generated for the difference between the book and market value. „ Write Down to Purchase Value: If the market value lies below the purchase value plus the previous amortization, then a write down is only generated for the difference between both amounts. Write-up rule „ The write-up rule decides how a positive difference between market and book value for a valuation step:is dealt with in a key date valuation. „ No Write-Up: No flows are generated „ Write-up to market value:A write-up is generated for the difference between the market and book value. „ Write Up to Purchase Value: If the market value lies below the purchase value plus the previous amortization, then a write down is only generated for the difference between both amounts.

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Additional Information About Customizing: Define Position Management Procedure Position mgmt procedure 4000 Name Forward exchange transactions: Spot/spot Position management category Foreign exchange transactions Step 1 Step category

6

Rate valuation for FX transaction

procedure

1000

Rate valuation: Spot/spot

9 Carry out for key date valuation Step 2 Step category

7

Swap/margin accrual

procedure 9 Carry out for key date valuation Step 3 Step category

8

Swap valuation

procedure 9 Carry out for key date valuation ¤ SAP AG 2006

The sequence of the steps in a valuation is established in the definition of the position management procedure. „ In the position management procedures, you define which valuation steps are performed in which order. For this, the previously defined valuation procedures are grouped into one position management procedure. „

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Additional Information About Customizing: Assign Position Management Procedure

Assignment criteria:  Valuation area

Position mgmt procedure

Accounting code Step 1

 Product Category Product type  Valuation class

4000

Step 2

Transaction type

...

Assign position management procedure:

Balance Sheet

Valuation Area

TR accounting code

60A...

Valuation class

4000

¤ SAP AG 2006

Certain influencing factors are assigned to position management procedures: When assigning the position management procedure, you can use the criteria valuation area, accounting code, product category, product type, valuation class and transaction type, for example. „ For all newly created positions, the position management procedure is initially derived from the data stored here. You can change this default value manually using the transaction Maintain Position Management procedures (TPM50). „ To ensure that a position management procedure is found in all cases, you can define a default procedure (where all influencing factors have their initial value). „ „

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Additional Information About Customizing: Update in Treasury Ledger

Update types

Derived business transactions

Account determination

¤ SAP AG 2006

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Additional Information About Customizing: Update Types - Terminology z

The identification of the new update types has been taken from the old flow types: „

Example: Update type FX1000+

Š Š Š

FX

=

Foreign exchange

1000

=

Flow type forex purchase

+

=

+ sign

DE

=

Derivatives

FX

=

Foreign Exchange

CML

=

Loans

MM

=

Money Market

SE

=

Securities

V

=

Valuation

VR

=

Valuation reset

DBT

=

Treasury ledger transactions (PG, PL, translations and reconciliation flows, valuation, etc.)

Update types are managed across modules in a table.

¤ SAP AG 2006

„ „

„ „ „

„

„

You create the update types in the IMG activity Define Update Types, specifying a short and long name for each one. In the sample Customizing, update types are defined, assigned to usages and specified for the different usages. SAP recommends that you use the sample Customizing settings delivered with the system as the basis for making your own settings. Update types are similar to flow types. They describe and classify flows. Update types are used comprehensively in the parallel valuation areas. The new term has been created because the existing flow type is not used and interpreted uniformly. Objective: Uniform view of the flows The update types are no longer dependent on the modules and have an implicit direction. This means, for example, that incoming and outgoing charges must be represented as two different update types. The new update types consist of the definition itself and a language-dependent text. No further indicators are defined directly with the update types.

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Additional Information About Customizing: Key Date Valuation - Update Types

Define update types

Assign update types to usages

Assign update types for valuations Position management procedure

¤ SAP AG 2006

„

For the individual usages, you must first define the required update types and then assign them. You assign update types for derived business transactions and valuations for each position management procedure. In account determination, the posting system is defined using the assignment of the posting logic to the update type. Using different update types therefore enables you to differentiate between the position management procedures.

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Additional Information About Customizing: Derived Business Transactions

Define update types

Assign update types to usages

Assign update types for derived business transactions

¤ SAP AG 2006

Based on the assigned position management procedure, derived business transactions are then calculated for each parallel valuation area. The derived flows include rate gains and rate loss flows. The determination can be done online or offline. y Online processing: ̘ For each position-changing business transaction, the derived business transactions are updated immediately. y Offline processing: The derived business transactions must be generated manually using a report (Transaction TPM27). „ If the status control is set to Status Plan, the derived business transactions are held as plan records; these become actual records when they are ““fixed””. „

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Additional Information About Customizing: Account Determination - Account Assignment Reference

Define account assignment references

Define account assignment reference determination

¤ SAP AG 2006

„ „

„

y y y

The account assignment reference controls which G/L account in FI the positions are to be posted to. Within the parallel valuation areas, the account assignment references no longer contain the (original) information as to which account is to be posted to; however, the account assignment reference can be used as a factor (besides position currency and valuation area) to determine the relevant account. The account assignment references for the parallel valuation areas can be determined automatically. Here we distinguish between:̘ OTC financial transactions (Money Market/Foreign Exchange/Derivatives)̘ Securities / listed derivatives Loans

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Additional Information About Customizing: Account Assignment Reference

Acct. assig. ref.

Name of account assignment reference

... IAS_AFS_AKT IAS_AFS_AKT IAS_HTM_AKT IAS_HTM_AKT IAS_TRA_AKT IAS_TRA_AKT ...

... IAS - Available for Sale - Stocks IAS - Available for Sale - Bonds IAS - Held to Maturity - Stocks IAS - Held to Maturity - Bonds IAS - Trading - Stocks IAS - Trading - Bonds ...

Assignment:

Assignment:

 Derivation Rule (s) Assignment

Manual

¤ SAP AG 2006

„

„

„

Within the parallel valuation areas, you initially define account assignment references without specifying a balance sheet account. In the context of account determination, you can assign the balance sheet accounts using a similar systematic to the one used for account assignment references. The account assignment references for the parallel valuation areas can be determined automatically. You can use derivation rules and/or assignments. When you are using DERIVATION RULES, characteristics serve to control the account assignment references in the form of ““If-then relationships””. y Example You should determine the account assignment reference in accordance with the characteristics valuation area, valuation class and product category. If necessary, you can further restrict these assignments using conditions (for example, if you use the characteristic company code in a condition, you can restrict the validity area of an assignment to a specific company code). ALLOCATIONS are used for relatively fixed assignment scenarios. y You can define a value in the source field, which is then used during the account assignment reference. y You define the account assignment reference as the target field.

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y

© SAP AG

You use a constant to explicitly assign the account assignment reference that is used for the target field AA_REF (account assignment reference in the parallel valuation area).

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Additional Information About Customizing: Account Determination Definition of account symbols Acct symb. Account symbol text 1

Position (book value)

Posting category from acct symbol Position posting (book value)

Definition of posting specifications 0001 Position to bank clearing Debit entry

Acct symbol

1

Credit entry

Acct symbol

3

Assigning update types to posting specifications - and/or valuation areas UType

UType

MM1100- Investment/Increase

Update type text 0001 Position to bank clearing

Assignment ofG/L Accounts to account symbols Acct symbol

AcAsRef

1 Balance

10001

ValArea

G/L acct 113113

¤ SAP AG 2006

First the account symbols are defined in abstract form. These account symbols are valid for all valuation areas. Since the account assignment references in the parallel valuation areas no longer contain the (original) information as to which account is to be posted to, you must also define an account symbol for the position. „ All the required posting specifications are first defined abstractly and then assigned to the update types. This simplifies the process as it reduces the number of Customizing entries. „ This assignment is valid for all valuation areas. If you wish to post business transactions in the individual valuation areas in a different way to these assignments, you can make different assignments of update types to posting specifications for the individual valuation areas. „ Finally, you assign the G/L accounts to the defined account symbols. Here, the criteria valuation area, account assignment reference and/or currency can be used for controlling the G/L account postings. „

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Unit 4 Transaction Manager: Foreign Exchange

1

Introduction to foreign exchange trading

2 Trading functions 3

Accounting functions Additional information: parallel

4 position management 5 Valuation functions

¤ SAP AG 2006

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Position Management: Valuation

You can perform the following foreign currency valuations: z Key date valuation: The position is valued on a key date – the realtime datafeed can provide the required valuation rates. Key date valuation is carried out with transaction TPM1. z Realized profit/loss: For positions that are closed, the realized gain/loss is determined using the principle of single valuation of transactions. This is calculated by taking the difference between the forward rate based on the conclusion of the contract and the posted rate on the value date. Realized gains/losses are posted with the derived business transactions (TPM18).

¤ SAP AG 2006

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Market Risk Analyzer: Saving OTC Net Present Values

Mark-to-market EUR

USD

Save

Valuation

GBP

10

Net present values

8 6 4 2

1 2 4 6 8 10 M Y Y Y Y Y

Money market Forex Derivatives

Financial !Accounting

¤ SAP AG 2006

In the Tools of the Market Risk Analyzer area, you can store net present value (NPV) figures (determined with the mark-to-market valuation) in the OTC NPV table. „ You must calculate and save a net present value for the relevant key date before the valuation run for all positions for which you wish to carry out a mark-to-Market valuation. The key date valuation then access this net present value. „ Transaction TPM60 performs the calculation and saving. „

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Key Date Valuation

General Accrual/Deferral Company Code

TRXX

to

valuation area

001

to

Product type

to

Valuation class

to

Portfolio

to

OTC Transaction Transaction

Posting control for updating to the parallel valuation areas

to

Valuation parameters Key Date of Valuation

002

30.09/YYYY

Valuation category

Various valuation categories enable end-of-quarter closings and yearend closings to be created

¤ SAP AG 2006

„

y

y y

„

The key date valuation is carried out on the basis of the position management procedure that is determined for the relevant position. With the parallel valuation areas, you have three options for key date valuation. Year-end valuation (without reset)̘ This key date valuation without reset is typically used in the context of annual accounting. Key date valuation permanently changes the book value of the position. The book value after the key date valuation is the starting point for all subsequent calculations of rate gains, for example, as well as for future valuations. Mid-Year Valuation Without Reset Mid-year valuation with reset You can use this valuation category for monthly or quarterly accounts. The results of the valuation are reset on the same date as the key date valuation. The key date valuation with reset, therefore, does not change the position permanently, but only for the period between the valuation key date and the reset key date. In the case of a valuation with reset, the reset automatically occurs and is posted in the same run as the valuation. The reset key date is one day after the valuation key date.

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Closing Operations: Key Date Valuation

¤ SAP AG 2006

„ „

y y y y y

The key date valuation can be done with or without reset. The valuation is controlled by the Valuation category. The following valuation categories are available: Year-end valuation Mid-year valuation with reset Mid-year valuation without reset Manual valuation with reset Manual valuation without reset

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Closing Operations: Valuation Log

¤ SAP AG 2006

„

For key date valuation, all relevant valuation steps defined in the position management procedure are performed; for example, amortization, security and forex valuation.

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Position Management Procedure: Valuation Rules I

Determine the rate valuation procedure for the position management procedure, for example: A. Spot rate on the market against spot rate in the transaction Write-down rule: (Unrealized losses): - Write-down to market value Or - Write-down to purchase value or - No write-down Write-up rule: Unrealized gains): - No write-up Or - Write-up to market value Or - Write-up to purchase value

¤ SAP AG 2006

Write-down rule „ The write-down rule decides how a negative difference between market and book value for a valuation step:is dealt with in a key date valuation. „ No Write-Down: No flows are generated „ Write Down to Market Value: A write down is generated for the difference between the book and market value. „ Write Down to Purchase Value: If the market value lies below the purchase value plus the previous amortization, then a write down is only generated for the difference between both amounts. Write-up rule „ The write-up rule decides how a positive difference between market and book value for a valuation step:is dealt with in a key date valuation. „ No Write-Up: No flows are generated „ Write-up to market value:A write-up is generated for the difference between the market and book value. „ Write Up to Purchase Value: If the market value lies below the purchase value plus the previous amortization, then a write down is only generated for the difference between both amounts.

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Position Management Procedure: Valuation Rules II

Define the position management procedure In the position management procedures, you define the basic rules for how positions are managed, that is, how positions are to be valued. Name of position management procedure, for example: FX spot rate on the market against the spot rate in the transaction Determine the position management procedure, for example: Rate valuation for forward exchange transaction

¤ SAP AG 2006

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Position Management Procedure: Valuation Rules III Position management procedures are assigned to certain influencing factors:

-

Accounting code Valuation area Valuation class Product category Product type Transaction type Portfolio Sec. acct group

Position Management Procedure, for example: FX spot rate on the market against the spot rate in the transaction

¤ SAP AG 2006

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Payment Transaction Processing

... using clearing accounts FT - Bal. sheet acct (Deuba)

c

House bank account (Deuba)

100M

100M

IDES

‫ٵ‬

FT dep. dep. inv.

House Bank DEUBA

Bank clearing acct

‫ٵ‬

100M

100M

c

c ‫ٵ‬

FT dep. inv. Statement from bank

¤ SAP AG 2006

If you conclude financial transactions with a business partner that is also one of the company's house banks, you do not usually make active payments. „ Instead, the business partner posts the relevant postings to the bank account. The flows ““preposted”” by Transaction Manager to the bank clearing accounts are then cleared with the aid of the electronic account statement. „

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Payment Transaction Processing Using the Payment Program

...using a clearing account for payment requests FT dep. inv. Fixed-term deposit Balance sheet account (broker)

c ‫ٵ‬

House bank Current account (Deuba)

100M 50M

150M

Clearing account for payment requests

t

150M

100M 50M

c 1st Fixed-term deposit - investment ‫ٵ‬ 2nd Fixed-term deposit - investment



IDES

Brokers

Payment Order House Bank DEUBA

Payment

Bank clearing account

c ‫ٵ‬

 t 

150M

150M

t

Payment !(Trigger PR run) Bank statement

¤ SAP AG 2006

„

„

y y y y y y y

If you conclude transactions with a partner for whom you do not have a house bank account, you can generate payment requests which are processed by a special payment program. This option applies to cases where the payment details are known, but where you do not want each transaction to result in a physical payment. This function also enables you to make joint payments for groups of transactions. Examples of use of the extended payment program: Several transactions are concluded with a business partner that is not a house bank When a fixed-term deposit is posted, a payment request is generated simultaneously All transactions are managed in the payment request clearing account Payments can be grouped together/netted When payment is due, a payment run is triggered in Accounting and the payment amount is transferred to the bank clearing account A payment medium is generated simultaneously and is passed on to the house bank When the bank statement is received a day later, the payment amount is posted to the bank account.

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Processing Payment Transactions: Overview FI pmnt program

Pmnt program for PR

Four alternatives: 1) G/L account posting

-

-

2) Posting to G/L accounts with payment request

-

x

3) Posting to customer accounts

x

-

4) Posting to customer accts with payment requests

-

x

¤ SAP AG 2006

„

y y

y y

Use of the four alternatives - Examples: Transactions with the house bank are usually processed as pure G/L account postings. Transactions with a partner that is not a house bank, without using a customer account. Payment using the payment program for payment requests. Payment requests are documents for generating payment media. They are usually generated automatically when you post flows that are due. The payments are then made individually or jointly using the payment program for payment requests (F111). Transactions with a bank that is not a house bank, which you want to pay using the FI payment program and using a customer account. Transactions with a partner that is not a house bank, using a customer account. Payments made with the payment program for payment requests in order to use the netting option.

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1) Posting to G/L Accounts

Business Partner

Bank

House Bank

Standing Instructions

Transaction - Payment Details P Currency ...

House!Account bank ID

+

EUR

...

DB

GIRUN

-

EUR

...

DB

GIRUN

Payment process

Payment Request

¤ SAP AG 2006

„

In the transaction, you enter the information required for processing payments on the Payment details tab.

„

In the case of a pure G/L account posting, you must enter the following: R: Direction of the flow (inflow, outflow) Curr.: Currency of the flow̘ House bank: House bank key (ID) Account ID: Account key at the house bank

y y y y

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2) + 4) Automatic Payment: Payment Program for PR

Business Partner

Bank

House Bank

Standing Instructions

Business partner – Payment details D Currency ... House Account Payer/ee Partn. bank ... Pmnt. Bank ID request +

EUR

...

DB

GIRUN

Recipient

B1

...

X

-

EUR

...

DB

GIRUN

Recipient

B1

...

X

Pmnt. Indiv. Methods pmnt ESU X

ESU

¤ SAP AG 2003

„

y y y y y y y y y y „

To use the payment program for payment requests, you must enter the following data: D: Direction of the flow (inflow, outflow) Curr.: Currency of the flow House bank: House bank key (ID) Account ID: Account key at the house bank Payment transaction: Blank = G/L account posting, or X = customer account posting Payer/payee: Person receiving the payment (usually the business partner) Partner bank: Partner bank ID (encodes the bank details –– bank and account –– of the payee) Payment request: Blank = Do not generate a payment request X = Generate a payment request Individual payment: Blank = This payment flow may be settled together with other flows, for example for netting purposes Payment methods: List of payment methods used to process payments in the payment run If you post payments using the payment program for payment requests, you can define in Customizing which bank account should be used - the bank account specified in the payment details for the CFM transaction, or the bank account found using account determination for the payment program.

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2) + 4) Automatic Payment: Payment Program for PR Payment control

Current parameters

Master

Payment Request

Proposal run

Documents Proposal Dataset

Edit proposal

Payment run Print Dataset Print program Check Bank transfer Eurocheck

Payment advice

Payment summary

IDOC

¤ SAP AG 2006

„

y y y y y „

The payment program for payment requests has the following functions: Processes payment requests (PR): Automatic selection of requests Generation of payment documents (customer accounts / vendor accounts / G/L accounts): Transfer posting to the relevant bank (sub-)accounts for each house bank and currency Generation of payment data Generation of payment lists and logs "Print programs" write this payment data to payment media, such as checks. Usually, you carry out a payment proposal run first. The run creates a proposal data set, which you can edit before the actual run.

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2) + 4) Automatic Payment: Payment Program for PR Payment control

Master

Current parameters

Pmnt. request Documen ts

Proposal run Proposal Dataset

Edit proposal

Payment run Print Dataset Print program Check Euro-check

Payment advice

Bank transfer

Payment summary

IDOC

¤ SAP AG 2006

„ One of the options is to make postings to customer accounts and use the FI payment

program. This option is used in the loans area, for example. Together with the account determination function in the Treasury posting interface, you can control whether payment activities involve a flow of funds. You can post transactions directly to the payer/ee to generate relevant payment documents using the payment program. „ The payment program has the following Functions:

y Automatic selection of the items to paid, taking account of exceptions (such as blocked items) y Generation of payment documents (debit/credit) y Generation of payment data y Generation of payment lists and logs y Print programs write this payment data to payment media, such as checks. „ Usually, you carry out a payment proposal run first. The run creates a proposal data

set, which you can edit before the actual run.

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Payment Program for Payment Requests

Prerequisites -

The Standard Payment Program also uses parts of Customizing.

-

You must make additional settings.

Use -

The payment program settles payment requests (PR)

-

It can be used in conjunction with postings to:! - Customer accounts - Vendor accounts - G/L accounts

¤ SAP AG 2006

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Netting z Especially in the case of transactions with business partners that are not house banks (that is, they require an exchange of payments), situations can arise where several transactions are to be settled at once. „

Example: Fixed-term deposit investment in EUR and fixed-term deposit borrowing in EUR

„

You balance the open payment amounts and only pay or receive the net amounts.

„

Advantage: Saving transaction costs or bank charges

z For this purpose, transactions can be summarized in “Netting transactions”. z Types of netting: „

Within a transaction

„

Cross-transaction

¤ SAP AG 2006

„ „ „ „

„ „

„

All netting transactions are explicit arrangements between the business partners in order to simplify the handling of payments. Transactions are blocked against changes to any relevant fields (particularly due dates, amounts, house bank and payment data) You can net transactions in the money market, foreign exchange, derivatives and securities areas, or across several of these areas. As a result of the integration of securities into Treasury Transaction Management, you can now create netting transactions with securities. These transactions can be netted with each other or in combination with other Treasury transactions from the money market, forex or derivatives areas. Payment requests have a special ““Grouping term”” field. You can use this field to control which payment requests are to be kept separate. All payment flows and/or their payment requests belonging to the same netting transaction are assigned the same unique grouping term and are, therefore, separated from other payment requests. These are not to be combined with other payment requests. Transactions linked by netting are referenced to each other by way of object links (reference key: KMP).

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Business Partner - Payment Details

Business Partner

Standing Instructions

Currency ......

Payment request

EUR

......

X

USD

......

X

Individual payment X

Same Pmnt Determ. direction meth group. X

EU EU

Determine grouping (text) All transactions can be grouped All transactions can be grouped

¤ SAP AG 2006

„

Using the Payment request indicator, you control whether transactions can be settled together.

„

The Determine grouping field controls which restrictions are to apply to the grouping of transactions for example: y ..within Treasury y ..within a TR application y ..within a product type y ..only flows of a financial transaction

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Netting - Process

z Triggering a netting transaction „

All netting transactions are explicit arrangements between the business partners in order to simplify the handling of payments.

„

The transaction confirmation (correspondence) contains a reference to the other related transactions.

Confirmation

z Results after netting transaction has been created „

Changes to the relevant transaction fields are blocked (particularly due date, amounts, house bank data and payment data).

„

The transactions and relevant payment requests are assigned a common grouping reference.

¤ SAP AG 2006

„

Payment requests have a special ““Grouping term”” field. You can use this field to control which payment requests are to be kept separate.

„

All the payment flows and payment requests linked to the same netting unit are given the same unique grouping term which separates them from other payment requests. These are not to be combined with other payment requests.

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Netting and Payment Requests

Contract

Settlement

Administrat.Data

Create Netting Item: Data

Administrat.Data

CoCd 0001 SAP AG Transaction 4711 PType 51a Activity 1 Basic Data TType 100 Activ.Cat. contract CoCd 0001 SAP AG Transaction 4711 1 PType 51a Activity TType 100 Activ.Cat. contract

Posting

Netting

CoCd 0001 SAP AG Transaction 4711 PType 1 Activity Basic51a Data TType 100 Activ.Cat. Settlmt CoCd 0001 SAP AG Transaction 4711 PType 51a 1 Activity TType 100 Activ.Cat. Settlmt

KMP Category 001 No. Partn DB

Netting 01.01.97 Value date Deutsche Bank

ReceivReceivables

Netting

TM

TM

CFM: Post Flows Test client Walldorf

Accounts

FI

CFM: Postings Log

Pmnt request

FI

¤ SAP AG 2006

„ „

„

y y y y y

Netting is a special form of joint payment of transactions. While you can always settle all transactions at once, netting only applies to an explicit subset of these transactions. The decision to create a netting transaction is usually made shortly before the payment flows are due, usually on the same day the transactions are posted. Only then do you know which transactions (for example, forward exchange and spot exchange transactions) are suitable for net payment. You can group flows in netting transactions if they share the following parameters: Same company code Same payer Same payment date Same payment methods̘ Same settings for other payment program criteria

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Unit 4 Transaction Manager: Derivatives

1

Introduction to derivative financial instruments

2

Control of exchange rate risks using OTC currency options - OTC currency options - Currency barrier options - Compound options

3 Control of interest rate risks using derivatives

-FRA, Interest rate swap, Cap/Floor

4

Information System

¤ SAP AG 2006

© SAP AG

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Derivatives: Unit Objectives

By the end of this unit, you will be able to: z Name the various instruments for hedging against interest rate and exchange rate risks and z Be able to map these instruments in Transaction Manager

¤ SAP AG 2006

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Selection of the Relevant Product Types Product Types Investment/Borrowing instruments

Money market

Securities

Hedging instruments

Foreign exchange „ „ „

„

Further extract of OTC options:

¤ SAP AG 2006

© SAP AG

Such as for FX standard options: -Barrier -Double-barrier -Compound -Average rate -Basket -Correlation -Forward volatility agreement

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„

„ „

Derivatives Cap / Floor FRA Swaps - Interest rate - (Int. rate) Currency OTC options - Currencies - Interest rates - Securities - Swaption Futures Interest, Bond, Index Repo Listen options

4-237

Product Matrix - Derivative Financial Instruments Important Hedging Instruments

Exchange rate risk

Interest rate risk

• Forward exchange transactions

• FRAs • Forward rate agreements • Interest rate futures • Interest Rate Swap

• Cross-currency swaps

• OTC interest rate options • Cap / Floor • Swaption • IRG

• OTC currency options

¤ SAP AG 2006

The hedging instruments you choose will determine what you want to hedge against (elimination of the currency risk, interest rate risk, or price risk). „ Derivative financial instruments can roughly be divided into exchange transactions (upper half) and optional transactions (lower half) on the currency and interest side. The latter can also be further sub-divided into listed and OTC (Over The Counter) options. „ The building block concept applies here - this means that an instrument can be formed from another one or combined with others to form a new instrument. „

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Unit 4 Transaction Manager: Derivatives

1

Introduction to derivative financial instruments

2

Controlling exchange rate risks Using OTC currency options - OTC currency options - Currency barrier options - Compound options

3 Control of interest rate risks using derivatives

FRA, Interest rate swap, Cap/Floor

4

Information System

¤ SAP AG 2006

© SAP AG

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Derivatives: 2 – Controlling Exchange Rate Risks Using OTC Currency Options Typical transaction and position management processes:! Transaction entry and back-office processing

OTC currency options Currency barrier options

Compound options

¤ SAP AG 2006

Using an option provides the flexibility to both reduce the risk of loss and at the same time to profit from favorable market trends. Options therefore represent a type of insurance. A premium is paid or collected for this. „ The use of currency options is recommended when there are strong exchange rate fluctuations or when future expectations are very uncertain. „ OTC currency options can be assigned to both foreign exchange trading and to the area of derivative financial instruments, and can be created in both areas. The input logic for derivatives follows that of other option types so that you can branch from the option data to the separate input screen of the underlying transaction (in the case of currency options, the spot transaction). „ OTC currency options are asymmetric hedging instruments since rights and obligations are split unevenly between purchaser and seller. In contrast to listed instruments, the OTC (overthe-counter) options with user-defined structures are traded directly between business partners. „

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OTC Currency Options

t0 t0+2

ti ti+2

n At t 0 the transaction is concluded (creation and settlement) o At t 0+2(Value date) the premium is paid (posting of the premium flow) p At t i: - Physical exercise and exercise settlement (Transfer posting of the premium flow) - The spot transaction (underlying transaction) is generated at the same time. This must be settled according to the back-office processing category. q At t i+2 (Value date) the posting of the spot transaction occurs.

¤ SAP AG 2006

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Creating an OTC Currency Option Cross-Rate Calculator Open Price Calculator Company code 1000 IDES AG Transaction Product cat. OTC currency options Activity 76A 1 Trans. type Purchase 100 ... Option Exercise period Currency pair UnderlyingCrcy Strike Value date Premium Quot. in points Points Payment date



++2 USD USD 1,82

European

Exercise

EUR 5.000.000,00 Inverse

Call

Settlmnt.

Contract

Physical exercise

Put

Procentage quot Crcy

EUR

Amnt

300.000,00

Conclusion Contract date ...

09.29.YYYY

...

¤ SAP AG 2006

When you create a currency option, you record the intention to buy or sell a currency option. On the initial screen, you enter the transaction type (purchase/sale) and the business partner for the product type, currency option. „ On the subsequent screen, you enter the term, the exercise and purchase premium for the option, in addition to the transaction data for the underlying spot exchange transaction. „ From here, you can branch to the entry screens of general transaction management. Tab strips help you navigate between the screens (Structure, Administration, Other flows, Payment details, Cash flow, Memos, Status). „ You can branch to the option price calculator to calculate the option premium. „

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Underlying

OTC Currency Option

Underlying Product type 60A

Forex - external

Strike

Trans. type

101

Spot transaction Pmnt. amount 3.640.000 EUR

Receivable

1800002 USD-CALL

USD

1,82 2.000.000

¤ SAP AG 2006

When you define the product types in Transaction Manager, you can include the related underlying transactions. In this way, a spot exchange transaction is entered as an underlying transaction in currency options, for example. In the case of physical exercise, the underlying transactions are normally generated automatically. This separation into two transactions allows you to specify different payment methods for the underlying transaction and the option. „ Option type: PUT/CALL̘ The internal view is focused not on the traded amount but rather on the risk currency. If you conclude an option - foreign currency against local currency, the put/call type is always determined dependent on the foreign currency. In the case of cross transactions (up to Release 4.5A), the type is determined dependent on the lead currency only. From Release 4.5B the following change is effective regarding cross transactions: If the local currency is a participating currency in the European Monetary Union, then the option type for cross transactions including a participating currency is not dependent on the lead currency but rather on the non-participating currency. „

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Currency Option: Option Price Calculator Premium Calculation for Standard Options Market data Swap/forward Premiums Sensitivities Implied volatility Curr. pair ... Market data 1,70900 Spot 0,11212Swap Forward 1,59688 Premiums Basic Data Put 1 Put 2 1,700000 Put 3 Call 1 Call 2 Call 3

1,700000

/ / /

1,71100 0,106441,60456

Int. 1st currency Int. 2nd currency Volatility

European

6,4152 3,8005 10,0000

/ / /

List

6,4574 3,8997 10,0000

American

0,06347

/ / /

0,06527

0,06366

/ / /

0,06545

0,04502

/ / /

0,04650

0,04878

/ / /

0,05020

¤ SAP AG 2006

„

„ „ „ „

„

While entering the option data, traders can use the direct link to the option price calculator to calculate the accounting par value of the option premium. Besides supplying the premium, this also provides you with the critical sensitivities of the options. You can enter the option premium on the entry screen as a percentage of the basis transaction (in percentage points) or as a fixed amount. The premium is calculated on the basis of the spot price, strike price, term, the risk-free interest rates in both currencies, the option category, and the volatility of the exchange rate. By choosing Market Data, load the current market data: spot rates, swap rates, interest rates for currency 1 and 2 as well as exchange rate volatility. You can enter different strike prices for the underlying currency transaction for 3 put and call options. You can determine premiums for European and American standard options and also for European currency barrier options (exotic options). If you position the cursor on a premium and choose Sensitivities, the option sensitivities (delta, gamma, and so on) are calculated. You can have a list displayed with all key figures for all the calculated options. By specifying an option premium, you can determine the underlying volatility (implied volatility) by calculating backwards using the option price model.

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Exercise Type

OTC Currency Option

Exercise Cash settlement Physical exercise

¤ SAP AG 2006

At the time of conclusion of the transaction, the cash flow consists only of the premium. Both European and American option forms can be represented in the SAP system. As settlement, you can have either physical exercise or cash settlement. „ When the option is exercised, in the case of a cash settlement, the settlement amount is based on the difference between the strike price and the market price. In the case of physical exercise, the spot transaction is generated automatically from the underlying transaction (option). „ If the option is worthless, it is deleted. As with the exercise, it may be necessary - depending on the back-office processing category - for this expiration to be settled by the back-office processing area again. „

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Currency Barrier Options

z

Barrier options are represented as product types with a specific option category.

z

The transactions are processed using special processing categories that take into account activities such as knock-in/knock-out.

z

As with options, the underlying transaction is assigned.

z

The barrier must also be specified.

¤ SAP AG 2006

„

„

y

y

„

Currency barrier options are different from regular OTC options in that they have a defined upper and lower limit (instrike or outstrike). If the market exceeds or falls below these limits, the option either becomes effective or expires - depending on the option type. This barrier is specified in the financial transaction data. In Transaction Manager, you can see the basic categories traded on the market: These are: Calls: Down&Out option expires below the outstrike Up&Out option expires above the outstrike Down&In Option is activated at or below the instrike Up&In Option is activated at or above the instrike Puts: Down&Out Option expires at or below the outstrike Up&Out Option expires at or above the outstrike Down&In Option is activated at or below the instrike Up&In Option is activated at or above the instrike You can also enter double barrier options. These either come into existence or expire if two barriers are exceeded or fallen below.

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Currency Barrier Option Barrier Company Code 1000 Product cat. 76F Transaction type 100 Structure

Underlying

Partner Exercise

Deuba

Option price calculator IDES AG Transaction Currency barrier option Up. Activity Purchase ...

...

...

1 ...

Contract

...

... Curr. Curr. barrier option Up&In

Currency barrier 2.10 USD/EUR Underlying Cancel Premium

Continue

Concludin g ¤ SAP AG 2006

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Knock-In/Knock-Out Activities Currency barrier option

Barrier exceeded/fallen exceeded/fallen short of

Knock-in Knock-out

Exercise

Expiration

¤ SAP AG 2006

The options are activated either for exercise or expiration by means of the knock-in/knock-out activities. Using the function Expiration/Barrier check, you can have the instrikes and outstrikes checked by currency barrier options. After comparing the transaction data with the relevant rates, the SAP system proposes a transaction (knock-in, knock-out, or expiration) to process the transaction further. „ To determine market-driven option prices, you can use the option price calculator. This takes the agreed barriers into account and also any rebates that are to be paid upon expiration of the option. „

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Unit 4 Transaction Manager: Derivatives

1

Introduction to derivative financial instruments

2

Controlling exchange rate risks Using OTC currency options - OTC currency options - Currency barrier options - Compound options

3 Control of interest rate risks via derivatives

FRA, Interest rate swap, Cap/Floor

4

Information System

¤ SAP AG 2006

© SAP AG

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Derivatives: 3 – Controlling Interest Rate Risks Using Derivatives Typical transaction and position management processes: Transaction entry and back-office processing

FRA Interest rate swap

CAP/FLOOR

¤

SAP AG 2006

© SAP AG

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Forward Rate Agreement z

Agreement between two parties (a buyer and a seller) - On a certain interest rate (FRA rate) - For a deposit or a loan - For a period in the future

z

Target: Fixing of an interest rate today to apply to a period in the future

z

Term: 3 - 24 months

z

Quotation: 3x9; 6x12; 12x24; (lead time: total term)

z

Reference interest rate: for example; 3-month LIBOR, 6-month LIBOR

z

Interest rate comparison (fixed rate against reference interest rate) after lead time and

z

Calculation of settlement amount to be paid

z

Interest netting in the form of cash settlement, no exchange of nominal

amounts ¤ SAP AG 2006

„

Background:

The buyer of a FRA anticipates higher interest rates for the reference period, while the seller anticipates lower interest rates.

„

Example:

FRA 3x9; Nominal amount 10M EUR FRA rate 5% (=> in 3 months for 6 months) Reference interest rate LIBOR 6 months Interest rate comparison in 3 months, Hedging period 6 months 6M LIBOR in 3 months = 6% => Settlement payment to the purchaser = Interest rate payment x Nom. amount x hedging period in days 360 x Discount factor If the LIBOR rate was lower than the FRA rate, the purchaser would have to make the settlement payment.

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FRA - Forward Rate Agreement

23

1

t0

t8 - 2 t8

n

At t0 the transaction is concluded (Input and settlement)

o

On fixing day = Start of hedging period -2 days (from the definition of the reference interest rate) (Carry out the interest rate adjustment)

p

Start of hedging period and payment of the discounted settlement amount (Posting of the flows generated under 3)

q

End of hedging period

4

t11

¤ SAP AG 2006

„

A company will receive EUR 10M in 8 months and it wishes to invest this as 3-month money. The company expects falling interest rates. Therefore, at time t0 the company agrees an FRA with the bank for EUR 10M. The FRA will start in 8 months (t8) for a term of 3 months until (t11). The agreed interest rate is 5%; 8 months later (Fixing day = t8 minus 2 days): The reference interest rate (3 months LIBOR) is 4.5%. Therefore, the bank is obliged to pay the company a settlement of EUR 10M x 0.5% x 90/360 = EUR 12,500 (this amount is still to be discounted). If the interest rate on the fixing day had been higher than the agreed interest rate of 5%, the company would have had to pay a relevant settlement as the FRA is a symmetrical financial instrument.

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Creating an FRA Company code 1000 Product type 63A Transaction type 200 Structure

...

IDES AG FRA Sale

Financial transaction Activity 1

...

...

... Term Start of lead time Start of Hedge Period End of Hedge Period

10.07.YYYY ++8 ++11

Interest structure Base amount Interest Rate Interest Structure Reference interest rate Fixing

10.000.000,00 5,0 LIB_3_EUR Act/360 2-

Business calendar ... Conclusion Contract date ...

10.05.YYYY

...

Inclusive

...

Contract

...

No. int. days

EUR

¤ SAP AG 2006

Forward rate agreements are financial instruments with which purchasers and sellers agree today on a fixed interest rate for a future time period. Amounts, currencies and terms can be determined by the parties to the contract; the interest rate reflects the forward interest rate curve. „ The FRA is based on a fictitious money market transaction in which the capital amount is merely used for calculation purposes. A '8 x 11' FRA has a contract period of three months and the term starts in eight months. At this point, the contract is also settled and paid out. The buyer of a FRA is looking for protection against rising interest rates, whereas the seller wants to hedge against falling interest rates. The entry in the SAP system is user-defined and is based on the trading conventions shown. „

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Swaps z

A swap is an exchange of cash flows over a fixed period of time.

z

The cash flows are defined when the swap is concluded, but their absolute value may depend on events in the future (for example, interest payments at variable interest rates which are dependent on future reference interest rates).

z

Depending on the type of cash flows to be exchanged, we differentiate between: - Interest rate swaps

and

- Cross-currency interest rate swaps ... Possible variations for exchange of interest payments: PAYER: Incoming interest payments fixed, outgoing variable RECEIVER: Incoming interest payments fixed, outgoing variable BASIS: variable vs variable interest payments FIX TO FIX: fixed vs fixed interest payments

¤ SAP AG 2006

„

Background: Swaps offer comparative cost advantages; these are achieved by two partners on the basis of their different positions in different financial market segments and could not be achieved individually.

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Interest Rate Swap - Interest Rate Fixing Example Interest Payment 1

2 3

4 5

6 7

1)

Conclusion of the SWAPs and 1st interest rate fixing (Entry and settlement of the transaction as well as the first interest rate adjustment)

2)

Interest rate fixing for the second period of the variable interest rate (6 months) (Adjust interest rate -> Generate interest flow)

3)

Interest payment for variable side/start of the second period (Posting of interest flow from 1 )

4)

Interest rate fixing for the third period

5)

Interest payment for variable and fixed side/start of the third period

6)

Interest rate fixing for the fourth period

7)

Interest payment for variable side/start of the fourth period

¤ SAP AG 2006

A company finances an existing investment with a fixed rate loan of 6.5%. The treasurer of the company expects falling interest rates and, therefore, agrees an interest rate swap with a bank. The company receives an annual fixed rate of 7.25% and pays a variable rate of 6 M LIBOR. The company incurs the following interest costs: y Interest expense of 6.5% and 6 M LIBOR y Interest revenue from Swap of 7.25% equals an interest expense of 6 M LIBOR - 0.75% „

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Creating Interest Rate Swap Companycode 1000 Producttype 62A 300 Contract Transaction type ...

IDESAG Interestrateswap(IRS)

Transaction 1 Activity

Payer

Term Businesscalendar ... 10.15.YYYY Start Calendar 1 10.15.YY+5 End Calendar 2 Inclusiveinterest Outgoing Incominginterest EUR Nominalamnt. 10M Nominalamnt. 10M 10.15.YYYY 10.15.YYYY Eff .from Eff.from Freq.month 12 1stduedate ++6 ++12 1stduedate Freq.month6 4,6 Fix.rate Fix.rate Var.interest Var.interest Lib_6_EUR Int.calc.method360/360 Int.calc.methodAct/360 Int. Contract ContractDate ¤

„ „ „

„

„ „ „

InterestRateAdjustment

Int.

InterestRateAdjustment

10.13.YYYY

SAP AG 2006

You input the transaction data for the partner, transaction conclusion, term and the actual trading object (amount, currency, interest structure, etc.). You can also branch to other entry screens to enter detailed information. There are conditions overviews available for the incoming and outgoing sides and also the detailed information in each case. You can change the nominal amounts and also specify the interest rate adjustment conditions. In the Interest rate adjustment detail view, you can set the frequency with which the variable interest is to be calculated and on what day the value of the underlying reference interest rate is to be taken. An interest rate adjustment can be carried out at the start of the period, at regular intervals, or at specific times. For automatic interest rate adjustment, choose Back Officeĺ Variable Interest Calculation ĺ Interest rate adjustment ĺAutomatic Processing ĺCreate. You can access the NPV calculator for Swaps by choosing Extras - NPV calculation. There is a notice function for premature settlement of a swap or a CAP/Floor.

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Conditions in Detail: Interest

Example: Interest conditions Update Rule

Standard

Unadjusted Frequency 12 Months 1Days +/

 Special

DueDate Duedate

DD.MM.YY

WorkingDay

Nextworkingday

Month end -

Calendar Calendar 0 Calendar GB Calendar ¤

„

SAP AG 2006

You can choose between standard update methods (rhythmic, unadjusted, adjusted) and special update methods. Examples Update Method Unadjusted Adjusted Regular

Calculation Date relative to due date before shifting relative to due date after shifting regular

Due Date regular regular regular

Unadjusted (interest period) date

regular

relative to calculation

Adjusted (interest period) date

regular

before shifting relative to calculation after shifting

© SAP AG

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„

As the table shows, for the ““Adjusted”” and ““Unadjusted”” methods, the calculation date is determined relative to the due date. For all other update methods with the supplement ““Adjusted”” or ““Unadjusted””, the due date is determined relative to the calculation date. Contrast this with the ““Unadjusted (interest period)”” and ““Adjusted (interest period)”” above.

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Cap / Floor

z

CAPs/Floors are a series of interest options that you can fit to the periods/term of the transaction that you want to hedge.

z

Agreement between the seller and buyer of the Cap. The seller agrees, in the case of a rise in the reference interest rate above the agreed fixed interest rate (Strike), to pay the difference in the interest rates to the holder of the Cap . If the agreed interest rate is fallen short of, no settlement payment is made.

z

Floor: The purchaser receives a settlement payment only if the agreed interest rate lower limit is not reached.

¤ SAP AG 2006

Background: Both are examples of a type of interest insurance. The purchaser of the Cap wants to hedge against rising interest rates. He agrees an interest rate upper limit for which he pays an ““insurance premium””. The purchaser of a Floor wants to have a minimum interest rate and agrees an interest rate lower limit for protection against falling interest rates. „ Caps or floors are a series of interest rate options that are exercised when a particular interest rate level is exceeded or is not reached. The exercise of the option right is regulated in such a way that the purchaser's declaration of intent is understood to be given automatically as soon as the favorable conditions apply. „

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Cap

12

3 4

5 6

78

9

1) Conclusion of the transaction (Entry and settlement) 2) Payment of the premium (Posting of the premium flow) 3) Fixing day for the first hedging period (Carry out interest rate adjustment) 4) Start of first hedging period 5) Fixing day for second hedging period 6) End of first/start of second hedging period - possibly first compensation payment 7) Fixing day for third hedging period 8) End of second/start of third hedging period; possibly second settlement payment 9) End of last hedging period; possible settlement payment ¤ SAP AG 2006

„

y y y y

A company has a variable loan liability of EUR 10M and has to pay interest at the LIBOR 6 month rate. The company expects that interest rates will stay roughly the same but does not rule out a rise. Therefore, it purchases a Cap. Term: Interest rate upper limit: Nominal amount: Premium:

© SAP AG

07.01.YY until 06.30.YY+2 6,125 % EUR 10 million 0.85 % = 85,000 UNI

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Creating a Cap/Floor Company code 1000 61A Product type Transaction type 100

IDES AG CAP Purchase

Financial transaction 1 Activity

Contract

... Term Start End

10.15.YYYY ++62

Strike Upper limit

4

Interest Base amount Effective from First due date Reference interest rate Interest calc. method Interest Contract Contract date

15M ++2 ++6 LIB_6_EUR Act/360

Business calendar ... Inclusive

Premium Amount Percentage

EUR Freq. mon 6

Pmnt date Eff. from

Interest rate adj

200.000,00

EUR

10.15.YYYY 10.15.YYYY

Option premium

10.13.YYYY

¤ SAP AG 2006

„

„ „

„

„ „

You input a contract for purchasing or selling a Cap or Floor in the usual way. The important point here is the interest-related data such as interest rate upper limit/lower limit, reference interest rate, interest calculation method, frequency of interest rate adjustment, etc. A detail view is available: Interest, interest rate adjustment, and option premium. In the Interest rate adjustment detail view, you can set the frequency with which the variable interest is to be calculated and on what day the value of the underlying reference interest rate is to be taken. An interest rate adjustment can be carried out at the start of the period, at regular intervals, or at specific times. When you create the CAP/Floor, the system will propose a single premium as default. In the detail view: Option premium, you can generate several premium payments by setting a frequency. By choosing Reverse, you can reverse activities. There is a notice function for premature settlement of a swap or a Cap or Floor.

© SAP AG

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Interest Rate Scenario: LIBOR with CAP

Int. 7,0

Interest rate upper limit

6,5 6,0 5,5 5,0 4,5

¤ SAP AG 2006

„

By purchasing a Cap, the purchaser is not relieved of having to pay the complete variable interest for the loan. However, the seller of the Cap is obliged to pay to the purchaser an amount equal to the excess of the variable interest rate over the agreed upper limit.

© SAP AG

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Interest Rate Adjustment

CREATE INTEREST RATE ADJUSTMENT

Interest Rate Adjustment Overview Int. fx dte

Weekdat

Ref.int.rate

Status

Interest Rate

Start

Interest Rate Adjustment Detail View Int. fx dte

Valid From

Ref.int.rate

Status

Int. rate

Trigger

Manual adjustment Automatic adjustment

¤ SAP AG 2006

The amount of the interest payments that can result from derivative interest rate transactions is usually determined by a variable Index (reference interest rate). Two examples are the reference interest rates LIBOR_6_months and LIBOR_12_months. Today, these might have the values 4.75 percent and 5.23 percent. Future values are not known, however. An example of a derivative financial instrument is a plain vanilla swap with variable and fixed interest rates: Libor_6 in return for 5.5%, term 20 years with semiannual interest payments. „ In the derivative financial instruments application, when you create a swap, you can create flows for the fixed interest side and the variable side of the contract. These flows correspond to the term. You can determine the payment amounts on the fixed interest side when you create the swap by using finance-mathematical rules. The future amounts on the variable side are, by definition, unknown since the future reference interest rate percentage is unknown when the swap is created. For this reason, the activity ““interest rate adjustment”” is necessary. This changes a plan interest rate (that is, a rate where the payment amount is unknown) into an actual interest rate (payment amount is known). This activity occurs at ““interest rate fixing””. „ The interest rate adjustment activity is usually run daily in a batch process. The function determines the plan interest rates that are to be converted to actual interest rates on a specific day (using the fixing date that is stored at the rate level). The function then determines the interest values per interest rate reference, calculates the amounts and writes the actual interest rates to the database. Following the interest rate adjustment, the plan interest rate is no longer „

© SAP AG

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available in the transaction. The result of the interest rate adjustment function is an interest rate fixing of the plan rate and generation of the actual interest rate.

© SAP AG

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Unit 4 Transaction Manager: Derivatives

1

Introduction to derivative financial instruments

2

Control of exchange rate risks using OTC currency options - OTC currency options - Currency barrier options - Compound options

3 Control of interest rate risks using derivatives

FRA, Interest rate swap, Cap/Floor

4

Information systems

¤ SAP AG 2006

© SAP AG

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Special Topics 1: Information System (Extract) Structure of information system Journal: Money Market Journal: Money Market, Forex, Derivatives, Securities Payment schedule Position list

Interest rate adjustment schedule Facilities: Reporting Alert Monitor ¤ SAP AG 2006

© SAP AG

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Overview of the Information System

Reports delivered by SAP

User-defined reports

Cumulative values

Non-cumulative values

¤ SAP AG 2006

„

In addition to using the reports delivered by SAP, you can define your own evaluations in the Information System.

© SAP AG

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Structure of the Information System: Example Journal ... Accounting  Treasury and Risk Management  Transaction Manager Area-specific journal

 Money market trading  Information System  Transaction

 Information System Transaction Overview  Journal: Money Market  Reports  strategic  operative

Cross-area journal

 Transaction  Transaction Overview  Journal: Money Market, Forex, Derivatives,Securities ¤ SAP AG 2006

„

For an overview of all Transaction Manager reports, see Reports.

„

You can find the cross-application reports under the menu option Reports -> Strategic. These include reports from Cash and Liquidity Management for analyzing liquidity, reports from the Limit Management and Risk Analysis areas for controlling risk, and cross-application reports for analyzing your positions and revenue.

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For detailed analyses for supporting work processes in day-to-day business, see the menu option Reports -> Operative.

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Information about area-specific reporting is aggregated in the cross-application reporting section in the Transaction Manager Information System.

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The reporting tree displays a complete directory of all reports that are defined in Treasury and Risk Management and that can be assigned to users. Just as with transactions, you can assign reports to specific users (role-specific).

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Journal: Money Market

Overview list of money market transactions Information about

Company Code 1000 Product Type 51A Transaction Activity Cat. 1 Contract

Buchungskreis Produktart

Transaction Activity Cat. 3 Contract

IDES AG Fixed-term deposit EXTERNAL

Entered/changed 09.06.YYYY on Transaction Type

Counterparty portfolio Finance Project Trader Status Crcy Amount StartTerm StartRoll. 1000 Deutsche Bank Active EUR 100.000,00 09.06.YYYY

1000 52A

IDES AG Callgeld EXTERN

100 Investment

OutConf. EndTerm 1 required 11.06.YYYY

IncomConf. Int. rate 1 required 2.5

ContDate Valid since 09.06.YYYY 09.06.YYYY

Chgd/Entd on Chgd/Entrd 09.06.YYYY BAUERT

Erf./Änd.datum 06.09.JJJJ Geschäftsart

Counterparty portfolio Finance Project Trader Status Crcy Amount StartTerm StartRoll. 1000 Deutsche Bank Active EUR 100.000,00 09.06.YYYY

100 Anlage

OutConf. 1 required

IncomConf. Int. rate 1 required 2.6

ContDate Valid since 09.06.YYYY 09.06.YYYY

Chgd/Entd on Chgd/Entrd 09.06.YYYY BAUERT

¤ SAP AG 2006

The Money Market journal enables you to call up an overview of the money market transactions stored in the system using flexible selection criteria. For each selection criteria you can define selection options (single values or interval, incl./excl.). „ This enables you to use the journal to select transactions, for example, that were concluded with certain traders or with certain business partners. „ Using Journal: Money Market, Forex, Derivatives, Securities, you can call up an overview list of the transactions saved in the system according to flexible selection criteria. „

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Payment schedule AreaArea-specific payment schedule

CrossCross-area payment schedule

Payment schedule: Money Market,

Payment schedule: Money Market, Forex, Derivatives, Securities

ƒ Company Code ƒ Payment date, payment amount, payment currency ƒ Transaction, name ƒ Product type, transaction type ƒ Posting status, posting release ƒ Bank key of house bank, bank account of house bank ƒ Bank key of business partner bank, business partner bank account ƒ ... ¤ SAP AG 2006

„ „

y y y y

You can use the payment schedule to call up incoming and outgoing payments within a userdefined time period. Considerable enhancements have been made to the payment schedule functions. You can output lists flexibly using the SAP List Viewer. The following options are available: Define and save your own layouts Sort using any fields Further filter using user-defined values Create control totals ̘

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Money Market: Position List

BuKr

Geschäft Ptyp Gtyp Part Gart Partner Gwähr Betrag

Zinssatz LfzBeginn LfzEnde ...

1000

1

510 100 51A 100 Deuba UNI

100.000,00 2.5

06.09.JJJJ 06.11.JJJJ

1000

3

520 100 52A 100 Deuba UNI

100.000,00 2.5

06.09.JJJJ

1000

4

510 100 51A 100 Deuba UNI

100.000,00 2.7

07.09.JJJJ 07.11.JJJJ

Link to the SAP List Viewer

¤ SAP AG 2006

Furthermore, you can execute results controls using the position list for traders or business partners. The transaction types are sorted and listed according to conditions. In the position list, the positions for Money Market transactions are displayed by key date. „ You can also select Money Market transactions that have a certain term start or due date. „ The connection to the SAP List Viewer provides you with a range of display options. You can determine the columns or rows to be displayed, sorted and consolidated and save these layouts for later use. „

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Facility: Reporting

Current utilization profile of a facility Integration of the facilities in Money Market Collective Processing Key date overview of facility utilization

Overview of facility charges

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Derivatives: Maturity Schedule OTC Options

Maturity Schedule OTC Options

Type Start Term Put

DD.MM.YY

Call

DD.MM.YY

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You can use flexible selection criteria (product type, transaction type, put, call, due date, etc.) to call up the option maturity schedule for transactions in a particular company code. „ You can exercise individual option transactions or allow them to expire by positioning your cursor on the option. „

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Alert Monitor

The alert monitor collects error messages from the various Transaction Manager areas to be assigned to processing. Content areas: Settlement Release Payment + Posting Correspondence Interest rate adjustment

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Principles of Drilldown Reporting

portfolio

z as a drilldown report

BOND

Data output

MM

zas a list (list viewer) Term From To

Basic s

MMkt/Sec./ Loan

Forex/ Derivatives

Open Position

zas a graphic

FX JPY USD FLOOR

EUR

CAP

Product Type

FRA

Currency

¤ SAP AG 2006

The drilldown reporting tool enables you to set up your own reports and process them interactively. Drilldown reporting is highly flexible: You can analyze the results graphically, transfer them to PC applications, link reports, and assign them to a hierarchical tree structure. „ Drilldown reports allow you to generate different views of your existing data. You do this by selecting the appropriate combination of characteristics and key figures. „ The idea behind drilldown reporting is to make the information available in a cube with ndimensions. Each sub-cube is specified by characteristics. The characteristics correspond to the dimensions (for example, 3 characteristics: portfolio, product type, and currency). Each sub-cube contains n key figures (example: 2 key figures: investment/purchase, borrowing/sale). By linking characteristics and key figures, you can generate different views according to the combinations of values you enter. „

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Drilldown Reporting Architecture Key figures

Characteristics

Form

Report

Report index

Save

Save

Winword

Create Change Execute Batch List

Lists Graphics Navigation/ Drilldown

Mail

Excel

...

¤ SAP AG 2006

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You can use characteristics, key figures, and forms to define reports. A report generates several lists that can be called up interactively and displayed on the screen. You can also print reports, export them to MS Word or Excel, or enter them in a file.

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Forms describe the content and format of reports. Forms provide the basis for reports, which you complete later when you define the reports.

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Characteristics define the different ways in which the dataset can be classified, for example, company code, business partner, or portfolio. You can include characteristics in the form and also in the report.

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Key figures are amounts and quantities: you can use a key figure transaction to define additional key figures from existing key figures (key figure tree). You can select the key figures either in the form or in the report.

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Note: For more detailed information, see the general documentation on Drilldown Reporting.

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Drilldown Reporting Functions

z Navigation to all levels (characteristics) z Exception reporting provides a visual warning when critical values deviate from expectations z Hierarchy processing shows external hierarchies (such as flow type hierarchy) z Graphics improve visualization of the figures z Analysis functions allow you to classify your data z Data mining allows you to identify conspicuous values in the dataset z Currency translation determines currency influences

¤ SAP AG 2006

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Form Report

z Form Report For reports prepared individually with „

formform-oriented layout

„

specific formatting (colors, colors, etc.)

„

integration of variables

„

complex selection

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„ „ „

y y y y „

The general maxim for creating reports is that simple tools are available for generating simple reports, while more sophisticated tools are available when you need to generate more complex reports. In the Transaction Manager area, you create form reports. These are reports based on forms and are suitable for printing reports. Drilldown reporting is always related to the business objects of an application. Reports Are complex structures, which comprise many subcomponents Are language-dependent and can therefore be translated Can be transported and delivered Contain authorization checks and can therefore be blocked for a specific user It is now possible to define Basic reports. When you use these types of reports, you do not need to create forms.

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Overview of Drilldown Reporting

z Create form

Transaction Manager Application; Customizing

z Create reports

Transaction Manager Application; Customizing

z Include report in report tree

Transaction Manager Customizing

z Execute report

Transaction Manager Application

¤ SAP AG 2006

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Exercises 9 Unit 4:

Transaction Manager – Foreign Exchange

Topic:

Trading - Forward Exchange Transaction

After completing these exercises, you will be able to: x Set up a forward exchange transaction in the Transaction Manager In three months, you must pay an invoice to the value of approximately USD 12 million and you want to take advantage of the current USD exchange rate. You therefore conclude a forward exchange transaction.

9-1

Create an order using a forward exchange transaction (USD-EUR). Choose the Deutsche Bank (1000) as your business partner. Choose the following transaction data: Amount: Rate: Value date:

USD 12 M, USD 1.3 In 3 months

(Use the input help relating to the amount field and value date.) Note: Do not perform a cash settlement. Save the financial transaction and note the transaction number for later settlement and posting activities. Transaction number:_______________________ 9-2

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Execute the order and observe the change in the activity category. Then perform the settlement as well.

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9-3

ROLLING OVER a forward exchange transaction Assumption: The forward exchange transaction that is currently concluded should be extended by one month as the payment target (=sold-to party) was extended. The old forward exchange transaction will be closed on the old rate basis (= forward rate of the netting transaction is the forward rate of the original transaction)! Enter a swap surcharge for the rollover transaction and save the rollover. Transaction number:_______________________

9-4

To obtain references of the transactions (original, netting, and rollover), use the PRL reference category. Specify which transaction numbers belong together.

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Solutions 9 Unit 4: Exchange

Transaction Manager – Foreign

Topic Trading - Forward Exchange Transaction

9-1

Create an order using a forward exchange transaction (USD-EUR). Choose the Deutsche Bank (1000) as your business partner. Choose the following transaction data: Amount: Rate: Value date:

USD 12 M, USD 1.3 In 3 months

(Use the input help for the amount field and value date.) Note: Do not perform a cash settlement. Save the financial transaction and note the transaction number for later settlement and posting activities. Transaction number:_______________________ To create an order (forward exchange transaction), choose: Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Foreign Exchange Æ Trading Æ Create Financial Transaction (FTR_CREATE)

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Enter the following data: Field Name or Data Type Value Company Code FS## Product Type 60A - Forex: External Transaction Type 102- Forex: External-Forward transaction Business Partner 1000 Order/Fixing X - select indicator Choose ENTER. Enter the following data: Field Name or Data Type Structure area Buy - Currency Buy - Amount Sell - Currency Sale amount Rate/Value Date area Rate Value Date

Value USD 12 M EUR 1,30 ++3

(Note: The status bar displays a message stating that market data may not be current. You can skip this message by choosing ENTER.) When you confirm the entries by choosing ENTER, the system then automatically determines the offset amount (here: sales). Only then should you save. To check whether the system automatically made entries in the Position Management Procedure and Account Assignment Reference fields, choose Environment ĺ Position Indicator. Choose Back in the standard tool bar to exit the transaction. Check the cash flow on the Cash Flow tab page to see whether the flow types were used for buy and sell. Save your financial transaction. Transaction number:_______________________ The status bar displays the message ““Forex transaction…… saved in company code FS##””.

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9-2

Execute the order and observe the change in the activity category. Then perform the settlement as well. Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Foreign Exchange Æ Trading Æ Collective Processing Æ Order (TXA5) Choose your company code and your transaction. Choose EXECUTE. Double-click the selected transaction to display the "Payment details" tab page and view the determined bank data of your own house bank. Choose BACK to return to the previous screen. Select ORDER EXECUTION. SAVE the data by choosing the Disk icon. The transaction now has the "Contract" activity. To settle the contract, choose Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Foreign Exchange Æ Trading Æ Edit Financial Transaction (FTR_EDIT) Enter the following data: Field Name or Data Type Company Code Transaction

Value FS## Transaction number from Exercise 9-1

Choose „Settle“. Save the data. The message “Forex transaction xxxx saved in company code FS##” appears in the status bar.

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Check the data and save the transaction.

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9-3

ROLLING OVER a forward exchange transaction Assumption: The forward exchange transaction that is currently concluded should be extended by one month as the payment target (=sold-to party) was extended. The old forward exchange transaction will be closed on the old rate basis (= forward rate of the netting transaction is the forward rate of the original transaction)!

Enter a swap surcharge for the rollover transaction and save the rollover. Note the new transaction number:_______________________ To roll over a forward exchange transaction Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Foreign exchange Æ Trading Æ Edit Financial Transaction (FTR_EDIT) Enter your transaction and company code as usual and choose Roll Over. On the left side of the screen (1st Transaction), you can see the rate taken from the old transaction in the ““Spot”” field, 1.30. For the rollover, raise the date in the ““Value date”” field by exactly one month. Enter a swap surcharge of 0.000085 in the Swap field of the first transaction. Save your data. (Skip any messages that appear by choosing ENTER.) The system issues a message indicating that the forward exchange transaction(s) was (were) saved or that the original transaction was automatically settled.

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9-4

To obtain references of the transactions (original, netting, and rollover), use the PRL reference category. Specify which transaction numbers belong together. Choose: Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Foreign Exchange Æ Back Office Æ Reference Æ Collective Processing (TBRL) Choose reference category PRL (Rollover of forex trans.). Enter your company code (FS##). Choose Execute. As a result, the related transaction numbers are displayed under a reference number unit.

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Exercises 10 Unit 4:

Transaction Manager – Foreign Exchange

Topic:

Back Office and Accounting

After completing these exercises, you will be able to: x Settle and post transactions

Having created the forex transaction, continue in the Back Office. Here, you settle or check the transaction. Then you post the transaction flows.

10-1

Enter an external forex spot transaction as a contract and settle the forex transaction. Choose business partner 1000, product type: 60A, and transaction type 101. The purchase is made in USD. The sale is made in EUR. Use the suggested rate from the market data table. Check that your entries are complete. Note the change in activity category.

10-2

Carry out the posting for the forex transaction. Note the due date. Carry out a test run prior to the update run. Post all valuation areas.

10-3

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Check the postings using transactions ““TPM20”” (Posting Journal) and ““S_ALR_87015254““ (Forex: Posting Overview). Compare the different reporting evaluations.

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Solutions 10 Unit 4: Transaction Manager – Foreign Exchange Topic

10-1

Back Office and Accounting

Enter an external forex spot transaction as a contract and settle the forex transaction. Choose business partner 1000, product type: 60A, and transaction type 101. The sale is made in EUR. Value date:+2 = two days from today Use the proposed rate from the market data table. Check that your entries are complete. Note the change in activity category. To create the forex spot transaction as a contract, choose: Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Foreign Exchange Æ Trading Æ Create Financial Transaction (FTR_CREATE) Enter the structure data as described in Exercise 9. Use the initial data from this exercise description. Save the contract and then settle the transaction as usual. Enter the following data: Field Name or Data Type Value Company Code FS## Product Type 60A - Forex: External Transaction Type 101- Forex: External Spot transaction Business Partner 1000 Order/Fixing X - select indicator Choose ENTER.

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Enter the following data: Field Name or Data Type Structure area Buy - Currency Buy - Amount Sell - Currency Sale amount Rate/value date area Price (Un. quote) Value Date

Value USD 12 M EUR 1,30 ++3

Execute the order using the collective purchase order. To settle the forex transaction, select: Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Foreign Exchange Æ Trading Æ Edit Financial Transaction (FTR_EDIT) Check that the data is complete. Save your data.

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10-2

Carry out the posting for the forex transaction. Note the due date. Carry out a test run prior to the update run. Post all valuation areas. To post the foreign exchange transaction, choose: Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Foreign Exchange Æ Accounting Æ Posting Æ Execute (TBB1) Enter the following data: Field Name or Data Type

Value

Company Code

FS##

Transaction

Transaction number from Exercise 10-1

Up To and Including Due Date

Adjust date

Carry out the posting in the test run and then in the update run. Check the posting log as usual (see exercise 6-1 and 6-2).

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10-3

Check the postings using transactions ““TPM20”” (Posting Journal) and ““S_ALR_87015254““ (Forex: Posting Overview). Compare the different reporting evaluations. Select: Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Foreign Exchange Æ Information System Æ Accounting Æ Posting Journal (TPM20) OR Æ Forex: Posting Overview (S_ALR_87015254) Enter the following data: Field Name or Data Type

Value

Product Groups Checkbox

OTC Transaction

General accruals/deferrals Company Code

FS##

OTC Transaction Transaction

Transaction number from Exercise 10-1

For the ““Foreign Exchange”” posting overview, enter the values in the same way as for the initial screen of the posting journal.

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Exercises 11 Unit 4:

Transaction Manager – Foreign Exchange

Topic:

Valuation - Forward Exchange Transaction

After completing these exercises, you will be able to: x Evaluate a forward exchange transaction in Transaction Manager In six months, you must pay an invoice to the value of approximately USD 10 million and you want to take advantage of the current USD exchange rate. You therefore conclude another forward exchange transaction. At the end of the quarter, you want to value your transactions (Key date valuation). You then have to determine your realized gains and losses. 11-1

Create a contract (Activity: Contract) using a forward exchange transaction (USD - EUR) with product type 60A and transaction type 102 for your company code (FS##). Choose the Deutsche Bank (1000) as your business partner. Choose the following transaction data: Amount: Rate: Value date:

Buy USD 10 M, 1.3 In 6 months.

Use the input help for the amount field and value date. Save the financial transaction and note the transaction number for later settlement and posting activities. Transaction number:_______________________ 11-2

Value your transaction at the end of the next two quarters. Have the system calculate the net present values of your transaction for the valuation key dates. Then carry out a mid-year valuation without reset for the valuation key dates. On the due date, the forex transaction is realized and posted (all valuation areas.) You must then carry out a valuation to determine the gains/losses realized (= fixing derived business transactions) and in order to post.

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11-3

View the created postings in the Posting Journal and display a complete view of all created subledger cash flows with the transaction ““TPM13”” (List of Position Flows). Select all possible TRL flows:

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Solutions 11 Unit 4: Transaction Manager – Foreign Exchange Topic: Valuation - Forward Exchange Transaction

11-1

Create a contract (Activity: Contract) using a forward exchange transaction (USD - EUR) with product type 60A and transaction type 102 for your company code (FS##). Choose the Deutsche Bank (1000) as your business partner. Choose the following transaction data: Amount: Buy USD 10 M, Amount: Sale EUR Rate: 1.3 Value date: in 6 months Use the available input help for the amount field and value date. Save the financial transaction and note the transaction number for later settlement and posting activities. Transaction number:_______________________ To create a forward exchange transaction, proceed as follows: Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Money Market Æ Trading Æ Create Financial Transaction (FTR_CREATE) Ensure that the Activity-Contract indicator is set. Save your transaction and make a note of the transaction number. Enter the following data: Field Name or Data Type Company Code Product Type Transaction Type

© SAP AG

Value FS## 60A - Forex: External 102- Forex: External-Forward transaction FSC010

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Business Partner Contract Choose ENTER. Enter the following data: Field Name or Data Type Structure area Buy - Currency Buy - Amount Sell - Currency Sale amount Rate/value date area Rate Value Date

1000 X - select indicator

Value USD 10M EUR 1,30 ++6

Transaction number:_______________________

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11-2

Value your transaction at the end of the next two quarters. Have the system calculate the net present values of your transaction for the valuation key dates. Then carry out a mid-year valuation without reset for the valuation key dates. On the due date, the forex transaction is realized and posted (all valuation areas.) You must then perform a valuation to determine and post the gains/losses realized (= fixing derived business transactions). Execute each program twice (once for key date 1; once for key date 2) To perform Interest Accrual/Deferral, choose Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Foreign exchange Æ Accounting Æ Valuation Æ Determine Net Present Values (TPM60) You are on the screen "Save NPVs from the Market Risk Analyzer””. Enter the following values: Field Name or Data Type

Value

Product Groups Check Box –– OTC transactions

Set indicator

General selections Company Code

FS##

OTC Transaction Transaction

Transaction number

Evaluation Parameters

© SAP AG

Currency

EUR

Evaluation type

RM01

Key date

Key date 1: End of the current quarter Key date 2: End of the next quarter

Indicator: Separate NPV (In/Out)

Selected

Test Run

X - select indicator

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Price/NPV type

001 (Standard & Hedge Accounting)

Detail log

X –– select indicator

Perform a test run and then an update run. If you require more information, choose Gotoo Detail Log. To valuate key dates, choose Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Foreign exchange Æ Accounting Æ Valuation Æ Execute valuation (TPM1) Field Name or Data Type

Value

Product Groups Checkbox

OTC Transaction

General Selections Company Code

FS##

OTC Transaction Transaction

Transaction number

Key date

Key date 1: End of the current quarter Key date 2: End of the next quarter

Valuation Category

Mid-Year Valuation Without Reset (3)

Test Run

X - select indicator

Detail log

X –– select indicator

Perform a test run and then an update run. The positions to be valuated are displayed. If you want to perform the valuation as displayed, choose Execute valuation in the application toolbar. The valuation log provides further information about the posting with various buttons in the application toolbar. Perform the steps for the second valuation as in the exercise description.

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You can carry out a test run if you wish.

The forward exchange transaction is now due/cashed.

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To post the forward exchange transaction, choose Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Foreign Exchange Æ Accounting Æ Posting Æ Execute (TBB1)

Make sure that the posting is made for all valuation areas. To determine the realized gains and losses, choose Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Foreign Exchange Æ Accounting Æ Derived Business Transactions Æ Post and Fix (TPM18) Enter the following data: Field Name or Data Type

Value

Product Groups Checkbox

OTC Transaction

General Selections Company Code

FS##

OTC Transaction Transaction

Transaction number

TRL Date

From TODAY until the final due date of the transaction

Test Run

X –– select indicator

Perform a test run and then an update run. The positions to be valuated are displayed. If you want to perform the valuation as displayed, choose Fix in the

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application toolbar. You can carry out a test run if you wish.

11-3

View the created postings in the Posting Journal and display a complete view of all created subledger cash flows with the transaction ““TPM13”” (List of Position Flows). Select all possible TRL flows. To valuate postings, choose

Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Foreign Exchange Æ Information System Æ Position Trend Æ Position Flow List (TPM13) Field Name or Data Type

Value

Product Groups Checkbox

OTC Transactions

General Selections Company Code

FS##

OTC Transaction Transaction

Transaction number

Selection of TRL flows

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TRL Date

From/to date

Checkbox

Scheduled Flows

Checkbox

Fixed Flows

Checkbox

Flows to Be Fixed

Checkbox

Flows to Be Reversed

Checkbox

Reversed flows

Checkbox

Posting Information

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Exercises 12 Unit 4:

Transaction Manager: Derivatives

Topic:

OTC Currency Option 1

After completing these exercises, you will be able to: x Create an OTC currency option in SAP Transaction Manager using the foreign exchange module You want to purchase a currency option. If this option gets to the exercise stage, you are entitled, but not obliged, to purchase USD from the Deutsche Bank.

12-1

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Check whether there are transaction authorizations for this business partner (BP##) and this product type (76A) in the standing instructions. Choose the direct access using the business partner (transaction BP). Create an OTC currency option (in the menu under Foreign Exchange) as a contract. Choose your ““BP##”” business partner as your business partner and 76A for the product type. Enter the following transaction data: Purchase of a currency option (transaction type 100)

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Enter the following data: Field Name or Data Type

Value

Structure - Exercise Exercise Period

++3 (3 months from today)

Exercise Type

European (1)

Settlement

Physical exercise (1)

Structure - Premium Payment date (premium)

+2 (today plus 2 days)

Currency

EUR

Amount

200 T (200,000)

Structure - Settlement Contract Date

today

Underlying Currency Pair

USD/EUR

Amount (purchase)

3M

Price (Un. quote)

1,3

Value Date

+2 (two days after exercise)

Enter a premium of your choice. Take a look at the cash flow. Which flows are shown? Check the payment details and the position indicator. If no payment details are created, add to the payment details for the option premium to be paid directly and manually in the financial transaction so that the option premium can be posted. For this, use the following values: Field Name or Data Type

Value

Direction

- (Outflow)

Currency

EUR

Field Name or Data Type

Value

House Bank

1000

Account ID

1000

Save the transaction.

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12-2

Settle the contract using collective processing (TI91). Enter your company code and transaction number.

12-3

Post the option premium. Note the posting due date and make sure that all valuation areas are posted. Take a look at the Financial Accounting document. Carry out a test run prior to the update run.

12-4

You decide that the you want to exercise the option. Execute the activity. Assumption: The exercise date has been reached - make the contract date and the exercise date the same as the date of the ““exercise period””. Skip information messages with the ““Enter”” key.

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Solutions 12

12-1

Unit 4:

Transaction Manager: Derivatives

Topic

OTC Currency Option 1

Check whether there are transaction authorizations for this business partner (BP##) and this product type (76A) in the standing instructions. Choose the direct access using the business partner (transaction BP). To switch from one business partner to another, choose the menu path Goto o Initial Screen. Call the business partner in change mode in the ““Counterparty”” role. Choose "Company Code““ to go to the company-code-specific data of the business partner. Switch to the ““SI: Authorizations”” tab. You see that the business partner for the relevant product type is not authorized for the product type. In the "SI: Authorizations" tab, select the product type 76A and save the business partner. (Product type 76A is contained under Derivatives o OTC Options. If required, you can also use the Binoculars icon). You can then create the OTC currency option. To create the OTC currency option, choose: Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Foreign Exchange Æ Trading Æ Create Financial Transaction (FTR_CREATE) Create an OTC currency option (in the menu under Foreign Exchange) as a contract. Choose your ““BP##”” business partner as your business partner and 76A for the product type. Enter the following transaction data: Purchase of a currency option (transaction type 100) On the subsequent dialog box, choose flow type 1301 –– Option Premium (OTC).

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Enter the following data: Field Name or Data Type

Value

Structure - Exercise Exercise Period

++3 (3 months from today)

Exercise Type

European (1)

Settlement

Physical exercise (1)

Structure - Premium Payment date (premium)

+2 (today plus 2 days)

Currency

EUR

Amount

200 T (200,000)

Structure – Contract Data Contract Date

Today

Underlying Currency Pair

USD/EUR

Amount (purchase)

3M

Rate

1,3

Value Date

+2 (two days after exercise)

Take a look at the cash flow. Which flows are shown? (Because this is only an initial version of a currency option, only the option premium is displayed). Check the payment details and the position indicator. Check the payment details for the option premium to be paid. The following values must be entered: Field Name or Data Type

Value

Direction

- (Outflow)

Currency

EUR

Take a look at the payment details in the detail view. To do this, double-click the relevant line. Return to the overview display by choosing Payment details overview.

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If no payment details are created, manually add to the payment details for the option premium to be paid in the financial transaction so that the option premium can be posted.

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For this, use the following values: Field Name or Data Type Direction Currency

Value - (Outflow) EUR

Field Name or Data Type

Value

House Bank

1000

Account ID

1000

Save the transaction. Note the transaction number:_______________________ 12-2

Settle the contract using collective processing (TI91). Enter your company code and transaction number. To settle using collective processing, choose: Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Foreign Exchange Æ Back Office Æ Collective Processing Æ OTC Options (TI9I) Enter your company code and transaction number. Choose Execute. Select the transaction that you want to settle and choose Settle in the application toolbar. Check and add to the payment details. The following values must be entered: Field Name or Data Type

Value

House Bank

1000

Account ID

1000

Save your transaction. (Skip any messages that appear with the ENTER key.) Refresh your collective processing display. You see the changed condition of the activity category (ACat). © SAP AG

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The category changes from 20 (contract) to 30 (settlement).

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12-3

Post the option premium. Note the posting due date and make sure that all valuation areas are posted. Take a look at the Financial Accounting document. Carry out a test run prior to the update run. To post the option premium, choose Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Foreign Exchange Æ Accounting Æ Posting Æ Execute (TBB1) Enter the following data: Field Name or Data Type

Value

Company Code

FS##

Transaction

Your transaction number

Up To and Including Due Date

Due date of the premium

Test Run

You can perform a test run and then an update run. After the update run, you can also view the document from here.

Post all Valuation Areas

X - select indicator

You can view the posting log as usual. 12-4

You decide that you want to exercise the option. Execute the activity. Assumption: The exercise date has been reached - make the contract date and the exercise date the same as the date of the ““exercise period””. Skip information messages by choosing ENTER. To exercise the option, choose:

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Enter the company code and transaction number as usual. Choose Exercise. Adjust the date details as described in the exercise. Save the transaction.

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Exercises 13 Unit 4:

Transaction Manager: Derivatives

Topic:

OTC Currency Option 2

After completing these exercises, you will be able to: x Create an OTC currency option in the SAP Transaction Manager - using the derivative module You want to sell a currency option. If this option gets to the exercise stage, the bank is entitled, but not obliged to purchase USD from you.

13-1

Create an OTC currency option (in the menu under Derivatives) as a contract. Choose the Deutsche Bank (1000) as your business partner and 76A for the product type (transaction type 100). Choose the following transaction data: Sale of a currency call option Premium Type: 1301 Option Premium (OTC) Option Exercise Period: ++3 (3 months from today) Exercise: European Settlement: Physical exercise Contract Date: Today Rate: for example, 2.20 Value Date: in 6 months Offset Currency: EUR Exercise Date: in 6 months minus 2 days Premium Value Date: in 2 days Currency: EUR Enter a premium of your choice. Take a look at the cash flow. Which flows are shown? Check the payment details and the position indicator.

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It may be necessary to provide business partner 1000 with authorization for these transactions. (see Exercise 1-6; Transaction Authorizations (TB16).

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13-2

Settle the contract using Collective Processing. Post the option premium. Note the posting due date and make sure that all valuation areas are posted. Carry out a test run prior to the update run. Take a look at the Financial Accounting document. Optional –– Enter a memo for accounting (such as ““Settle fee of EUR 10 separately””). Transaction number:_______________________

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Solutions 13

13-1

Unit 4:

Transaction Manager: Derivatives

Topic:

OTC Currency Option 2

Create an OTC currency option (in the menu under Derivatives) as a contract. Choose the Deutsche Bank (1000) as your business partner and 76A for the product type (transaction type 100). Select the activity Contract. Choose the following transaction data: Sale of a currency call option Premium Type:

1301 Option Premium (OTC)

Option Exercise Period: Exercise: Settlement: Contract Date:

++3 (3 months from today) European Physical exercise Today

Rate: Value Date: Offset Currency: Exercise Date:

For example, 2.20 In 6 months EUR In 6 months minus 2 days

Premium Value Date: Currency:

In 2 days EUR

Enter a premium of your choice. Take a look at the cash flow. Which flows are shown? Check the payment details and the position indicator. It may be necessary to provide business partner 1000 with authorization for these transactions. (see Exercise 1-6; Transaction Authorizations (TB16). To create a currency option using the derivative module, choose: Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Derivatives © SAP AG

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Æ Trading Æ Create Financial Transaction (FTR_CREATE) On the subsequent dialog box, choose flow type 1301 –– Option Premium (OTC). Enter the following data: Field Name or Data Type

Value

Exercise Period

++3 (3 months from today)

Exercise Type

European

Settlement

Physical exercise

Premium Payment Date

+2 (today plus 2 days)

Currency

EUR

Amount

200.000

Contract date

is suggested

Underlying Purchase - Currency

USD

Purchase - Amount

3M

Sale - Currency

EUR

Sale - Amount

Leave blank (will be determined)

Rate

1,3

Value Date

+2

Contract Date

Will be automatically set based on the exercise period (three months from today)

Check the activity first using the Check button in the application toolbar. If a message appears, stating that the day is not a business day, select the following day with the right arrow key. Save your data. Transaction number:_______________________

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13-2

Settle the contract using Collective Processing. It may be necessary to edit the transaction (FTR_EDIT) and to execute the order (see button). Post the option premium. Note the posting due date and make sure that all valuation areas are posted. Take a look at the Financial Accounting document. Carry out a test run prior to the update run. Optional –– Enter a memo for accounting (such as ““Settle fee of EUR 10 separately””). To settle using collective processing, choose: Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Derivatives Æ Back Office Æ Collective Processing Æ OTC Options (TI91) Select your company code and financial transaction. Choose Execute. Select the transaction and choose Settle in the application toolbar. In the following overview on the relevant tab pages, check the ““underlying”” data, the payment details (your own house bank) and the cash flow (in the ““Accounting view”” layout). Select Environment ĺ Position Indicator and check the account assignment reference (the field must be filled). Go to the Memos tab page and enter the specified text in the first row of the Accounting row. Save the transaction. Update the view in collective by choosing Refresh in the application toolbar (or F8). To post the option premium, choose Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management

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Æ Transaction Manager Æ Derivatives Æ Accounting Æ Posting Æ Execute (TBB1) Enter the following data: Field Name or Data Type

Value

Company Code

FS##

Transaction

Your transaction number

Up To and Including Due Date

Due date of the premium

Test Run

You can perform a test run and then an update run. From here, you can view the document.

Post all Valuation Areas

X - select indicator

You can view the posting log as usual.

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Exercises 14 Unit 4:

Transaction Manager: Derivatives

Topic:

Forward Rate Agreement (FRA)

After completing these exercises, you will be able to: x Set up a Forward Rate Agreement (FRA) as a contract in SAP Transaction Manager using the derivative module You want to sell an FRA because you expect interest rates to fall.

14-1 Create a forward rate agreement (FRA) as a contract. You are the seller of the FRA, as you want to protect yourself against sinking interest. The goal is to agree on a quotation of 12x24 (lead time-total term) with the business partner. Take the Deutsche Bank (1000) as your business partner (FRA buyer). The product type is 63A. The transaction type is 200 (sale). Enter the following transaction data: Contract Date: Start of lead time: Start of hedge period: End of hedge period: Base amount: Interest rate: Reference interest rate: Interest calculation method: Calendar:

TODAY In 2 days 1 year after start of lead time 2 years after start of lead time EUR 10.000.000 4.56 % p.a. EUREUR01YM Act/360 01

Interest rate fixing is to occur two days before the start of the hedging period. Note the date. Check the payment details and the position indicator. Check the cash flow as usual. Which flows are relevant to the posting?

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Transaction number:_______________________ Settle the contract using collective processing (TI92).

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14-2 Take a look at the interest rate adjustment schedule. Carry out a manual interest rate adjustment. The interest rate fixing date is two days before the beginning of the hedge period. Choose a low interest rate (4.00 percent) so that you receive a settlement payment. Then post the interest generated as a result of the interest rate adjustment. Take a look at the cash flow before and after the interest rate adjustment.

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Solutions 14

14-1

Unit 4:

Transaction Manager: Derivatives

Topic

Forward Rate Agreement (FRA)

Create a forward rate agreement (FRA) as a contract. You are the seller of the FRA, as you want to protect yourself against sinking interest. The goal is to agree on a quotation of 12x24 (lead time-total term) with the business partner. Take the Deutsche Bank (1000) as your business partner (FRA buyer). The product type is 63A. The transaction type is 200 (sale). Enter the following transaction data: Contract Date: Start of lead time: Start of hedge period: End of hedge period: Base amount: Interest rate: Reference interest rate: Interest calculation method: Calendar:

TODAY In 2 days 1 year after start of lead time 2 years after start of lead time EUR 10.000.000 4.56 % p.a. EUREUR01YM Act/360 01

Interest rate fixing is to occur two days before the start of the hedge period. Note the date. Check the payment details and the position indicator. Check the cash flow as usual. Which flows are relevant to the posting?

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Settle the contract using collective processing (TI92). To create a forward rate agreement, choose: Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Derivatives Æ Trading Æ Create Financial Transaction (FTR_CREATE) Select the data for your company code, product type 63A, transaction type 200 and partner 1000. Choose Execute. Enter the following data: Field Name or Data Type

Value

Start of Lead Time

Today +2 days

Start of Hedge Period

++12

End of Hedge Period

++24

Base amount

EUR 10 M

Int. rate

4,56

Ref. Int. Rate

EUREUR01YM

Int.calc.method

Act/360

Contract date

Is proposed

Skip the messages by choosing ENTER. Check the cash flow as usual (the Cash flow tab page). Which flows are relevant to the posting? Save the transaction.

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To settle using collective processing, choose:: Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Derivatives Æ Trading Æ Collective Processing Æ OTC Interest Rate Instruments (TI92) Select the data for your company code. Choose Execute (““Clock““ or F8). All entered transactions are displayed in Collective Processing. Click your FRA transaction to select it and then choose Settle in the application toolbar. After checking the cash flow and payment details, save the transaction. Update the collective processing view by pressing the appropriate button (or F8). 14-2

Take a look at the interest rate adjustment schedule. Carry out a manual interest rate adjustment. The interest rate fixing date is two days before the beginning of the hedge period. Choose a low interest rate (4.00 percent) so that you receive a settlement payment. Then post the interest generated as a result of the interest rate adjustment. Take a look at the cash flow before and after the interest rate adjustment.

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To view the interest rate adjustment schedule, choose:

Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Derivate Æ Information System Æ Transaction Æ Deadline Monitoring Æ Derivatives: Interest Rate Adjustment Schedule (TJ07) Apply the interest adjustment schedule to your entire company code. You will then see a total overview of your pending interest rate adjustments and those that have not yet been executed for the financial transactions that have a reference interest rate in their interest structure. To perform a manual interest rate adjustment, choose: Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Derivatives Æ Back Office Æ Variable Interest Calculation Æ Interest Rate Adjustment Æ Create (TI10)

Enter a company code and your transaction number and choose ENTER. Enter the following values: Field Name or Data Type

Value

Int. rate

4 (percent)

Choose ENTER. Save the manual interest rate adjustment. Return to the overview menu and choose Back Office ĺ Edit Financial Transaction (FTR_EDIT) to display your transaction. Check the cash flow. Choose the ““Posting view”” layout and then the ““Calculation view”” (choose the ””Select Layout”” button).

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Because of the currently low interest rate as compared with the interest rate of the original transaction, an incoming payment (settlement payment) is expected and therefore reported. To post the interest generated as a result of the interest rate adjustment, choose: Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Derivatives Æ Accounting Æ Posting Æ Execute (TBB1) Proceed as usual. Note the due date of the interest payment date. Post in all valuation areas. Perform a test run and then an update run.

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Exercises 15 Unit 4:

Transaction Manager: Derivatives

Topic:

Interest Rate Swap

After completing these exercises, you will be able to: x Set up an interest rate swap as a contract in SAP Transaction Manager using the derivative module You want to conclude an interest rate swap.

15-1

Create an interest rate swap (receiver swap) as a contract. The product type is 62A. The transaction is 301. Choose the Deutsche Bank (1000) as your business partner. Choose the following transaction data: Contract date: TODAY Start of term: Two days after contract date End of term: 4 years after start of lead time Nominal amount: EUR 5.000.000 Regulations concerning fixed amounts Deutsche Bank pays the fixed amounts. Fixed interest rate: 6.53% p.a. Interest calc. method: 360/360 Frequency: Every 12 months Regulations concerning variable amounts You pay the variable amounts. Variable rate: EUREUR06MM Interest calc. method: Act/360 Spread: 0% p.a. Frequency: Every 6 months First due date: In 6 months

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Remember to maintain the condition details. Update rule : ““Unadjusted”” (for the INTEREST detail view)

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Shift the due date relative to the end of the interest period (days +/-). Choose the value 1-. Choose the shift rule ““Next working day modified””. Check the payment details and the position indicator. The reference date for the interest rate fixing date should always take place two working days before the beginning of the interest period. Take a look at the complete cash flow. Choose the separate view of the outgoing interest and then the incoming interest. (You can choose different views in the layout, such as the calculation view and the interest rate adjustment view.) Enter the following values: Field Name or Data Type

Value

Interest rate adjustment date

- (minus) 2

15-2

Then settle the interest rate swap.

15-3

Perform the manual interest rate adjustments - for your company code only. Compare the fixing data with the details in the exercise. Take a look at the interest rate adjustment schedule. Then post the interest generated as a result of the interest rate adjustment. Note the due date.

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Solutions 15

15-1

Unit 4:

Transaction Manager: Derivatives

Topic:

Interest Rate Swap

Create an interest rate swap (receiver swap) as a contract. The product type is 62A. The transaction is 301. Choose the Deutsche Bank (1000) as your business partner. Choose the following transaction data: Contract date: TODAY Start of term: Two days after contract date End of term: 4 years after start of lead time Nominal amount: EUR 5.000.000

Regulations concerning fixed amounts: Deutsche Bank pays the fixed amounts. Fixed interest rate: 6,53% p.a. Interest calc. method: 360/360 Frequency: Every 12 months Regulations concerning variable amounts You pay the variable amounts. Variable rate: EUREUR06MM Interest calc. method: Actl/360 Spread: 0% p.a. Frequency: Every 6 months First due date: In 6 months Remember to maintain the condition details. Update rule: ““Unadjusted”” (for the INTEREST detail view) Shift the due date relative to the end of the interest period (days +/-). Choose

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the value 1-. Choose the shift rule ““Next working day modified””. Check the payment details and the position indicator. The reference date for the interest rate fixing date should always take place two working days before the beginning of the interest period. Take a look at the complete cash flow. Choose the separate view of the outgoing interest and then the incoming interest. (You can choose different views in the layout, such as the calculation view and the interest rate adjustment view.) Enter the following values: Field Name or Data Type

Value

Interest rate adjustment date

- (minus) 2

Solution for creating an interest rate swap.

Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Derivatives Æ Trading Æ Create Financial Transaction (FTR_CREATE) _

Since the incoming interest is fixed, choose ““Receiver swap””.

Enter the following values: Field Name or Data Type

Value

Company Code

FS##

Product Type

62a

Transaction Type

301 –– Interest rate swap (IRS)Recipient

Business Partner

1000

Activity –– Contract

X - select indicator

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Enter the following values: Field Name or Data Type

Value

Structure - Term Start

Two days from today

End

+++4 (4 years from today)

Outgoing Interest Nominal amnt

EUR 5 M

Effective from

Two days from today

1st due date

++6 (6 months from today)

Freq.month

6

Var. Interest

EUREUR06MM

Int.calc.method

Act/360

Incoming Interest Nominal amnt

5m

Effective from

two days from today

1st due date

++12 (12 months from today)

Freq.month

12

Fix. rate

6,53

Int.calc.method

360/360

Select Check in the application toolbar to check the entered data. On the Structure tab page, in both the Incoming Interest and Outgoing Interest areas, choose Int. Check the following values for the outgoing and incoming interest pages:

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Field Name or Data Type

Value

Update –– Rule

Unadjusted

Frequency

6 or 12 months

Days +/-

1-

Due Date

Is proposed (6 months and 2 days from today)

Working Day

Next working day modified

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Calendar 1

Is proposed The end of the interest period is determined relative to the due date. It is determined before the due date is shifted (unadjusted) by the working day check.

Choose Back in the standard tool bar to return to the overview. (WARNING –– This applies to outgoing and incoming interest!) Choose the button Int. Rate Adj. on the Structure tab page under outgoing interest. Enter the following values: Field Name or Data Type

Value

Interest rate adjustment date

- (minus) 2

Confirm the data by choosing the green arrow and returning to the overview. Chow to check the payment details and the position indicator: Select the Payment Details tab page. Double-click to go to the detail view. To view the position indicator, choose Menu ĺ Environment and enter the account assignment reference. Check the conditions for both sides (outgoing and incoming). Choose Conditions –– outgoing side or Conditions –– incoming side from the application toolbar on the overview screen. Double click an individual row to view the details screen. Choose the Cash flow tab page. Choose Select layout to view the Calculation view. If you want a separate display for the incoming or outgoing interest, choose the Incoming or Outgoing tab pages. Save your data by choosing the appropriate button.

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15-2

Then settle the interest rate swap. To create an interest rate swap: Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Derivatives Æ Trading Æ Collective Processing Æ OTC Interest Rate Instruments (TI92) Select the data for your company code, product type 62A, transaction type 301 and partner 1000. Choose Execute. Click the relevant activity to select it and choose Settle from the application toolbar. Save the transaction.

15-3

Perform the manual interest rate adjustments - for your company code only. Compare the fixing data with the details in the exercise. Take a look at the interest rate adjustment schedule. Then post the interest generated as a result of the interest rate adjustment. Note the due date. To view the interest rate adjustment schedule, choose: Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Derivates Æ Information System Æ Transaction Æ Deadline Monitoring Æ Derivatives: Interest Rate Adjustment Schedule (TJ07) Apply the interest adjustment schedule to your entire company code.

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You will then see a total overview of your pending interest rate adjustments and those that have not yet been executed for the financial transactions that have a reference interest rate in their interest structure.

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To perform a manual interest rate adjustment, choose: Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Derivatives Æ Back Office Æ Variable Interest Calculation Æ Interest Rate Adjustment Æ Create (TI10) Enter your company code and transaction number. In the display, you can see that the interest fixing takes place two days before the beginning of the interest period. Enter the following values: Field Name or Data Type

Value

Int. rate

5 (percent)

Choose ENTER. Save the manual interest rate adjustment. Display the cash flow as usual. Choose the layout Posting view, Interest Rate Adjustment View layout and then Calculation view.

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To post the interest generated as a result of the interest rate adjustment, choose: Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Derivatives Æ Accounting Æ Posting Æ Execute (TBB1) Proceed as usual. Note the due date of the interest payment date. Post in all valuation areas. Perform a test run and then an update run.

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Transaction Manager: Securities Management Overview Diagram

Unit 1 Course Overview Unit 2 Treasury and Risk Management: Overview Unit 3 Transaction Manager: Money Market Unit 4 Transaction Manager: Forex, Derivatives Unit 5 Transaction Manager: Securities Management Unit 6 Market Risk Analyzer Unit 7 Credit Risk Analyzer

¤ SAP AG 2006

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Unit 5 Transaction Manager: Securities Management

1

Securities Management: Overview

2

Master Data

3 Trading and Back Office 4 5

Accounting and Closing Operations Position Management

¤ SAP AG 2006

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Securities Management: Overview

Standard Reports in the Information System

Master Data z z z z z z z

Business partner Class master data Securities account Master master dataData Position indicator

Transaction Management z

Purchases/sales Exercising rights

z

...

z

Position Management Valuation z Corporate actions z Transfers z

z

...

Exchange rates Securities prices Other

Integrating SAP Financial Accounting ¤ SAP AG 2006

„

Securities Management enables you to manage securities transactions and positions. The resulting posting activities are transferred to the Financial Accounting module automatically.

„

You are required to enter master data before you can use the management processes. For example, before you can represent the purchase (or sale) of a security in the system, you first have to enter its relevant structure and condition characteristics as a class.

„

You can use master data as well as transactions and positions to create reports in the information system.

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Transaction and Position Management Process

Release

Trading Create new order/contract Exercise/expiration „ Exercising rights

Back office Settlement/control Interest rate adjustment „ Netting „ Referencing „ Confirmation letters „ Securities transfer postings „ Corporate actions

Accounting Postings Payment transactions „ Reversals „ Accrual/deferral „ Valuation

„

„

„

„

„

„

User authorization Limit management

¤ SAP AG 2006

„

In transaction and position management, the following areas are differentiated: y In the Trading area, you create transactions and exercise rights. y In the Back Office area, you settle and check the transactions you entered. Here, you also manage processes relating to position management, such as securities account transfers. y In the Accounting area, you perform accounting activities. These include posting transactions, posting incoming payments (such as interest earned or dividends), or posting write-downs that result from a position valuation.

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Securities Management

z Securities Management enables you to manage your securities transactions and positions. z The various stages of the transaction and position management process are included in the trading, back office, and accounting areas. z You must maintain the relevant master data before you can use Securities Management. z Dividends, interest, repayments, corporate actions, etc. are processed through the position management.

¤ SAP AG 2006

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Unit 5 Transaction Manager: Securities Management

1

Securities Management: Overview

2

Master Data

3 Trading and Back Office 4 5

Accounting and Closing Operations Position Management

¤ SAP AG 2006

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Securities: Master Data

By the end of this unit, you will be able to: z Create the business partner in different roles z Maintain class master data, including basic data,

conditions, and other data z Set up securities accounts and portfolios, if required,

to manage your positions z Understand and create position indicators

¤ SAP AG 2006

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Master Data Partner Master Data

Class Master Data Basic Data

Conditions

Other Data

Securities Account Master Data Position indicator per ID number and per securities account

Transaction Management

Position Management ¤ SAP AG 2006

You create master data for the following areas: „ Business partner: In addition to the minimum data entries (name and address) in the master record, you have to define the role of the business partner. „ Class: You have to enter master data for each security managed in the position. This is a prerequisite for any position changes in the trading and back office areas. Class master data contains the product-specific conditions and all the general structure characteristics for securities. Other entries include, for example, the exchanges for this security. „ Securities account: You manage and administer securities positions in securities accounts. „ Position indicator: You define the parameters for position management and valuation in the company code for each security by securities account.

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Class Master Data and Product Types

Product Type - Fully paid stock - Partly paid stock - Floating rate bond - Fixed-interest security . . .

ID Number

Class SAP Unit

716 460

...

...

Government bond

113500

APPLICATION LEVEL

¤ SAP AG 2006

You create each traded security with a unique ID number as a class master record by assigning it to a product type. „ You can use the product type settings in Customizing for the relevant classes. „

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Create Class: Initial Screen

ID number Search crit.

731400 Basic Data

Conditions

Exchanges

User data

Create a class New class

ID number

731400

Product type

01A

Status  active

inactive

Name

Short

HEIDELDRUCK Long Heidelberger Druckmaschinen AG

Create

with reference



without reference

¤ SAP AG 2006

To create complex financial instruments as well, the class information is generally categorized into various areas such as Basic Data or Condition Information. The initial screen for defining master data of a security never depends on the class or product type. Entering the ID number of a security uniquely defines the security you are creating. When you assign a relevant product type, the system adopts all the settings made for this product type. For example, you can set the control parameters for entering class master data according to the product type. You can enter class data in various statuses: inactive, active and obsolete. You can use the inactive status if some of the class data you require is not yet available. You use the obsolete status to indicate classes that are no longer available for new transactions, but that still need to be available in the system in order to trace the history, for example. „ The following usually applies: y A short name for the security is displayed in evaluation reports. y You can delete class master data if no position indicators exist, if neither planned nor actual records exist/have existed, and if no transactions exist/have existed. „

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Create Class: Basic Data

ID number

731400

Heideldruck

Basic Data Issue

Issuer Issue start

HEIDRUCK 08.12.1997

Heidelberger Druckmaschinen AG

Nominal value Issue currency

EUR

Issue price

Structure

Security type

Bearer security Quotation

Unit-quoted

Stock category

Common stock Stock form

Old stock

¤ SAP AG 2006

The class master data for stocks consists of basic data, conditions, and other data. References (for example, between the subscription right and new stock) are generated automatically when you enter the data. „ Selected fields in the basic data for stocks are explained below: Issuer: Partner ID of the business partner (issuer role) Security type: for example: Bearer Security Registered Security Registered Security with limited transferability Quotation: Percentage-quoted ̘ Unit-quoted Stock category: Common stock ̘ Preferred stock Stock form: Old stock ̘ New stock ̘ Newest stock „

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Create Class: Conditions

ID number

731400

Heideldruck

Conditions

Condition items

¤ SAP AG 2006

You use the data entered in the conditions screen as a basis for structuring flow records in the cash flow. In Customizing, you can configure your system settings in such a way that you can create only those condition items that are assigned to this product type through the conditions group. „ The dividend entered for the stock simply represents an estimated item. We recommend that you enter the estimated dividend without the frequency only for the coming payment date.* ̘ If the company informs you of the current amount of the dividend payment you have to change the amount in the class master data and start the planned record with the updated information. Once the dividend amount has been entered, it can be processed using the automatic debit position function. y When you enter a frequency, the system calculates the dividend planned records for the following periods in the cash flow. If the actual dividend amount varies from the updated estimated amount, you have to make adjustment postings manually when you post the incoming amount. „

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Exchange

ID Number

731 400

Heideldruck

Exchanges Assignment of Exchanges Handelsplatz Währung Heimatbörse FFM EUR

...

¤ SAP AG 2006

„ „

The entries for the exchange tell you at which exchange the class is traded. Entering an exchange in the class master data is a prerequisite for importing market prices for account-based valuations.

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Create Class: Stock swap

ID number

731400

Heideldruck

Stock Swap

Stock Swap O ld ID

N e w ID

N u m e r a to r

D e n o m in a to r

S e tt lm n t. Am o u n t C r c y

¤ SAP AG 2003

„

In the case of a takeover bid, for example, you can enter swap bids in the class data and also include a clearing payment.

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Create Class Master Data: Subscription Right

ID number

222222

Basic Data Issue

Issuer

Deuba

Issue currency

EUR Issue price

Deutsche Bank

67

Subscription periods Kennummer BezR Kennr. Underl BezVerZähler BezVer Nenner Bezugspreis Währung BFrist von

222222

333333

5,0000

1,0000

100,00

EUR

BFrist bis

25.01.JJJJ 08.02.JJJJ

¤ SAP AG 2006

Class master data for subscription rights consists of basic data and other entries (for example for the exchange). „ Selected fields in the basic data screen for subscription rights are explained below: y Subscription price: The price that has to be paid for a new stock when the subscription right is exercised. y Sub.ratio- Numerator / Sub.ratio- Denominator: The number of subscription rights that are needed to receive the number of new stocks entered in Subscription ratio denominator (such as five subscription rights for one new stock). y Subscription period from/to: Period in which you can exercise the subscription right. „

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Create Class: Bond - Basic Data

ID number

Fixed-interest bonds

113500 Basic Data

Issue

Issuer Issue currency

BUND EUR

Federal Republic of Germany

Nominal per TU 0,01

Nominal value Issue start

10/21/YYYY

Term end Issue rate

10/21/YY+10 99,5000

Structure

Quotation

Percentage-quoted

Security type

Bearer security

¤ SAP AG 2006

„ „

The class master data for bonds consists of basic data, conditions, and other data. Selected fields in the basic data screen for bonds are described below: y Nominal value: Nominal value per individual security. y Nominal per TU: The minimum nominal value that can be traded. y Quotation: Percentage-quoted ̘ Unit-quoted y Securities type: Example Bearer Security Registered Security Registered Security with limited transferability

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Create Class: Conditions

ID number

113500

Fixed-interest bonds

Conditions Interest Calculation

Int.calc.meth.

Act/ActP

Repayments

Repayment type Maturity

Condition items

¤ SAP AG 2006

„ „

A condition item consists of several entries for a condition type. Selected fields in the conditions screen for bonds are explained below: y Effective from: Date from which the condition is valid y Percent: Nominal interest rate y Calculation date: Last day on which interest is calculated in the current interest period y Due date: Day when the interest payment is due y Frequency (Frq): Number of months in the interest-paying period y Calendar rule (CR): The calendar rule enables you to shift the relevant date entries to a working day. Example: 0: No shift 1: Next working day 3: Previous working day y Shifting the due date to a working day makes it easier to reconcile accounts when interest payments are made. The calculation date is the basis for the calculating the financial mathematical transactions. It is fixed and is usually managed by calendar rule "0".

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Create Class: Bond - Conditions Detail Screen

Per condition type 100 Interest

263 Final repayment

and so on

Details view Dates Calendar

01

Calendar 2 Calculation Date

1. Date

10/20/YY+1 9 Inclusive

No Shift

Due Date

1st date

10/21/YY+1

Next working day

¤ SAP AG 2006

„ „

You can enter detailed data for each condition item. If the shift mode has been specified for a calendar rule, you have to specify in the condition details which calendar you want to use for the validations.

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Class Master Data – Create Bond: Cash Flow

ID number Product type

113500 04I

Calculation Date 10/20/YY+1 10/20/YY+2 10/20/YY+3 10/20/YY+4 10/20/YY+5 10/20/YY+6

Paymnt Date 10/21/YY+1 21/10/YY+2 10/23/YY+3 10/22/YY+4 10/21/YY+5 10/21/YY+6

C

Fixed-interest bonds

Description Purchase Nominal int. Nominal int. Nominal int. Nominal int. Nominal int.

Amount NomCrcyFtype 99.500,00 EUR 1000 6.000,00 EUR 5000 5000 6.000,00 EUR 6.000,00 EUR 5000 6.000,00 EUR 5000 6.000,00 EUR 5000

¤ SAP AG 2003

„

You can calculate the cash flow for bonds as soon as you enter the class master data. We start with a fictional purchase of EUR 100,000.00 as a nominal amount. You can use the cash flow to check wither the conditions have been provided correctly, for example.

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Create Class: Notice

ID number

113500

Fixed-interest bonds

Notice

Notice periods of Issuer Kennummer Anleihe KündFrist von KündFrist bis Kündigungsrate 113500 1.10.JJ+9 01.12.JJ+9 99,2000

Bezeichnung

Notice periods of Bondholder Kennummer Anleihe KündFrist von KündFrist bis Kündigungsrate

Bezeichnung

¤ SAP AG 2006

If a bond has been assigned a notice right for the issuer or the bondholder, you enter the relevant data. „ Conversion period from/until:Period in which you can give notice on the bond. „ Notice rate: Price (unit-quoted stocks) or rate (percentage-quoted stocks), this is paid when the bond is called. „

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Class Master Data - Bond: Step-Up 214600

Bond step-up

Conditions Condition items Bez. Konditionsart Zinsen Zinsen Zinsen Endfällige Tilgung

Cash Flow

gültig ab 12.01.JJJJ 12.07.JJJJ 12.01.JJ+1 12.01.JJJJ

Whr Prozent EUR 4,0000 EUR 4,5000 EUR 5,0000 EUR 0

Berechnungstag 11.01.JJJJ 11.07.JJJJ 11.01.JJ+1 11.01.JJ+2 11.01.JJ+3 11.01.JJ+4

Berechtag K Fälligkeit 11.07.JJJJ 12.07.JJJJ 11.01.JJ+1 12.01.JJ+1 11.01.JJ+2 12.01.JJ+2 11.01.JJ+10 12.01.JJ+10

K 1 1 1 1

FArt FArt Betrag BW BWhr. SE1000 Kauf 100.000,00 EUR SAM5000 Nominalzinsen 2.000,00 EUR SAM5000 Nominalzinsen 2.250,00 EUR SAM5000 Nominalzinsen 5.000,00 EUR SAM5000 Nominalzinsen 5.000,00 EUR SAM5000 Nominalzinsen 5.000,00 EUR

RyM 6 6 12 0

Tage 0 180 360 360 360 360

¤ SAP AG 2006

„

For bonds with fixed interest rates that are subject to change (such as step-up bonds) you maintain condition items for each interest period with a different rate. Condition item entries are replaced by the entries for the next (similar) condition item depending on the "effective from" date. Example: step-up bond with bi-annual interest payment in the first year, followed by annual interest payments: 12.01.YYYY –– 11.07.YYYY 4,0 % 12.07.YYYY –– 11.01.YY+1 4,5 % 12.01.YY+1 - end 5,0 %

EUR 4.000 p.a EUR 4.500 p.a EUR 5.000 p.a.

EUR 2.000 on the interest date EUR 2.250 on the interest date EUR 5.000 on the interest date

In this example, the frequency entered (6) does not affect the first condition item since this interest item (on frequency date 07/12/YYYY) is replaced by a new interest item (on 07/12/YYYY).

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Class Master Data – Bond: Variable Interest 214600

Variable Bond

Conditions

Condition Items Cond. Type Desc.

D e t a i l

Eff. as of

Crcy

Ref. Int.

Var. Interest

01/15/YYYY EUR EUR_6_UNI

Int. Rate Adj.

01/15/YYYY EUR

Final Repmnt

01/15/YYYYEUR

Interest Rate Adj.

At start of period Interest rate fixing date Relative Interest rate adjustment date - 2

Calendar 1 Calendar 2

01 EU

Working days

V Percent Calc Date C Due Date 0.5000- 07/14/YYYY

C Freq

07/15/YYY 1 6 3 6

01/14/YY+7

Eff. as of 01/15/YYYY 07/15/YYYY 01/15/YY+1 07/15/YY+1

01/15/YY+71

Int. Fx. Dte PerDueDtePercent 01/13/YYYY 01/01/YYYY3,8523 07/13/YYYY 06/14/YYYY4,1964 01/13/YY+1 10/23/YYYY3,4239 07/11/YY+1 10/23/YYYY3,4239

Dates

¤ SAP AG 2003

„

Variable-interest bonds have the condition types Variable interest and Interest rate adjustment. You have to enter a reference interest rate in the condition items area. Here, you may also be required to enter a markup or markdown on the reference interest rate in the percent field. You enter a minus sign (-) in field "+/-" for a reverse floater. The interest adjustment date is the date from which the condition entered is valid for the first time. You have to make specific settings in the details view for the interest adjustment dates. You can define a preferred fixing date for the interest fixing date. The following dates are valid: Effective from: Date from which the calculated interest is valid. Int. fx dte: Date on which the reference interest rate was determined (fixing date). PercFDte: The percentage fixing date is the effective-from date that is valid for this fixing period. A reference interest rate has been maintained for this date. Percent: The interest rate that has been defined in the system.

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„

If you have maintained the reference interest rate, the cash flow data is recalculated once the interest rate has been adjusted and the class master data is changed accordingly. To update the data to the database, you have to start the planned record update.

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Securities Account Master Data Company Code Sec. acct Sec. acct name Bank information Depository bank Clearing account Sec.acct number House Bank House Bank House bank acct

TR## Acc A##

DEUBA 445556## 22224446

Bank Data

DEUBA EUR

Disposition block Lock type Lock flag until Assignments Business area Portfolio

Other Data Portfolio 1

¤ SAP AG 2006

„

Securities accounts that you create in the SAP system are usually linked to an existing securities account at a bank. Selected fields for securities account master data are explained below: Depository bank: Partner ID of the bank where the securities account is kept. You first create the bank as a business partner in the role of "depository bank". Security account number: Number of the securities account at the depository bank. Clearing account: Account number of the cash clearing account at the depository bank. House bank: Name of the bank at which the cash clearing account of the new securities account is kept. You can provide details for multiple house banks for each settlement currency. House bank account: Name of the cash clearing account in the SAP system Lock type: You have to enter the blocking type if a restraint on disposal applies to the entire securities account.

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Lock flag until: Date until which restraint on disposal applies for the securities account Portfolio: Assigning the securities account to a portfolio. Business area: The business area is taken from the securities account master data when you post a transaction. If the field is empty, the system takes the entry from the account assignment reference. „ You can delete securities account master data if there is no position indicator and no transactions exist/have existed.

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Securities Account and Securities Account Group

Company code position

Sec. acct 1

Sec. acct position 1

Individual items

Sec. acct 2

Sec. acct position 2

Individual items

¤ SAP AG 2006

Securities accounts are valuation and position management units. They are necessary for all financial transactions that require position management. Securities accounts enable functions such as securities account statements, position analysis, and securities account transfers. You can assign a securities account to a portfolio as a superior position-managing unit when you create securities account master data. „ Average positions are formed at the portfolio level. „

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Securities Account Position Indicators

¤ SAP AG 2003

„

In the securities account position indicator you can define different information relating to custody type, grouping of positions, or holding share. You can use this information for evaluation purposes as well to import characteristics for account assignment reference.

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Subledger Position Indicator

¤ SAP AG 2003

Subledger position indicators enable you to specify, for example, how you want the positions of a particular ID number to be managed and evaluated. „ Key functions of the position indicator include, for example, allocating account assignment references (automatically if required) and assigning valuation and position management parameters. You can change the values suggested in the subledger position indicator for processes in account assignment reference and position management as long as there are no position postings present. „ You can create position indicators manually or automatically. The process you want can be set in Customizing. „

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Maintain Exchange by Company Code and ID Number

¤ SAP AG 2003

For each ID number you can enter multiple exchanges in the class master data for which you can maintain rates for this security. „ To value a security, the system uses the price from the price table of the exchange entered in this table. „

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Unit 5 Transaction Manager: Securities Management

1

Securities Management: Overview

2

Master Data

3 Trading and Back Office 4 5

Accounting and Closing Operations Position Management

¤ SAP AG 2006

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Transaction and Position Management Process (1)

Release

Trading Enter order Enter contract Reversals Transaction history

Back office Settlement/control Confirmation letters Netting - Securities account transfers Corporate actions Reversals Transaction history

Accounting Postings Accrual/deferral Valuation Reversals

User authorization Limit management

¤ SAP AG 2006

The organizational procedures of transaction management can be split up into several steps: y You can create a security transaction directly as a contract or create it first as an order. y The activity sequence to be followed is dependent on the processing category selected in Customizing (with or without settlement). „ Within transaction management, you can branch from any application to the partner management functions in order to create, display, and change business partners, in addition to maintaining their payment details. „ Each activity within transaction management (contract, processing, and others) can be analyzed in Cash Management. „

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Transaction Management: Initial Variants

Order

Contract

¤ SAP AG 2006

The Transaction Management functions enable you to manage transactions as orders, executed orders and contracts, and settled and posted transactions. You can map potential orders (order), orders that you conclude (execution or contract) and the securities transactions that you post (purchases and sales) in the system. „ You can create a security transaction initially as an Order or enter it directly as a Contract. „

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Create Order: Initial Screen

Company Code ID Number

TR00 113500

Bond 96/06

Purchase Transaction Type 100 Deuba Business Partner

Deutsche Bank

Transaction 

Order

O Contract

Transaction External number assignment

¤ SAP AG 2006

„

When you create a securities transaction, you are mapping an order or contract through the purchase or sale of securities. You specify which class you want each business partner to purchase or sell.

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Creating an Order

Company Code ID Number Transaction type Structure Partner

TR00 113500 100

Order

Deuba

Basic Data

Limit

Deuba Acc1 Sec. Acct 01/20/YY Order date Nominal amount 200T Trading Trader

Activity

Maier

Limit Type Limit date Limit price Conclusion Contact person

Dmax,Pmax 11/31.01/YY 105

Mr. Bauer

¤ SAP AG 2006

Transaction data includes: „ Basic Data: y Here, you enter the nominal amount for percentage-quoted securities and the number of units for unit-quoted securities. (You can determine whether a security is "unit-quoted" or "percentage-quoted" in the class master data of the relevant ID number). y The order date shows when the order was issued or created. „ Limit data: Here, for example, you can enter a suitable maximum/minimum price and a date up to which the order is effective.

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Executing an Order Company Code ID Number Transaction type Structure Partner

TR00 113500 100

Activity

Contract

Deuba

Inventory

Date Details

Deuba Acc1 Position Value Date 01/22/YY Sec. Acct -1 Calculation date General valuation Short-term inv. class 0 Quantity position Payment date Amounts Nominal amnt Rate

200.000,00 EUR 100

Payment amount

% EUR

Accrued interest calculation

Coupon Round. rule ¤ SAP AG 2006

„

„ „

„ „

If you want to execute a transaction after you have placed a securities purchase/sales order, you have to enter this change in the system. Then the order is executed. You have to add to or change the existing order entries by entering the actual transaction data. For example, you enter the actual execution price. The general valuation class helps you assign the position in the parallel valuation areas. Date details (in the sample data, the system assumes you want to execute the order the day the order is placed): y The position value date tells you when the position is available in the system (usually order date plus two days). y The calculation date is relevant for financial mathematics in relation to the conditions. This date enables you, for example, to calculate the interest accrued for interest-bearing securities and indicates the last day the vendor is entitled to earn interest (usually order date plus one day). y When you execute an order, the payment date refers to the day you post the payment amount and the data is updated in Cash Management. (usually order date plus 2 days). The dates can be populated using rules specified in Customizing. You can use rounding rules defined in Customizing for the accrued interest calculation.

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Execute Order: Other Flows

Company Code TR00 ID Number 113500 Transaction Type 100

Activity

Contract

Other Flows

Main flow Bart O100

Bezeichnung Zahlbetrag Whr Richtung Kauf 200.000,00 EUR

Net payment amount

208.200,00-

EUR

Other Flows Bewegung Bezeichnung Richtung Zahlbetrag W hr O870 Stückzinsen 7.200,00 EUR O312 Provision nicht akt. 1.000,00 EUR

F4 Other selection options ¤ SAP AG 2006

On the "Other flows" screen, the system automatically calculates the accrued interest for interest-bearing securities. For all types of securities, you can also create other flows, such as charges, brokerage, or commission, which accrue when you buy and sell securities. „ In Customizing, you define the other flows you are permitted to use. „

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Execute Order: Transaction Cash Flow

Company Code ID Number Securities Acct.

TR00 113500 Deuba Acc2 Cash Flow

Transaction cash flow ZhlgTermin 22.01.JJ 22.01.JJ 22.01.JJ

Bart O100 O870 O312

Bezeichnung Zahlbtr. ZW Richtg. Kauf 200.000,00 Stückzinsen 7.200,00 Prov. n. akt. 1.000,00

Whr EUR EUR EUR

¤ SAP AG 2006

When you execute orders, enter contracts, and settle (new) transactions in transaction management, the system displays the transaction cash flow. „ For example, a purchase leads to an outgoing payment. The accrued interest is calculated on the basis of the condition entries which were defined (fixed) in the class master data for this ID number, as well as including the rounding rules, if required. „ The transaction cash flow is displayed on the SAP List Viewer. You can set it up flexibly and therefore adjust it to suit the particular requirements of your company. You can set up your own display variants. „

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Overview of Execution/Contract

Suggested Order DataÎChanges possible

Order created

Execute

or:

: Nominal Number amnt of units Sec. price :

200.000 100

Enter data

Create Contract:

Company Code ID number Transaction  Contract

TR00 113500

¤ SAP AG 2006

„

A transaction can be in activity category "Contract" if y an order that you created earlier (with any necessary changes/additional data) has been executed or y a contract has been created directly.

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Securities Account Class Cash Flow

¤ SAP AG 2006

„

The securities account class cash flow displays all flows of a securities account class position relevant to cash flow. This may include condition details (such as interest calculation method, number of days, percentage, and so on).

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Flow List

¤ SAP AG 2006

All flows for a position are shown in the flow list including accounting flows or write-ups and write-downs. Each flow is shown with its status(planned or actual record). „ You can display all valuation areas in the flow list at the same time. „

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Collective Processing in Securities: Initial Screen

Transaction category Purchase 9

Sale

9

Settlement Expired Order

9 9

Current activity category 9 Order Contract 9 General selections Company code Receivable ID number Sec. acct : .

TR00

Output controlDisplay variant

¤ SAP AG 2006

The "Collective processing" function enables you to manage transactions efficiently. You can display information about the individual transactions depending on the criteria you select on the initial screen. „ You can display lists of orders, contracts, settlements, and expired orders and restrict each of your selections even more (for example, for the company code or securities account). „

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Collective Processing: List

9

Order expiration

CoCd Transaction Actv.cat.

Trans.type

Billing

Name

Reverse

ID Number

Short name

Cash Flow

History

Sec. Acct

Nominal

TR00

353 Contract

100

Purchase

113500

Bond 96/06

Deuba Sec Acc2

200.000,00

TR00

352 Order

100

Purchase

113500

Bond 96/06

Deuba Sec Acc2

300.000,00

Price (Un. quote) 100 90

¤ SAP AG 2006

The collective processing list allows you to branch to the relevant transaction to display the (position) cash flow of the operative valuation area, or the history. It also has several important processing functions that enable you to change, execute, settle and reverse selected transactions. „ The collective processing function allows you to display lists flexibly using the SAP List Viewer. „

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Unit 5 Transaction Manager: Securities Management

1

Securities Management: Overview

2

Master Data

3 Trading and Back Office 4

Accounting and Closing Operations - Posting transactions - Manual posting - Automatic debit position - Position Management - Closing Operations

5

Position Management

¤ SAP AG 2006

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Posting Transactions: Transferring Data to Financial Accounting using the Posting Report

Application Forex Money market Derivatives Securities

General selections

Company Code Transaction Product type ...

to to to

Posting control Posting date 9 Test run

¤ SAP AG 2006

„

„

„ „ „ „

Posting transfers the settled financial transactions to Financial Accounting. You can only post transactions which have reached contract or settlement status (depending on the processing category) at the internal level (system level). Before you post the transactions, you have to select the flows or positions of the transactions you want to post. You can have the system carry out a test run in order to check the accuracy of the posting entries in the posting log. When you execute the posting, flows and related documents are transferred to Financial Accounting. Postings to the SAP Financial Accounting module take place online. The FI document numbers are displayed. When you post a transaction, the system generates a posting log. If you double-click a posting line you can access the relevant posting document. You can post all valuation areas at once or just the flows of the operating valuation area (001). If you post only the operative flows, the flows of the parallel valuation areas must be posted or fixed using a separate posting report.

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Post Transaction

Transaction Post

Posting Log 40 40 50

45010 273100 113105

200,000.00 EUR 7.200,00 EUR 207.200,00 EUR

S S N

Accounting document generated in FI 45010 200.000

273100 7.200

113105 207.200

¤ SAP AG 2006

„

To transfer your data to Financial Accounting you must ensure that the appropriate accounts and the required document types already exist there.

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Integration Between General Ledger and Subledger Treasury Subledger Transaction Management

FI- General Ledger

Purchase of a fixed-interest bond at CHF 90 with a broker's fee of CHF 1 Ledger 1

Valuation Area 001 - Trading Position Valuation rule for fixed-interest bond Brokerage not capitalized Valuation at market value

Document #1 Document #4

Document #2 Document #5

Securities purchase Valuation

Ledger 3

Valuation area 003 - Financial assets Valuation rule for fixed-interest bond Brokerage capitalized Lowest Value Principle

Valuation

Ledger 2

Valuation area 002 - Financial Assets Valuation rule for fixed-interest bond Brokerage capitalized Amortization

Securities purchase

Document #3

Securities purchase

Inventory 311044 90

Expense 118500

3

Expense 118500

91 1

Inventory 311044 90

91

1

3

Inventory 311044

Unreal. Bank clearing acct 112200 220155

Unreal. Bank clearing acct 112200 220155 91 1

Expense 118500

Unreal. Bank clearing acct 112200 220155

1

91

Valuation

Valuation area 004 - IFRS Valuation rule for fixed-interest bond Brokerage capitalized Valuation at market value

Treasury Ledger Example: Purchase of a zero bond at CHF 90 with a broker's fee of CHF 1 At the month end, the bond is valuated at a market value of CHF 93, the amortization is CHF 1. ¤ SAP AG 2006

This is the same example as before. The nominal value is EUR 100 to 90. The charge for each transaction is EUR 1. „ The transaction is entered in Transaction Manager and as soon as the data is saved it is updated to the Treasury ledger. Using a special interface, the Distributor, the transaction data is updated to the relevant valuation area. First Valuation Area 001 is posted and it „

generates document 1. The first valuation area 001 is posted and generates Document 1. Valuation areas 002 and 003 can be updated at the same time as valuation area 001 or later. Documents 2 and 3 are generated. „ This example also contains valuation area 004, which is not updated to Financial Accounting. Therefore, the positions are only managed in the subledger and are not available in the general ledger. „ At the end of the period, key date evaluation occurs at market value. On the key date, the bond has a value of 93, which is displayed as an unrealized gain in valuation 001 (Document 4 is generated). In valuation area 002, the same transaction is valuated according to the Amortized Cost Method instead of the market value. The value of the amortization for this period of 1, this is displayed as an unrealized gain (Document 5 is generated). Valuation area 003 valuates this transaction according to the lowest value principle; as a result, the gain is not attributed. „

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„

The two slides should illustrate that the account numbers in all three valuation areas are the same. This means that the number of general ledger accounts must not be multiplied by the number of valuation areas.

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Post Transaction: Overview E.g.: Securities purchase Posting record (= "Posting specifications") : (40) Balance sheet account

here:

45000 Securities Fixed assets

to

(50) Bank clearing account

to

... EUR

113105 ... EUR Deutsche Bank—other postings

Bal. sheet account

Bank clearing account

from

from Transaction

Position Indicator

by Acct Determ.

Acct assignment ref.

- Changeable -

- Fixed ¤ SAP AG 2006

„

To post purchases/sales of securities: The balance sheet account is defined in the account determination. In addition to the securities balance sheet account, you can define other information (such as the business area) as an additional account assignment in Customizing. These are then automatically derived for the relevant business operation. In turn, you enter the account assignment reference in the position indicator. The indicator contains additional information about the position of the particular security. You cannot change the balance sheet account in the account determination when you post a transaction.

„

The bank clearing account is read from the transaction. You can change this account in account determination when you post the transaction.

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Manual posting Company Code TR00 ID number 113500 Securities Acct. Deuba Acc2 Update type SE3012 (Commission, not capitalized) Amount

100 EUR

Post

Posting Log 40 50

479100 100.00 EUR 113105 100,00 EUR

¤ SAP AG 2006

You use Manual Posting for flows that are not entered in Transaction Management and that are therefore assigned to positions and not to individual transactions. „ You can use the manual posting function to enter irregular or subsequent posting activities (such as one-off commissions) by ID number and securities account. It allows you to include and process several update types. The "Post" function generates actual records that are transferred immediately to Financial Accounting. The "Save without posting" function creates planned records which are later posted using the manual debit position function and then transferred to FI. „

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Manual Posting – For all Security ID Numbers

Posting involving several security ID numbers

Example: Securities account charges

G/L accounting

G/L account posting

General ledger only

¤ SAP AG 2006

„

If postings do not relate to one security ID number in a particular securities account (for example, securities account charges), they are entered in the general ledger in Financial Accounting.

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Automatic Debit Positions I

FI

Alternative I: Dividends

Nominal interest

P

Automatic Debit Position Bank clearing account

Bank clearing to revenue

F

Account statement

Bank to bank clearing

Bank Account

¤ SAP AG 2006

The automatic debit position function enables you to automatically process activities that occur regularly whose dates and amounts are fixed in advance. It can be used, for instance, to post interest, dividend or repayment flows, in other words, flows that are generated from the conditions. „ Planned records must exist (such as planned records for interest received) before you can use the automatic debit positions function. „ To use the automatic debit positions function, you must first post all the activities that affect the position for the ID numbers and securities accounts you have selected up to the date when you want to perform automatic posting. „ There are two procedures for processing activities that recur regularly: y Alternative I: When you use the one-step procedure, you post the flows directly to the bank clearing accounts. These are cleared in Financial Accounting when the bank statement is imported. y Alternative II: In the two-step procedure, you first post the expected payments to receivables accounts. When the bank statement has been imported, the bank clearing accounts are cleared in the subledger accounting and the automatic debit positions function is triggered. „

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Automatic Debit Position I: Planned Record

Company Code ID Number Securities Acct.

TR00 514000 Deuba Acc2

UType Description SE1000 Purchase SAM5013 Dividend ... ...

Status Nominal amnt Crcy StmntAmnt Settlmt.curr. fixed 120.000,00 EUR 120.000,00 EUR planned 1.600,00 EUR 1.600,00 EUR ... ... ... ... ...

¤ SAP AG 2006

„

The automatic debit position function processes planned records that are generated from the conditions and are for regularly occurring payments.

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Automatic Debit Position I: Initial Screen

General Accrual/Deferral Company Code

TR00

Product type ID number

514000

Sec. acct

to

...

to

...

to

...

to

...

Automatic posting parameters Up To and Including Due Date Posting Control Posting Date

Instead of due date

Document date

Instead of current date

( Test run 9

¤ SAP AG 2006

„

For automatic debit positions, you use selection criteria to select the relevant planned records. Entering a date in the Up to and including due date field means that the system generates only planned records that are due up to this date.

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Automatic Debit Position I: Posting Log Posting Log Pos.val.dte Flow type Doc.type PKey For.curr. amount Loc.curr.amount

ID number 16.02.YY

514000

FI doc. no. G/L acct

Post. date Post.year

Dt. Bank Registered Stock

5013 Dividend

SA

9 0000648 16.02.YY YYYY

40

1,600.00 EUR

1,600.00 EUR

113105

Dt. Bank interim postings

50

1,600.00 EUR

1,600.00 EUR

272100

Securities revenue

Securities Account (Class) Cash Flow Pos.vl.dte

UpdateType Description Status Nominal amnt Crcy SttmntAmnt Settlmt.curr.

02/03/YYYY SE1000

Purchase

fixed

100.000,00

05/17/YYYY SAM5013 ... ...

Dividend ...

fixed ...

1.600,00 ...

EUR 200.000,00 EUR EUR ...

1.600,00 EUR ... ...

¤ SAP AG 2006

„

In the one-step procedure, the automatic debit position function transfers the selected planned records as actual records in CFM and automatically forwards the relevant posting records (in this case, directly via bank clearing) to Financial Accounting.

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Automatic Debit Position II: With Manual Debit Position Function

Alternative II: Dividend/Nominal interest

FI P P

1 IP

Automatic debit positions Receivables account

F

Receivables to revenue

1

Bank statement

By bank-to-bank clearing

Bank account Manual debit position Bank clearing account

F

By bank clearing on receivables IP

¤ SAP AG 2006

Two-step procedure:̘̘ y In the first step you use the automatic debit function to post the selected planned records. The relevant posting records are automatically forwarded to G/L accounting in Financial Accounting (in this case, using the interim receivables account). [In G/L accounting in FI a cash receipt triggers a posting to the bank clearing account.] y In the second step you fix the planned records for the automatic debit function. The relevant posting records are transferred automatically to G/L accounting in FI. There it is possible to clear both the receivables account and the bank clearing account. The update types for the manual debit position function are generated in settlement currency and in position currency. This means, for example, that it is also possible to represent interest payments for Euro bonds in USD in the system. „ You generally use the manual debit position function to post-process and post activities that were created by the automatic debit position function. Whereas the automatic debit position function posts several activities at once, the manual debit position function only allows you to process one activity at a time. „

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Automatic Debit Position II: Planned Record

Company Code ID Number Securities Acct. Pos.vl.dte 01.21./YYYY 01.21./YYYY 01.21./YYYY 16.02.YYYY 16.02.YYYY

UType SE1000 SE8702 SE3012 SAM5000 SAM6000

TR00 113500 Deuba Acc2 Description Status Nominal amnt Purchase fixed 200.000,00 Accrued interest fixed 7.200,00 Comm.not.cap.fixed 1.000,00 Nom. interest planned 12.000,00 Nom. interest IPplanned 12.000,00

Crcy SttmntAmnt EUR 200.000,00 EUR 7.200,00 EUR 1.000,00 EUR 12.000,00 EUR 12.000,00

Settlmt.curr. EUR EUR EUR EUR EUR

¤ SAP AG 2006

„

The relevant planned records are selected in the automatic debit position. Activities that have been posted are shown in the fixed status, and the interest is shown in planned.

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Automatic Debit Position II: With IP Records

Posting log (operative): Pos.val.dte Flow type Doc.type FI doc. no. PKey For.curr. amount Loc.curr.amount G/L acct

ID number 16.02.YY

113500

Post. date Post.year

Bond 96/06

5000 Nominal Interest

SA

9 0000693 16.02.YY YYYY

40

EUR 12,000.00

EUR 12,000.00

152050

Interest receivables

50

EUR 12,000.00

EUR 12,000.00

273100

Interest income

¤ SAP AG 2006

When you use the two-step procedure, the automatic debit position function posts the selected planned records and transfers the relevant posting records (in this case: via the interim receivables account) automatically to G/L accounting in Financial Accounting. „ You can configure your system (in Customizing) so that when you post the nominal interest the system posts the related tax flows automatically. The two-step process then collects all the related flows. This means that when tax flows are generated the system also generates the actual records for incoming payments. „

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Automatic Debit Position II: Planned Record IP

Company Code ID Number Securities Acct. Pos.vl.dte

TR00 113500 Deuba Acc2

UpdateType Description

Status

Nominal amnt Crcy SttmntAmnt Settlmt.curr.

01/21/YYYY SE1000 01/21/YYYY SE8702

Purchase fixed Accrued interest fixed

01/21/YYYY SE3012 02/16/YYYY SAM5000

Comm.not.cap. Nom. interest

1.000,00 12.000,00

EUR EUR

1.000,00 EUR 12.000,00 EUR

02/16/YYYY SAM6000 02/16/YY+1 SAM5000

Nom. interest (IP) planned 12.000,00 Nom. interest planned 12.000,00

EUR EUR

12.000,00 EUR 12.000,00 EUR

...

...

...

200.000,00 7.200,00

fixed fixed

...

...

EUR 200.000,00 EUR EUR 7.200,00 EUR

...

...

...

¤ SAP AG 2006

„

After automatic debit position, posting is carried out and the relevant activity is displayed as actual records.

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Position Management Options

Company Code Position at portfolio level at security account group level at security account level at single position level

¤ SAP AG 2006

„

It is very important that you decide at which level you want to manage your securities positions. The main purpose of position management is to provide the basis for valuing your positions and determining price gains/losses.

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Position Management: Portfolio-Related

Transaction 1+2 Transaction 3+4 Transaction 5+6 Receivable 7

113500

113500

113500

716460

716460

716460

113500

Portfolio 1 Portfolio 2

¤ SAP AG 2006

For position management regarding portfolios, the system defines portfolios that each have individual transactions assigned to them when the transactions are entered. Each securities account group represents a position-managing unit. „ Each portfolio is defined in Customizing and represents an organizational unit in the company code that enables financial transactions to be summarized to perform aggregated position analysis. „

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Position Management: at Security Account Group Level

Sec. acct group 1

Sec. acct group 2

Sec. Acct 1

Sec. Acct 2

Sec. Acct 3

Sec. Acct 4

113500

113500

113500

113500

716460

716460

716460

¤ SAP AG 2003

To manage positions at securities account group level, you define portfolios to which you assign several securities accounts (with their respective positions). A securities account group is a superior unit for managing positions. This means that securities account positions belonging to a securities account group are seen as a single unit. „ A securities account group is an organizational unit within a company code that allows you to group certain financial transactions and positions and to perform aggregated position evaluations. „ You can also define the securities account groups you have created as a basis for valuation. „ You define security account groups in Customizing. You assign securities accounts to a securities account group when you create master data for the securities account. „

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Position Management at Securities Account Level

Securities Account 1

Securities Account 2

Securities Account 3

Securities Account 4

113500

113500

113500

113500

716460

716460

716460

¤ SAP AG 2006

Position management at the securities account level means that you consider each securities account and its respective positions as a single unit. „ Securities accounts are valuation and position management units. They are needed for all financial transactions that require position management. „ You can use securities accounts to display securities account statements, evaluate positions, and transfer securities accounts. The securities accounts created in the system are usually related to real securities accounts managed at a bank. „

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Position Management at Securities Account Level Company code position

is divided into positions in several different securities accounts

COMBA1

COMBA2

DEUBA1

DEUBA2

DREBA1

DREBA2

DREBA3

Purchases and sales of securities ¤ SAP AG 2006

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Flexible Position Management Procedures Enable You to Map Different Methods of Financial Reporting

Sequence of the valuation steps during key date valuation

Customizing

¤ SAP AG 2006

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Classification Allows the Position to Be Managed According to Different Procedures Transaction Management

Sale of a stock 1,000 units

HGB

EUR 270.000

IAS

Position mgmt procedure

Sale of a stock 1,000 units

Sale of a stock

EUR 270.000

1,000 units

Valuation: Lowest value principle

HGB KG

EUR 270.000

Valuation: Mark-to-Market

Derived Business Operations Generate valuation-area-dependent price gains/price losses/amortizations

Parallel

IAS KV

valuation areas

¤ SAP AG 2006

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Classification Allows the Position to Be Managed According to Different Procedures Transaction Management

Purchase of a Bond 500.000 Nominal

X- GAAP

102 %

Position mgmt procedure

Purchase of a Bond 500.000 Nom.

Y GAAP Purchase of a Bond

102 %

500.000 Nom.

Amortization: Gross SAC

102 %

Amortization: Net SAC

X-GAAP Y-GAAP Derived Business Operations Post Post Generate valuation-area-dependent price gains/price losses/amortizations Premium nominal Parallel

valuation areas

¤ SAP AG 2006

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Settlement Tasks: Accruals/Deferrals

Interest accrual/deferral: 1 2

Difference procedure* Reset procedures

Reverse accruals/deferrals Reset accrual/deferral Amortized cost *currently not supported for securities

¤ SAP AG 2006

„ „

„ „ „ „

You perform accruals/deferrals to assign receipts and expenditures to the accounting period to which they belong. The accrual/deferral procedure describes how the expense and revenue accounts used are updated. The accrual/deferral activity is based on flows from selected business transactions that are relevant for accrual/deferral up to the specified key date. The system determines the accrual/deferral amount for each flow and generates the relevant accrual/deferral flows. You can execute the accrual/deferral run as a test run (accrual/deferral log) or you can post the accruals/deferrals immediately (accrual/deferral log and posting log). You can use the "Reverse accrual/deferral" function to reverse accruals/deferrals that have been posted or reset. If you used the reset procedure to perform accruals/deferrals, use the "Reset accrual/deferral" function to write back the accruals/deferrals. The amortized cost method is available in the Securities area as a special procedure for accruals/deferrals, in particular for discounted bonds. Customizing:̘ Defining the accrual/deferral: - Specify the linear accrual/deferral method - Assign the accrual/deferral flow types you want to generate as reference flows for the flows

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you want to accrue/defer.

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Closing Operations: Valuation - Position Valuation

Position valuation Maintain security price z Posting Log z Valuation Log

¤ SAP AG 2006

You can value securities positions on any key date. This key date valuation is the valuation of positions for accounting purposes and uses the prices on a particular key date. „ To value your positions, you first have to maintain the related security prices. If you want to value different positions, you use the classification according to price types (such as valuation, spot, middle, bid, ask or closing price) in the price table. „ You set up valuation parameters in Customizing. „

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Closing Operations: Position Valuation

¤ SAP AG 2006

The key date valuation can be done with or without reset. The valuation is controlled by the ““Valuation category””. „ The following valuation categories are available: y Year-end valuation y Mid-year valuation with reset y Mid-year valuation without reset y Manual valuation with reset y Manual valuation without reset „

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Closing Operations: Valuation - Posting

¤ SAP AG 2006

„

For key date valuation, all relevant valuation steps defined in the position management procedure are performed - for example, amortization, security and forex valuation.

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Closing Operations: Foreign Currency Valuation

A. Two-step: First security, then foreign exchange

A. Two-step: First foreign exchange, then security

1

Sec. write-up/write-down (PC): Compares unit * sec. prices (depending on valuation rule: acquisition price, price on key date, etc.)

Foreign crcy write-up/write-down: Compares old book value (PC) * exchange rate (depending on valuation rule: acquisition price, priceon key date, and so on)

2

Sec. write-up/write-down (LC): Sec. write-up/write-down (PC) * book exchange rate, old

Sec. write-up/write-down (PC): Sec. write-up/write-down (LC): Compares unit * sec. price (depending on val. rule: acq. price, Sec. write-up/write-down (PC) * Book exchange rate,old price on key date, and so on)

Foreign crcy write-up/write-down: New book value (PC) * exchange rates (depending on val rule: acq. price, priceon key date, etc.)

Sec. write-up/write-down (LC): Sec. write-up/write-down (PC) * book exchange rate, new

3

C. One-step Sec. write-up/write-down (PC): Compares unit * sec. price (depending on valuation rule: acquisition price, price on key date, and so on)

Total write-up/write-down (LC) -: Old book value (LC) New book value (LC)

Foreign currency write-up/writedown: Total write-up/write-down (LC) Sec. write-up/write-down (LC)

4

¤ SAP AG 2006

You can choose among three methods for valuing the performance of foreign currency securities. These differ in the way in which they calculate the profit/loss for the security and foreign currency components: y A two-step procedure that first calculates the profit/loss for the security component, and then for the foreign currency component. y A two-step procedure that first calculates the profit/loss for the foreign currency component, and then for the security component. y A one-step procedure that calculates the total profit/loss in the local currency. „ PC: Position currency „ LC: Local currency „

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Foreign Currency Valuation: Example

TwoTwo-step method (first security, then foreign currency) Foreign currency rate

1,80

Security profit/ profit/loss

1,70

Foreign currency profit/ profit/loss

1,50

Security price 32

36

39

¤ SAP AG 2006

„

Example: Two-step method (first security, then foreign currency) Purchase (1,000 units) Preperiod valuation Current valuation

„

Security price 39 32 36

Foreign currency rate 1,80 1,50 1,70

In the preperiod, both the security and the foreign currency were written down. As a result of the underlying valuation rules, you have to write-up the current foreign currency rate and security price for the current valuation. In doing this, you first calculate the profit/loss in the security, then in the foreign currency.

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Unit 5 Transaction Manager: Securities Management

1

Securities Management: Overview

2

Master Data

3 Trading and Back Office 4 5

Accounting and Closing Operations Position Management - Corporate actions - Repostings - Securities account, account assignment reference, valuation class

¤ SAP AG 2006

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Corporate Actions Are Directly Supported by the System „ Capital increase against investments (subscription rights management, new stock) „ Capital increase from retained earnings „ Capital reduction „ Stock Split „ Exercising rights „ Separating warrants and warrant bonds „ Manually generated corporate action ¤ SAP AG 2006

You can represent the following activities in the Corporate Actions area:̘ post subscription rights; transfer new stock; capital increases from retained earnings; stock splits; capital reductions; stock swaps; other corporate actions; convert issue currency. „ You first define corporate actions centrally for all company codes. When you have activated the corporate actions, you can perform posting in each company code in which you manage positions belonging to the securities affected. From there, you update the securities positions and generate FI documents, if required. „ You must also create the position indicators for all securities or securities accounts affected. „

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Corporate Actions: Overview Prerequisites

Create corporate action Cross-company codes

Save Activate

Post corporate action per company code

or PI for security to be posted

¤ SAP AG 2006

You can represent the following activities in the Corporate Actions area:̘ post subscription rights; transfer new stock; capital increases from retained earnings; stock splits; capital reductions; stock swaps; other corporate actions; convert issue currency. „ You first define corporate actions centrally for all company codes. When you have activated the corporate actions, you can perform posting in each company code in which you manage positions belonging to the securities affected. From there, you update the securities positions and generate FI documents, if required. „ You must also create the position indicators for all securities or securities accounts affected. „

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Position Management: References – Overview

Subscription right

Equity warrants

ity Eq u

C bo onv nd er ti

EUR 100.000,00

Warrant bond

bl e

n tio Convertible bond

Stock EUR 50

cum Warrant bond

ip cr bs Su ht rig

Convertible bond

new

Wa rra nt bo nd

Warrant bond EUR 100.000,00

ex

¤ SAP AG 2006

„

For position-changing activities that affect several securities the relationship between the securities is represented by the relevant references, if required. Example: y You assign one reference to one subscription right; this entitles you to new stocks. y You link convertible bonds and warrants to the relevant underlying transaction. y You create a reference for the cum warrant to both the warrant bond ex and the warrant.

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Position Management: References

 Warrant: stocks  Warrant: interest  Warrant: index  Warrant: currency  Subscription right  Convertible bond  Warrant bonds  Callable bond  Putable bond

¤ SAP AG 2006

„

Relationships between individual securities or particular rights are displayed as a reference. This is generated automatically when you enter the class master data once you have specified the ID number of the related security or the data for the right displayed.

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(Regular) Capital Increase: Overview Prerequisites (Old) stocks in position Subscription right class PI subscription right New stock class Post subscription rights (CorpAct) Purchase/sell subscription rights, if required PI new stock Exercise subscription rights New stocks in position Transfer new stocks (CorpAct)

New stock position ¤ SAP AG 2006

You have to satisfy the above prerequisites if you want to represent a capital increase in the system and execute the resulting transactions. „ PI: Position indicator̘̘ CorpAct: Corporate Actions „

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Capital increase Stock UNI 50

Old stock

Subscr. Right

Stock UNI 50

Old stock

Subscr. Right

Stock UNI 50

Old stock

Subscr. Right

Stock UNI 50

Old stock

Subscr. Right

Stock UNI 50

Old stock

Subscr. Right

New Stock

Subscr. right ratio 1:1

Subscription ratio

5

:

1

¤ SAP AG 2006

In the case of a capital increase, existing stockholders have the right (in Germany) to obtain new stocks in proportion to the number of stocks they currently hold. This enables existing stockholders to maintain their share of voting rights and compensates for any negative price trend resulting from the capital increase. „ The subscription right ratio indicates how many subscription rights are attached to an old stock. One old stock usually has one subscription right (ratio 1:1) „ The subscription ratio indicates how many subscription rights you require to obtain one new stock. Example: Capital increase from EUR 50 M to EUR 60 M. OK corresponds to a ratio of 50:10 or 5:1. 5 existing stocks to 5 subscription rights to 1 new stock. „

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Capital Increase: Post Subscription Rights

Book value Old position

Subscr. rights

post

Value Old stocks

+ acctg. Value Subscr. rights

- Sub.rts markdown

¤ SAP AG 2006

The subscription price of the new stock is lower than the exchange price of the old stocks. As a result of this difference, the subscription right has a theoretical value equivalent to the difference between these two prices, taking into account the subscription right ratio. „ The total value of a securities account position is not affected by the capital increase. The resulting subscription rights simply shift the value amounts in the position. The value of the subscription right for accounting purposes differs from the theoretical value if the book value of the old stock is lower than its market value. In this case, you have to determine the accounting value of the subscription right and, in doing so, bring the theoretical value into line with the book value of the old stock. The book value of the old stocks is, on the one hand, reduced by the amount of the accounting value of the subscription right. On the other hand, the subscription right is posted in the position such that the total position value is identical before and after the capital increase. The system makes adjustment postings to the old stock position required for book value markdowns automatically. „ Subscription right markdown occurs on the first day of the subscription period. The old stocks are traded as Subscription rights ex. ̘ „

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Capital Increase: (Theoretical) Value of Subscription Rights You determine the theoretical value of the subscription right automatically using the following formula: + Dividend disadvantage

Ka -

Subscr. Subscr. right value

=

- Dividend advantage m +1 c

350 -

Here:

Kn

100

5 + 1 1

= EUR 41.67

The old stocks in the position are marked down by the value of the subscription right used for accounting purposes: Markdown = Subscription right value x Old stock book value Old stock market here: 41.67 x300 = EUR 35,71 price 350

= Accounting subscr. subscr. rgt value

¤ SAP AG 2006

The theoretical value of the subscription right is determined using the above formula: Ka: current exchange price of the old stock Kn: subscription price of the new stock m: old capital̘ n: amount of capital increase m/n: Subscription ratio „ You convert the theoretical value of subscription rights for the subscription right markdown to the book value of the position in old stocks (value for accounting purposes). Example: Old stocks position: purchased 200 units at EUR 300 Capital increase at a ratio of 5:1; (subscription right ratio 1:1) ̘ Subscription price EUR 100 Current exchange price for old stock: EUR 350 „

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Capital Increase: Post Subscription Rights

Post subscription rights

Postings

111 111

222 222

PK

Account

40 50

194200 7.142,86 EUR 133020 7.142,86 EUR

N

40 50

133000 7.142,86 EUR 194200 7.142,86 EUR

H

¤ SAP AG 2006

„

The old stocks position (ID number 111111) is marked down and the subscription rights position (ID number 222222) is posted, in both cases at an amount of 200 (subscription rights) x 35.71 EUR* (value for accounting purposes per subscription right) = 7,142.86 EUR* y Rounding difference; the system uses exact values for calculation.̘

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Capital Increase: Exercise Subscription Rights Subscription rights posted SubR - purchases SubR– Sales: 50 units

Exercise subscription rights

: 150 units at 35.72 EUR at a subscription price of 100 EUR per new stock

Postings 222 222: 222: 194200 to 133000

5.357,15

333 333: 333: 133020

8.357,15

to to

194200 113105

5.357,15 3.000,-3.000,--

¤ SAP AG 2006

You exercise subscription rights for all securities accounts in a company code. To follow selective strategies for individual securities accounts, you can first perform transfers, make additional purchases or sell subscription rights. „ When you exercise subscription rights, new stock is added to your position. You post new stocks at the value of the relevant subscription rights and the subscription price paid. Example: y Sale of 50 subscription rights. Subscription rights position: 150 units at EUR 35.71*. y Exercise 150 subscription rights to obtain 30 new stocks (subscription ratio 5:1) with payment of EUR 3,000 (subscription price of EUR 100 per new stock). „

Exercise and post subscription rights (ID number 222222) at [150 x 35.71]* = EUR 5,357.15 *. Post new stocks (ID number 333333) at [5,357.15 + 30 x 100]= EUR 8,357.15 *. y Rounding difference; the system uses exact values for calculation.

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Capital Increase: Transfer New Stocks

New Stock

Old Stock

Post A

ID no.

xx

B xx

333 333

ID no.

111 111

Postings

111 111

333 333

PK

Account

40

133020

8,357.15 EUR D

50

194200

8,357.15 EUR C

40 50

194200 133020

8,357.15 EUR D 8,357.15 EUR C

Amount

¤ SAP AG 2006

As soon as new stocks are aligned with old stocks, new stocks lose their status and are assigned to the old stocks position. When new stocks are transferred they are automatically assigned the ID number of the old stocks. „ After you select the new stocks at company code level, all positions of this class are displayed in all the securities accounts of the company code. The posting transfer then takes place within the outgoing payments securities account. A securities account transfer is recorded in a posting log. „ Example:̘ 30 new stocks (ID number 333333) are transferred at a book value of 8,357.15 EUR to the old stocks position (ID number 111111). „

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Securities Account Transfer: Process

Company Code

TR00

ID number

444444

Product type

01A

Securities Account Transfer Source sec. account Number of units

Deuba Acc1

Target sec. account

Deuba Acc2

1000

Values Calculation date No. of units to be transferred

XX,XX,XXXX 700

¤ SAP AG 2006

„

After you enter the data for the source securities account and the posting date, the system displays an overview of the securities account position from which you can select any number of units to transfer to the target securities account. The system generates the flows required for the transfer and updates the position of the respective securities account.

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Securities Account Transfer: Post

¤ SAP AG 2006

„

A securities account transfer is recorded in a posting log.

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Account Assignment Reference Transfer: Execute

¤ SAP AG 2006

The account assignment reference postings of a class are selected by identity numbers. The positions of the postings concerned are displayed by position management. „ The new account assignment reference and posting day are provided on the selection screen. Postings can be carried out for one particular area or all valuation areas. „

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Account Assignment Reference Transfer: Post

¤ SAP AG 2006

„

The balance sheet transfer is recorded in a posting log.̘̘

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Valuation Class Transfer: Execute

¤ SAP AG 2006

A valuation class must be transferred to transfer an asset class or position management of a position. For this transfer, you must select a valuation area and the specific valuation classes on the initial screen. „ Valuation classes are transferred on the general valuation class level and are valid for all valuation areas. „

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Valuation Class Transfer: Post

¤ SAP AG 2006

„

A securities account transfer is recorded in a posting log.

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Exercises 16 Unit 5:

Transaction Manager: Securities

Topic

Master Data

After completing these exercises, you will be able to: x Create class master data x Set up securities accounts x Define position indicators You want to invest long-term funds in stocks and in a bond that has just been issued. Since this is the first time you are investing in both types of securities, you must first maintain class data. You want to manage some of the investments separately, and open another securities account at your house bank specifically for these purchases. 16-1

You want to purchase stocks of the Deutsche Bank AG. Before you enter the transaction, you have to create the relevant class master data: Use the following ID number: DE0005140## (##=PC no./Group number). Enter the following data: On the Basic data tab page: Field Name or Data Type

© SAP AG

Value

Issuer

1000

Nominal value

5

Issue currency

EUR

Security type

Regist. security

Stock category

Common stock

Quotation

Unit-quoted

Stock form

Old stock

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On the Conditions tab page: Field Name or Data Type

Value

Eff. from

22.MM.YYYY

Amount

1,50

Due Date

22.MM.YYYY

Frequency

Leave at 000

On the Exchanges tab page:

16-2

Field Name or Data Type

Value

Listed

X - select indicator

Exchange

FFM

Preparatory data for exercise 19: Create the following class: ID number: DE0008046##0. This is for a stock. Enter the following data: Go to the Basic data tab page: Field Name or Data Type

Value

Issuer

BKDRBANKDE

Nominal value

5

Issue currency

EUR

Security type

Regist. security

Stock category

Common stock

Quotation

Unit-quoted

Stock form

Old stock

On the Conditions tab page:

© SAP AG

Field Name or Data Type

Values

Eff. from

26.MM+3.YYYY

Amount

0,75

Due Date

26.MM+3.YYYY

Frequency

Leave at 000

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On the Exchanges tab page:

16-3

Field Name or Data Type

Values

Listed

X - select indicator

Exchange

FFM

Enter the class master data for the following step-up bond, which is repayable in full upon maturity: ID number: XS0001136## Product type: 04I Description: Step-Up Bond ## Classification: Bank Bonds Rating: Eff. from 15.03.YYYY-1 ; S&P; Aa Issuer: 1000 Issue currency: EUR Nominal value: 1000 Nominal per TU: 1000 Issue currency: 15.03.YYYY Term: 10 years Issue price: 100 % Conditions:

from 15.03.YYYY-1 4 % from 15.03.YYYY 5% from 15.03.YYYY+1 6%, whereby payments will now be made every 6 months Interest rate calculation method: act/actP Make sure that the due date always falls on a working day. Exchange: FFM (Frankfurt/Main) Use the cash flow to check that the conditions have been entered correctly. 16-4

© SAP AG

You have opened a new securities account at the Deutsche Bank. Enter the securities account master data in the system: Securities account: Acc A## Depository Bank 1000 Clearing Account: 444556## Account number: 75352## House bank for EUR payments: 1000 House bank account for EUR payments: 1000 House bank for USD payments: 1000 House bank account for USD payments: 1050

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16-5

You want to purchase Deutsche Bank stocks for your new securities account. You want to create the position indicator manually. Company Code: FS## General valuation class: 0001 ID number: DE0005140## Securities account: Acc A## Portfolio Portfolio1 Check whether an entry has been made in the account assignment reference and the position management procedure.

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Solutions 16

16-1

Unit 5:

Transaction Manager: Securities

Topic

Master Data

You want to purchase stocks of the Deutsche Bank AG. Before you enter the transaction, you have to create the relevant class master data: Use the following ID number: DE0005140## (##=PC no./Group number). Enter the following data: Go to the Basic data tab page:

© SAP AG

Field Name or Data Type

Value

Issuer

1000

Nominal value

5

Issue currency

EUR

Security type

Regist. security

Stock category

Common stock

Quotation

Unit-quoted

Stock form On the Conditions tab page:

Old stock

Field Name or Data Type

Value

Eff. from

22.MM.YYYY

Amount

1,50

Due Date

22.MM.YYYY

Frequency On the Exchanges tab page:

Leave at 000

Field Name or Data Type

Value

Listed

X - select indicator

Exchange

FFM

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Creating the stock To create the stock, choose:

Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Securities Æ Master Data Æ Class (FWZZ) Enter the following data: Field Name or Data Type

Value

ID Number

DE0005140##

Choose Create (on the left of the ID number). A dialog box appears. Field Name or Data Type

Value

ID number

DE0005140##

Product Type

01A Stocks

Short description

Dt. Bank AG

Long name

Deutsche Bank AG

Without reference

X - select indicator

Choose Create. Go to the Basic Data tab page. Enter the following data:

© SAP AG

Field Name or Data Type

Value

Issuer

1000

Nominal value

5

Issue currency

EUR

Security type

Regist. security

Stock category

Common stock

Quotation

Unit-quoted

Stock form

Old stock

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© SAP AG

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Go to the Conditions tab page. The dividend is suggested (taken from the product type). Field Name or Data Type

Value

Eff. from

22.MM.YYYY

Amount

1,50

Due Date

22.MM.YYYY

Frequency

Leave at 000

Select the Exchanges tab page. Choose Insert Row on the lower left edge of the screen. You now have an open row to enter data. Enter the following data: Field Name or Data Type

Value

Listed

X - select indicator

Exchange

FFM

Save your data by selecting Save in the standard toolbar. 16-3

Preparatory data for exercise 19: Create the following class: ID number: DE0008046##0. This is for a stock. Enter the following data: Go to the Basic data tab page:

© SAP AG

Field Name or Data Type

Value

Issuer

BKDRBANKDE

Nominal value

5

Issue currency

EUR

Security type

Regist. security

Stock category

Common stock

Quotation

Unit-quoted

Stock form

Old stock

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On the Conditions tab page: Field Name or Data Type

Value

Eff. from

26.MM+3.YYYY

Amount

0,75

Due Date

26.MM+3.YYYY

Frequency

Leave at 000

On the Exchanges tab page: Field Name or Data Type

Value

Listed

X - select indicator

Exchange

FFM

To create the class master data for a stock: To create the stock, choose:

Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Securities Æ Master Data Æ Class (FWZZ) Enter the following data: Field Name or Data Type

Value

ID Number

DE0008046##0

Choose Create (on the left of the ID number). A dialog box appears. Enter the following data:

© SAP AG

Field Name or Data Type

Value

ID number

DE0008046##0

Product Type

01A Stocks

Short description

Dresdner Bank

Long name

Dresdner Bank

Without reference

X - select indicator

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Choose Create.

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Go to the Basic data tab page. Enter the following data: Field Name or Data Type

Value

Issuer

BKDRBANKDE

Nominal value

5

Issue currency

EUR

Security type

Regist. security

Stock category

Common stock

Quotation

Unit-quoted

Stock form

Old stock

Go to the Conditions tab page. The dividend is suggested (taken from the product type). Field Name or Data Type

Value

Eff. from

26.MM+3.YYYY

Amount

0,75

Due Date

26.MM+3.YYYY

Frequency

Leave at 000

Go to the Exchanges tab page. Choose Insert Row on the lower left edge of the screen. You now have an open row to enter data. Enter the following data: Field Name or Data Type

Value

Listed

X - select indicator

Exchange

FFM

Choose Save to save the class data.

© SAP AG

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16-3

Enter the class master data for the following step-up bond, which is repayable in full upon maturity: ID number: Product type: Description: Classification: Rating: Issuer: Issue currency: Nominal value: Nominal per TU: Issue currency: Term: Issue price:

XS0001136## 04I Step-Up Bond ## Bank Bonds Eff. from 15.03.YYYY-1 ; S&P; Aa 1000 EUR 1000 1000 15.03.YYYY 10 years 100 %

Conditions:

from 15.03.YYYY-1 4 % from 15.03.YYYY 5% from 15.03.YYYY+1 6%, whereby payments will now be made every 6 months Interest rate calculation method: act/actP Make sure that the due date always falls on a working day. Exchange: FFM (Frankfurt/Main) Use the cash flow to check that the conditions have been entered correctly. To create the class master data for a step-up bond:

Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Securities Æ Master Data Æ Class (FWZZ) Enter the following data:

© SAP AG

Field Name or Data Type

Value

ID Number

XS0001136##

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In the subsequent dialog box, enter the following data: Field Name or Data Type

Value

Product Type

04I

Short description

Step-Up Bond ##

Long name

Step-Up Bond ##

Without reference

X - select indicator

Choose Create. Go to the Search terms tab page. Field Name or Data Type

Value

Classification

Bank bonds

Rating (Select Insert row) Eff. from

15.03.YYYY-1

Institute

Standard and Poor’’s

Rating

Aa

Go to the Basic data tab page. Field Name or Data Type

Value

Issue Issuer

1000

Issue currency

EUR

Nominal value

1.000

Nominal per TU Issue start

1.000 15.03.YYYY-1

End of term

15.03.YYYY-1+ 10

End of term

Set the checkmark

Issue rate

100

Structure Quotation

© SAP AG

Percentage-quoted

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Go to the Conditions tab page. Here you will find various pre-defined values. Interest rates and the final payment for condition items are displayed. Change the following value for the interest rate conditions: Field Name or Data Type

Value

Int.calc.method

Act/ActP (ISMA)

Enter or confirm the following values: Field Name or Data Type

Value

Interest –– eff. from

15.03.YYYY-1

Interest –– Percent

4

Calculation date

14.03.YYYY

Due Date

15.03.YYYY

Frequency

012

Check the detailed information about this interest condition by selecting the row and clicking Detail (on the lower part of the screen). An overview with two tab pages is displayed. Go to the Dates tab page and enter the following values: Field Name or Data Type

Value

Calendar

01

CR- Calendar rule (up to due date)

2 (next working day modified)

Calendar data is required for the working day check in the calendar rule. Select Back in the standard tool bar to return to the overview. Select ENTER to fill/update several fields. Add a row to the condition items by selecting Insert row. Select condition type 100 (interest) and choose Copy. The new row is displayed.

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Enter the following values in the new row: Field Name or Data Type

Value

Interest –– eff. from

15.03.YYYY

Interest –– Percent

5

Calculation date

14.03.YYYY

Due Date

15.03.YYYY

Frequency

012

Check the detailed information about this interest condition by selecting the row and clicking Detail (on the lower part of the screen). An overview with two tab pages is displayed. Go to the Dates tab page and enter the following values: Field Name or Data Type

Value

Calendar

01

CR- Calendar rule (up to due date)

2 (next working day modified)

Choose Insert row to add another new line to the condition items. The new row is displayed. Enter the following values in the new row: Field Name or Data Type

Value

Interest –– eff. from

03/15/JJJJ+1

Interest –– Percent

6

Calculation date

14.03.YYYY

Due Date

15.03.YYYY

Frequency

006

Before leaving the Conditions tab page, make sure that Calendar 01 is stored for each of the existing conditions . Check the detailed information about this interest condition by selecting the row and clicking Detail (on the lower part of the screen).

© SAP AG

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An overview with two tab pages is displayed. Go to the Dates tab page and enter the following values: Field Name or Data Type

Value

Calendar

01

CR- Calendar rule (up to due date)

2 (next working day modified)

To display and check the cash flow for this class, choose Cash Flow in the application tool bar. You can view the planned purchase and condition flows arising from the previously maintained condition types. Return to your class creation transaction and select the Exchanges tab page. Choose Insert Row on the lower left edge of the screen. You now have an open row to enter data. Enter the following data: Field Name or Data Type

Value

Listed

X - select indicator

Exchange

FFM

Save your data by selecting Save in the standard toolbar.

© SAP AG

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16-4

You have opened a new securities account at the Deutsche Bank. Enter the securities account master data in the system: Securities account: Depository Bank Clearing Account: Account number: House bank for EUR payments: House bank account for EUR payments: House bank for USD payments: House bank account for USD payments:

Acc A## 1000 444556## 75352## 1000 1000 1000 1050

Creating a securities account To create the securities account, select:

Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Securities Æ Master Data Æ Securities Account Æ Edit (TRS_SEC_ACC) Enter the following values:

© SAP AG

Field Name or Data Type

Value

Company Code

FS##

Sec. Acct

ACC A##

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Choose Create. Create without copy by choosing Create (green checkmark) in the dialog box. Enter the following values: Field Name or Data Type

Value

Securities account

Acc A##

Depository bank

1000

Clearing account

444556##

Sec. acct number

75352##

Payment Currency

EUR

House Bank

1000

House bank –– Account

1000

Insert a new row by selecting the appropriate pushbutton. Enter the following values: Field Name or Data Type

Value

Pymnt Crcy

USD

House Bank

1000

House bank –– Account

1050

Go to the Other tab page. Enter the following values: Field Name or Data Type

Value

portfolio

PORTFOLIO1

Choose Save to save the securities account master data. The securities account is created.

© SAP AG

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16-5

You want to purchase Deutsche Bank stocks for your new securities account. You want to create the position indicator manually. Company Code: General valuation class: ID number: Securities account: Portfolio

FS## 0001 - Exchange for valuation: DE0005140## Acc A## Portfolio1

Check whether an entry has been made in account assignment reference and position management procedure.

To create the position indicator, select: Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Securities Æ Master Data Æ Position Indicator Æ Create (TPM55A)

Enter the following data: Field Name or Data Type

Value

Securities

X –– select indicator

Company Code

FS##

Gen. Valuation Class

0001 –– Trading IFRS/USGAAP

ID number

DE0005140##

Sec. Acct

ACC A##

portfolio

PORTFOLIO1

Choose ENTER. Verify that the fields Position Management Procedure and the Account Assignment Reference are filled in the Subledger Position Indicator area of the next screen. Choose Save to save the data.

© SAP AG

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© SAP AG

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Exercises 17 Unit 5:

Transaction Manager: Securities

Topic

Trading and Back Office

After completing these exercises, you will be able to: x

Enter security transactions: Orders –– Contracts

x

Settle security transactions

x

Reverse transactions

You want to increase your stock position using our long-term measures. You place an order with your house bank to purchase 30,000 Deutsche Bank shares. The bank executes the order and charges a broker's fee. After the transaction has been posted, you discover that incorrect data was entered. You have to correct this. You carry out a check using the cash flow. You also want to purchase fixed interest securities. 17-1

You placed an order to purchase 30,000 units of Deutsche Bank stocks on 05.MM.YYYY. (ID number: DE0005140## ). Enter this activity in the system. Note the transaction number ________________ . First, enter the transaction as an order.

17-2

The bank confirms the order at a price of EUR 115, with the value date 2 days after the order was placed. Enter this in the system and assume that the transaction is for securities account ““Acc A##”” with position value date 07.MM. YYYY. A position is posted only once this contract has been entered.

© SAP AG

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17-3

You later find out that there was an error in the date(s) entered for the Deutsche Bank stock purchase. It is important that the position value date for this purchase is 08.MM. YYYY relevant. Correct this. x Use the Securities collective processing function to call up the orders, contracts and settlements for your company code. x Select the relevant order execution and change the transaction.

17-4

Settle the transaction.

17-5

Preparatory data for Exercise 19: Now purchase stocks (1000 units) of class DE0008046##0, which you created in exercise 16-2, at EUR 75 per unit (value date: 10.MM.YYYY) Transaction number:_______________________ Then settle the transaction.

17-6

Now purchase fixed interest securities of the class, which you created in exercise 16-3. Use business partner 1000. Create the transaction with a nominal amount of EUR 1 million at 102%. (Position value date and payment date: 10.MM.YYYY Calculation date: one day earlier –– inclusive) Check the accrued interest calculation. Transaction number:_______________________ Calculate the transaction as described in exercise 17-4.

17-7

Using the cash flow in the HGB or IFRS valuation areas, obtain an overview of the position trend of your securities. To do this, use the Collective Processing function. Also look at the details for the number of units/acquisition price/book price.

© SAP AG

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Solutions 17

17-1

Unit 5:

Transaction Manager: Securities

Topic

Trading and Back Office

You placed an order to purchase 30,000 units of Deutsche Bank stocks on 05.MM.YYYY. (ID number: DE0005140## ). Enter this activity in the system. Note the transaction number ________________ . First, enter the transaction as an order.

To enter the order, choose:

Æ Accounting

o Financial Supply Chain Management o Treasury and Risk Management o Transaction Manager o Securities o Trading o Create Financial Transaction (FTR_CREATE) Enter the following values: Field Name or Data Type

Value

Company Code

FS##

Product Type

01A

Transaction Type

100 –– Stocks-Purchase

Business Partner

1000

ID Number

DE0005140##

Activity –– Order

X - select indicator

Choose ENTER.

© SAP AG

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_

© SAP AG

First, enter the transaction as an order.

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Enter or confirm the following values: Field Name or Data Type

Value

Flow Type

0100 - Purchase (trans.)

Sec. Acct

ACC A##

Order Date

MM/05/JJJJ

Number of Units

30.000

Limit price

116 EUR

Save the order by selecting Save in the standard toolbar. 17-2

The bank confirms the order at a price of EUR 115, with the value date 2 days after the order was placed. Enter this in the system and assume that the transaction is for securities account ““Acc A##”” with position value date 07.MM.YYYY. A position is posted only after this contract has been entered.

To enter this contract, choose:

Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Securities Æ Trading Æ Edit Financial Transaction (FTR_EDIT) Enter the following values: Field Name or Data Type

Value

Company Code

FS##

Transaction

Your transaction number from exercise 17-1

Choose Execute.

© SAP AG

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Enter or confirm the following values: Field Name or Data Type

Value

Flow Type

0100 - Purchase (trans.)

Inventory Securities Account

ACC A##

General Valuation Class

1 Trading IFRS/US-GAAP

Date Details Position Value Date

07.MM.YYYY

Calculation Date

07.MM.YYYY

Payment Date

07.MM.YYYY

Amounts Number of Units

30,000 (taken from the order data)

Price (Un. quote)

115

Save the transaction by choosing Save in the standard toolbar. 17-3

You later find out that there was an error in the date(s) entered for the Deutsche Bank stock purchase. It is important that the position value date for this purchase is 08.MM. YYYY relevant. Correct this. x x

Use the Securities collective processing function to call up the orders, contracts and settlements for your company code. Select the relevant order execution and change the transaction.

To change the transaction:

Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Securities Æ Trading Æ Collective Processing Æ Securities (TS00)

© SAP AG

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Enter or check the following values: Field Name or Data Type

Value

Company Code

FS##

Select one transaction. Select the transaction by positioning the cursor and selecting Change in the application toolbar. The transaction is displayed. Change the following values: Field Name or Data Type

Value

Date Details Position Value Date

08.MM.YYYY

Calculation Date

08.MM.YYYY

Payment Date

08.MM.YYYY

Save the data by selecting Save in the application toolbar. You will be taken back to Collective Processing. You will receive the new data when you refresh the data with the appropriate button in the application toolbar. 17-4

Settle the transaction. To settle the transaction, select:

Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Securities Æ Trading Æ Collective Processing Æ Securities (TS00) Select your company code. Select your transaction. Choose Settle in the application tool bar.

© SAP AG

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Select Save in the standard toolbar to execute the settlement.

© SAP AG

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Alternatively, you can select:

Æ Securities Æ Trading Æ Edit Financial Transaction (FTR_EDIT) Enter the following values: Field Name or Data Type

Value

Company Code

FS##

Transaction

Your transaction number from exercise 17-1

Choose Settle. Save the displayed data by choosing Save in the standard toolbar. The transaction is settled.

17-5

Preparatory data for exercise 19: Now purchase stocks (1000 units) of class DE0008046##0, which you created in exercise 16-2, at EUR 75 per unit (value date, calculation date and payment date: 10.MM.JJJJ). Then settle the transaction. To help you, use the solution for exercise 17-2 (Purchasing Stocks) and exercise 17-4 (Settlement). Transaction number:_______________________

17-6

Now purchase fixed interest securities of the class, which you created in exercise 16-3. Use business partner 1000. Create the transaction with a nominal amount of EUR 1 million at 102%. (Position value date and payment date: 10.MM.YYYY Calculation date: one day earlier –– inclusive) Check the accrued interest calculation.

© SAP AG

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To purchase fixed-interest securities, choose:

Æ Accounting

o Financial Supply Chain Management o Treasury and Risk Management o Transaction Manager o Securities o Trading o Create Financial Transaction (FTR_CREATE) Enter the following values: Field Name or Data Type

Value

Company Code

FS##

Product Type

04I

Transaction Type

100 –– Fixed-interest bondsPurchase

Business Partner

1000

ID Number

XS0001136##

Activity –– Contract

X - select indicator

Choose ENTER. On the Structure tab, enter or confirm the following values: Field Name or Data Type

Value

Flow Type

0100 - Purchase (trans.)

Sec. Acct

ACC A##

General Valuation Class

1 IFRS/US-GAAP: Available for Sale /HGB: UV

Date Details Position Value Date

10.MM.YYYY

Calculation Date

09.MMJJJJ

Inclusive indicator

X - select indicator

Payment Date

10.MM.YYYY

Amounts

© SAP AG

Nominal amnt

1.000.000 EUR

Price (% Quot.)

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Check the calculated accrued interest flow and the net payment amount on the Other flows tab page. Save the securities transaction by choosing Save in the standard toolbar. Transaction number:_______________________ Then settle the transaction as described in exercise 17-4. 17-7

Using the cash flow in the OPERATIONAL or IFRS valuation areas, obtain an overview of the position trend of your securities. To do this, use the Collective Processing function. Also look at the details for the number of units/acquisition price/book price. Select Collective Processing to display the cash flow for the valuation areas (TS00). Restrict the selection to your company code. Your transactions are displayed. Select the relevant transaction. Select Cash flow to view the requested data. In this overview, Position and Valuation Areas buttons are available in the application toolbar. You have the choice between IFRS and OPERATIONAL for the valuation areas. In each case, you can view a list of planned position flows (subledger –– cash flow).

© SAP AG

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Exercises 18 Unit 5:

Transaction Manager: Securities

Topic

Accounting

After completing these exercises, you will be able to: x Post transactions x Enter postings manually x Use the different debit position procedures x Valuate positions for accounting purposes The bank charges a commission fee, which you have to post. One of the postings must be reversed. You valuate your security position at the end of the month.

18-1

You post settled transactions in the accounting area. Post the transaction for all valuation areas.

18-2

The bank charges a commission fee of EUR 1,000 with value date 11.MM.YYYY. You want to enter this charge in the securities module and decide to post it to securities account ““Acc A##”” for the Deutsche Bank stock (ID no.: 5140##). Post this flow manually with value date/position value date 11.MM.YYYY. Display the posting journal for this ID number.

18-3

Your bank notifies you by telefax that the commission amount was incorrect. Due to a typing error, you have been charged EUR 1,000 instead of EUR 100. Correct this mistake: 18-3-1 Reverse the posted charge (entering a reversal reason). 18-3-2 Enter the charge of 100 EUR, value date 11.MM.YYYY. Save the process without posting.

© SAP AG

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18-4 18-4-1 The manual debit position of the charge is executed, so that the charge is posted. 18-4-2 You also wish to post dividends with value date 22.MM.YYYY. Use the automatic debit position function to do this. 18-5

At the end of the month, you want to value your position. Carry out a ““midyear valuation without reset””. For this key date valuation (Date: last day of the current month) a price rate must be maintained in the system. After the update run, check the relevant changes to the planned records in the cash flow for the valuation areas 001 IFRS and 002 OPERATIONAL. 18-5-1 Perform the accounting valuation: To do this, enter the current price of EUR 110 on the Frankfurt Stock Exchange as the valuation price for Deutsche Bank stock. 18-5-2 Check the log in the simulation (valuation test run). 18-5-3 After the update run, the cash flow (of the valuation areas) displays the posted write-down amount. Use transaction TPM13.

18-6

As stock prices increase, you decide to sell part of your stock and realize your gains. You sell 20,000 units of Deutsche Bank stocks on 25.MM.YYYY at a price rate of 120 EUR. 18-6-1 Enter the order in the system. Transaction number:_______________________ 18-6-2 Check and settle the transaction in the back office. 18-6-3 Then post the transaction for all valuation areas. Check the posted profit.

18-7

© SAP AG

Display the transaction. Check the generated price gain in the cash flow of valuation areas 001 IFRS and 002 OPERATIONAL. To do this, use the Collective Processing function.

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Solutions 18

18-1

Unit 5:

Transaction Manager: Securities

Topic

Accounting

You post settled transactions in the accounting area. Post the transaction for all valuation areas. To settle the transaction, choose:

Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Securities Æ Accounting Æ Transaction Æ Post (TBB1)

Ensure that you only select securities and that all valuation areas are posted. Perform a test run and then an update run. The posting log displays an overview of all posted flows.

© SAP AG

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18-2

The bank charges a fee of EUR 1,000 with value date 11.MM.YYYY. You want to enter this charge in the securities module and decide to post it to securities account ““Acc A##”” for the Deutsche Bank stock (DE0005140##). Post this flow manually with value date/position value date 11.MM.YYYY. Display the posting journal for this ID number. To execute the manual posting, choose:

Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Securities Æ Back Office Æ Securities Account Management Æ Payments Æ Manual Posting (FWBS) Enter the following data: Field Name or Data Type

Value

Company Code

FS##

ID Number

DE0005140##

Sec. Acct

ACC A##

Choose ENTER. Field Name or Data Type

Value

Date Details

11.MM.YYYY

Now add a row (select Insert other flow). The dialog box Manual Posting: Process Flow appears. Select SE3015 as the update type (Charge). Enter 1,000 EUR as the settlement amount. Choose Copy. Save the data by selecting Post in the application toolbar. The posting log is displayed. You can find the posting journal in Accounting in the securities information system (TPM20). Select the required values and view the posting log. As usual, you can set the layout as you wish.

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You can view the securities account class cash flow by selecting Securities ĺ Back Office ĺ Securities Account Management ĺ Position Information ĺ Securities Account Cash Flow (TPM40). The charge is now posted. 18-3

Your bank notifies you by telefax that the commission amount was incorrect. Due to a typing error, you have been charged EUR 1,000 instead of EUR 100. Correct this mistake: 18-3-1 Reverse the posted charge (entering a reversal reason). To correct the transaction, choose:

Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Securities Æ Back Office Æ Securities Account Management Æ Payments Æ Reverse Debit Position (FWOEZ) Enter the following data: Field Name or Data Type

Value

Company Code

FS##

Sec. Acct

ACC A##

ID Number

DE0005140##

Click the selected row and select Reverse business transaction. On the next screen, enter the following values in the Posting Control area:

© SAP AG

Field Name or Data Type

Value

Reason for Reversal

Process.error

FI Reversal Date

Date of the original operation is proposed

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Save your data by selecting Reverse in the standard tool bar. The data is saved and posted in Financial Accounting. The reversal log is displayed. (You can verify that the original process is no longer displayed using TPM40.)

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18-3-2 Enter the charge of 100 EUR, value date 11.MM.YYYY. Save the process without posting. Call up the transaction as described in exercise 18-2. However, now enter 100 as the settlement amount. There are two alternatives: 1. In practice, the activity is posted immediately (see exercise 18-2). 2. You can also save your data first and then post the flow with the debit position in a second step. Take alternative 2 by selecting Save Without Posting. (The cash flow (TPM40) still displays the charge as Scheduled and not Fixed.) 18-4 18-4-1 The manual debit position of the charge is executed, so that the charge is posted. To execute the manual posting, choose:

Æ Accouting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Securities Æ Back Office Æ Securities Account Management Æ Payment Æ Manual Debit Position (FWZE) Enter the following data: Field Name or Data Type

Value

Company Code

FS##

ID Number

DE0005140##

Sec. Acct

ACC A##

Choose ENTER. Select the required activity (Charge) and choose Post business transaction. © SAP AG

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The fields are predefined. Simply choose Save to post the activity. You can view interesting information in the posting log.

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18-4-2 You also wish to post dividends with value date 22.MM.YYYY. Use the automatic debit position function to do this. To execute the automatic posting, select:

Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Securities Æ Back Office Æ Securities Account Management Æ Payments Æ Automatic Debit Position (FWSO) Enter the following data: Field Name or Data Type

Value

Company Code

FS##

Up To and Including Due Date

22.MM.YYYY

You can perform a test run and then an update run. 18-5

At the end of the month, you want to value your position. Carry out a ““midyear valuation without reset””. For this key date valuation (Date: last day of the current month) a price rate must be maintained in the system. After the update run, check the relevant changes to the planned records in the cash flow for the valuation areas 001 IFRS and 002 OPERATIONAL. 18-5-1 Perform the accounting valuation: To do this, enter the current price of EUR 110 on the Frankfurt Stock Exchange as the valuation price for Deutsche Bank stock.

To valuate the position, choose:

Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Basic Functions Æ Market Data Management Æ Manual Market Data Entry Æ Securities and Indexes Æ Enter Security Prices (FW17 or S_ALR_87008536) Enter the following data: © SAP AG

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Field Name or Data Type

Value

ID Number

DE0005140##

Exchange

FFM

Choose Change. Enter or confirm the following values: Field Name or Data Type

Value

Rate date

Last day of the current month

Rate type:

01 Market price

Market value:

110

Save the data. Confirm warning messages by choosing Enter. 18-5-2 Check the log in the simulation (valuation test run). To perform the valuation, choose: Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Securities Æ Accounting Æ Valuation Æ Execute Valuation (TPM1) (Kay Date Valuation) Enter the following data: Field Name or Data Type

Value

Product Groups - Securities

X - select indicator

Company Code

FS##

ID Number

DE0005140##

Key date

Last day of the current month

Valuation Category

Mid-Year Valuation Without Reset

Perform a test run and then an update run. Possible processes are displayed. If the Status column is empty, a valuation has not yet been performed. (After a valuation for the key

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date has been performed, a green symbol is displayed in the status field and a further valuation is no longer possible.) To perform the valuation, select Execute valuation in the application toolbar.

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18-5-3 After the update run, the cash flow (of the valuation areas) displays the posted write-down amount. Use transaction TPM13. To display the cash flow for the valuation areas: Transaction call TPM13 Or

Æ Securities Æ Information System Æ Position Trend Æ Position Flow List 18-6

As stock prices increase, you decide to sell part of your stock and realize your gains. You sell 20,000 units of Deutsche Bank stocks on 25.MM.YYYY at a rate of 120 EUR. 18-6-1 Enter the order in the system. To enter this contract, choose: Æ Accounting o Financial Supply Chain Management o Treasury and Risk Management o Transaction Manager o Securities o Trading o Create Financial Transaction (FTR_CREATE) Enter the following data: Field Name or Data Type

Value

Company Code

FS##

Product Type

01A

Transaction Type

200

Business Partner

1000

ID Number

DE0005140##

Activity –– Contract

X - select indicator

Choose ENTER.

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Enter or confirm the following values: Enter the following values on the Structure tab page. Field Name or Data Type

Value

Flow Type

Sale (transaction)

Sec. Acct

ACC A##

General Valuation Class

Trading IFRS/US-GAAP

Position Value Date

25.MM.YYYY

Calculation Date

25.MM.YYYY

Payment Date

25.MM.YYYY

Amounts Number of Units

20.000

Rate

120

Check the quantity position before saving. On the Structure tab, choose Quantity Position. Check that you have 30,000 units ““Without transaction““ and 10,000 units with transaction in the position. Save the activity as usual. Transaction number:_______________________ 18-6-2 Check and settle the transaction in the back office. Proceed as described in detail in exercise 17-4. 18-6-3 Then post the transaction for all valuation areas. Check the posted profit. Proceed as described in detail in exercise 18-1. 18-7

Display the transaction. Check the generated price gain in the cash flow of valuation areas 001 IFRS and 002 OPERATIONAL. Choose the Cash Flow button of the Collective Processing function. Proceed as described in detail in exercise 17-7.

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Exercises 19 Unit 5

Transaction Manager: Securities

Topic

Position Management

After completing these exercises, you will be able to: x Enter a capital increase as a corporate action

A corporation in which you hold stocks performs a capital increase. You post the subscription rights to which you are entitled, and decide to exercise all of them. You later bring the new stocks into line with the old stocks.

19-1

You purchased 1000 units of Dresdner Bank stocks, with ID number DE0008046##0, at EUR 75 in securities account Deuba Acc2 (see exercise 17-5). Use the securities account cash flow to check this activity.

19-2

Due to a capital increase by the Dresdner Bank, you are entitled to subscription rights to purchase new stocks. Create the following class master data: 19-2-1 New stock: ID number: DE0008046##2 Use the Copy function to copy the old stock (ID number DE0008046##0). (Also copy the basic data, conditions, and exchanges.) You must make changes to the stock form (new stock). 19-2-2 Create the subscription right as follows (use product type 03A): ID number: Issuer Issue currency: ID number of underlying: Subscription price: Subscription ratio: Subscription period:

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DE0008046##6 BKDRBANKDE EUR DE0008046##2 65 EUR 20 : 1 14.MM+1.YYYY ––

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Exchange:

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28.MM+1.YYYY FFM

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19-3 19-3-1 On the first day the subscription rights are traded (14.MM+1.YYYY), you post the subscription rights to which you are entitled with value date and position value date 14.MM+1.YYYY. Create the relevant corporate action and activate the process. When you enter the corporate action, make sure that you take into account the price of the reference stock (EUR 80) and the dividend disadvantage (EUR 0.75). The subscription ratio is 1:1. Note the corporate action ID number (CA number) ___________ You must also maintain the position indicator for subscription right postings. You can do this in two ways 1. You can create the position indicator manually (as described in exercise 16-5) or 2. you have the system create it automatically with the corporate action posting. 19-3-2 The corporate action is posted in your company code. The posting log displays the posted subscription rights and the subscription right markdown of EUR 636.16 for the old stocks. The theoretical value of the subscription right is determines as follows: 75 * 0.678570 / 80 =: EUR 0.63616 For 1000 stocks with 1000 subscription rights you post subscription rights worth EUR 636.16 and subtract the relevant markdown for the old stocks. 19-3-3 Check the procedures in the IFRS and OPERATIONAL cash flows for both the old stock and the subscription right. Position: - Old stock cash flow: DE0008046##0: 1000 units at (75 –– 0.63616) = EUR 74.36384. - Subscription right cash flow: DE0008046##6: 1000 units at EUR 0.63616.

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19-4

On 18.MM+1.YYYY, you decide to exercise all the subscription rights. The new stocks are posted when you exercise the subscription rights. The security right, which was generated by subscription right link to new stock is also displayed. This was carried out when the class data was created in exercise 19-2. Remember to create a position indicator before you post the new stock. You can do this in two ways 1. You can create the position indicator manually (as described in exercise 16-5) or 2. you have the system create it automatically with the exercising rights posting.

When you exercise the subscription rights you obtain 50 new stocks at a total value of EUR 3,886.16. (50 stocks at a subscription price of EUR 65 (= EUR 3,250) plus the subscription right value of EUR 636.16).

19-5

Assume that the new stock equals the old stock on 01.MM+2.YYYY. 19-5-1 Transfer this new stock to the securities account of the old stock as a corporate action. Note the number of the corporate action _______. 19-5-2 Post the corporate action in your company code. When you have transferred the new stock, check the cash flow of both the new and old stock.

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Solutions 19

19-1

Unit 5:

Transaction Manager: Securities

Topic

Position Management

You purchased 1000 units of Dresdner Bank stocks, with ID number DE0008046##0, at EUR 75 in securities account Deuba Acc2 (see exercise 17-5). Use the securities account cash flow to check this activity. To display the ““Securities Account Cash Flow””, choose:

Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Securities Æ Back Office Æ Securities Account Management Æ Position Information Æ Securities Account Cash Flow (TPM40) Enter the following data: Field Name or Data Type

Value

Company Code

FS##

ID Number

DE0008046##0

Sec. Acct

ACC A##

You can see the purchase of 1,000 shares with a total value of EUR 75,000 in the position.

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19-2

Due to a capital increase by the Dresdner Bank, you are entitled to subscription rights to purchase new stocks. Create the following class master data: 19-2-1 New stock: ID number: DE0008046##2 Use the Copy function to copy the old stock (ID number DE0008046##0). (Also copy the basic data, conditions, and exchanges.) You must make changes to the stock form (new stock).

To create new stock as a class, select: Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Securities Æ Master Data Æ Class (FWZZ) Enter the ID number of the new class. Field Name or Data Type

Value

ID number (new class!)

DE0008046##2

Choose CREATE on the displayed screen. A dialog box appears. Set the With reference indicator. The dialog box expands to display the Copy Reference area. Enter the ID number of the class intended as the template (DE0008046##0). Enter the ID number of the new class.

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Field Name or Data Type

Value

Short name

Dresdner NS

Long name

Dresdner New Stock

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Field Name or Data Type

Value

Copy reference

DE0008046##0

(Also copy the basic data, conditions and exchanges.) Set the relevant indicator in the lower left area of the screen. Field Name or Data Type

Value

Basic Data

X - select indicator

Conditions

X - select indicator

Exchanges

X - select indicator

Choose Copy in the lower area of the dialog box. Before saving, change the stock form to New stock (Basic data tab page). Field Name or Data Type

Value

Stock form

New stock

Save your data by selecting Save in the standard toolbar. 19-2-2 Create the subscription right as follows (use product type 03A): ID number: Issuer Issue currency: ID number of underlying: Subscription price: Subscription ratio: Subscription period: Exchange:

DE0008046##6 BKDRBANKDE EUR DE0008046##2 65 EUR 20 : 1 14.MM+1.YYYY –– 28.MM+1.YYYY FFM

To create the subscription right, select: Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Securities Æ Master Data Æ Class (FWZZ)

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Enter the subscription right ID number: Field Name or Data Type

Value

ID Number

DE0008046##6

Choose Create on the displayed screen. A dialog box appears.

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Select product type 03A. Field Name or Data Type

Value

Product Type

03A

Short name

SubscRight DrBa

Long name

Subscription Right Dresdner Bank

Without reference

X - select indicator

Choose Create in the lower area of the dialog box. Before saving, enter the following values: Basic data tab page: Field Name or Data Type

Value

Issuer

BKDRBANKDE

Issue currency

EUR

Add a new line for the subscription periods using Insert Row. Field Name or Data Type

Value

Subscription Right ID

entered automatically

Underlying ID number (ID no.underlying)

DE0008046##2

Subscription ratio numerator (SubRatNumer)

20

Subscription ratio denominator (SubRatDenom)

1

Subscription price

65

Currency

EUR

Subscript. period from

14.MM+1.YYYY

Subscript. period to

28.MM+1.YYYY

Description

Choose your own

Go to the Exchanges tab page.

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Field Name or Data Type

Value

Exchange

FFM

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Save your data by selecting Save in the standard toolbar.

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19-3 19-3-1 On the first day the subscription rights are traded (14.MM+1.YYYY), you post the subscription rights to which you are entitled with value date and position value date 14.MM+1.YYYY. Create the relevant corporate action and activate the process. When you enter the corporate action, make sure that you take into account the price of the reference stock (EUR 80) and the dividend disadvantage (EUR 0.75). The subscription right ratio is 1:1. Write down the corporate action number (CA number) ___________

You must also maintain the position indicator for subscription right postings. You can do this in two ways 1. You can create the position indicator manually (as described in exercise 16-5) or 2. You have the system create it automatically with the corporate action posting.

To create the corporate action, select: Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Securities Æ Back Office Æ Corporate Actions (FWK0)

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Enter the following data: Field Name or Data Type

Value

CA number

Leave blank

CA cat.

Post subscription rights

CA type

70 –– entered automatically

Choose Create. Field Name or Data Type

Value

Key date

14.MM+1.YYYY

Description

Choose your own

ID subscription right

DE0008046##6

Old stock ID

DE0008046##0

Subscription right ratio

1:1

Divid. adv/disadv

EUR 0,75

Market price old stock

80

The subscription right value is entered automatically when you choose ENTER. Theoretical value of the subscription right: 80 - (65 + 0.75) / 20+1 = EUR 0.678571

Activate the corporate action by selecting Activate in the application toolbar. This also saves the corporate action. Note the CA number ________________

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19-3-2 The corporate action is posted in your company code. The posting log displays the posted subscription rights and the subscription right markdown of EUR 636.16 for the old stocks. The theoretical value of the subscription right is determines as follows: 75 * 0.678570 / 80 =: EUR 0.63616 For 1000 stocks with 1000 subscription rights you post subscription rights worth EUR 636.16 and subtract the relevant markdown for the old stocks. To post a corporate action, choose Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Securities Æ Accounting Æ Corporate Action Æ Post (FWKB) Enter the following values: Field Name or Data Type

Value

Corporate action number

##

Company Code

FS##

Perform a test run and then an update run. 19-3-3 Check the procedures in the IFRS and OPERATIONAL cash flows for both the old stock and the subscription right. Position: - Old stock cash flow: DE0008046##0: 1000 units at (75 –– 0.63616) = EUR 74.36384. - Subscription right cash flow: DE0008046##6: 1000 units at EUR 0.63616. To display the cash flow, choose: Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management

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Æ Transaction Manager Æ Information System Æ Reports Æ Position Trend Æ Position Flow List (TPM13)

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Enter the following values: Field Name or Data Type

Value

Product Groups - Securities

X - select indicator

Company Code

FS##

Valuation Area

First, 001 (IFRS) then 002 (OPERATIONAL)

ID Number

DE0008046##0 and DE0008046##6 (select Multiple Selection on the right, next to the entry field.)

Choose Execute. You can modify the layout of the displayed list as required in the usual way. You can see that, following the corporate action, the acquisition value of the old stock has been reduced by the theoretical value of the subscription right. The subscription right is also displayed. 19-4

On 18.MM+1.YYYY, you decide to exercise all the subscription rights. The new stocks are posted when you exercise the subscription rights. The system also displays the security right, which was generated by subscription right link to new stock. This was carried out when the class data was created in exercise 19-2. Remember to create a position indicator before you post the new stock. You can do this in two ways 1. You can create the position indicator manually (as described in exercise 16-5) or 2. You have the system create it automatically with the exercising rights posting.

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When you exercise the subscription rights you obtain 50 new stocks at a total value of EUR 3,886.16. (50 stocks at a subscription price of EUR 65 (= EUR 3,250) plus the subscription right value of EUR 636.16).

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To exercise subscription rights, choose: Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Securities Æ Trading Æ Security Right Æ Exercise (FWER) Use the navigation tree on the left side of the screen to display existing rights. Choose ID number DE0008046##6 under Subscription right. The data for the subscription right appears on the left side of the screen. Enter the following data: Field Name or Data Type

Value

Key date

18.MM+1.YYYY

Select ENTER and the subscription right position is displayed in the lower part of the screen, since the entered key date falls within the subscription period of the respective right. Perform a test run by selecting Test Run in the application toolbar. However, you must first select the position. To execute the update run, choose Save. The system produces a log for the procedure. EUR 3,250 subscription price; Total posting amounts: Subscription price EUR 3,250.00 Subsc. right value EUR 636,16 Total EUR 3.886,16

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Cash flow for subscription rights (DE0008046##6): No position as at 18.MM+1.YYYY Cash flow for new stock (8046##2): 50 units at EUR 77.7232 (= EUR 3,886.16 for 50 units).

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19-5

Assume that the new stock equals the old stock on 01.MM+2.YYYY. 19-5-1 Transfer this new stock to the securities account of the old stock as a corporate action. To transfer the new stock, choose: Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Securities Æ Back Office Æ Corporate Actions (FWK0) Enter the following data: Field Name or Data Type

Value

CA number

Leave blank

CA cat.

Transfer new stock to old stock

CA type

60 –– entered automatically

Choose Create. Enter the following data: Field Name or Data Type

Value

Key date

01.MM+2.YYYY

Description

Choose your own

New stock ID

DE0008046##2

Old stock ID

DE0008046##0

Activate the corporate action by selecting Activate in the application toolbar. This also saves the corporate action. Note the ID number ________________

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19-5-2 Post the corporate action in your company code. When you have transferred the new stock, check the cash flow of both the new and old stock. To post a corporate action, choose Æ Accounting Æ Financial Supply Chain Management Æ Treasury and Risk Management Æ Transaction Manager Æ Securities Æ Accounting Æ Corporate Action Æ Post (FWKB) Enter the following values: Field Name or Data Type

Value

Corporate action number

##

Company Code

FS##

Perform a test run and then an update run. Posting log: Clear new stock EUR 3,886.16 Post old stock EUR 3,886.16

Cash flow new stock (DE0008046##2): No position as at 01.MM.YYYY Cash flow old stock (DE0008046##0): On 01.MM.YYYY: Position 1,050 units at 74.523810 1000 old stocks + 50 new stocks = 1,050 units. 1000 old stocks book value 75,000.00 ./. SR markdown 636.16 + 50 new stocks 3,886.16 ___________________________________ 1,050 stocks 1 stock

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78,250.00 74,523810

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Market Risk Analyzer: Overview

Unit 1 Course Overview Unit 2 Treasury and Risk Management: Overview Unit 3 Transaction Manager: Money Market Unit 4 Transaction Manager: Forex, Derivatives Unit 5 Transaction Manager: Securities Management Unit 6 Market Risk Analyzer Unit 7 Credit Risk Analyzer

¤ SAP AG 2006

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Unit 6 Market Risk Analyzer

1

Course overview

2

Price parameters

3 4 5

Analysis structure and basic settings

NPV/sensitivity analysis

Value-at-risk evaluations

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Unit Objectives

This unit provides knowledge on the following topics: z

Price parameters

z

Basic configuration of market risk analysis

z

Use of functions and tools of component risk analysis

z

NPV Analysis

z

Value-at-risk evaluations

¤ SAP AG 2003

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What is Market Risk? Risks Risks Area Areaof ofOperations Operations

Value/Finance Value/FinanceArea Area

Personnel... Personnel...

Revenue Revenuerisks risks

Liquidity Liquidityrisks risks

Technical... Technical... Refinancing Refinancing Market Marketrisks risks

Credit Creditrisks risks

Interest Interestrate rate

Default Defaultrisks risks

Currencies Currencies

Country Countryrisks risks

Stock Stockprices... prices...

Settlement... Settlement...

Date... Date...

¤ SAP AG 2003

„ „

Risk is the probability of loss from a financial transaction. The risk of a financial transaction is called a market risk when it results solely from changes in market parameters (interest rates, stock prices, currency exchange rates, volatilities, and so on).

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Risk Controlling Process

I. Identifying risks ¾ Risk factors IV. Controlling in the narrower sense of inspecting management

Risk Controlling II. Quantifying risks ¾ Key risk figures III. Risk Management ¾ Hedging ¾ Diversification ¾ Cumulation ¾ Limiting ¤ SAP AG 2003

In identifying risks, the next topic is which risks exist and which risks should be included in risk management. In identifying risks it helps to understand that risks have a cause and an effect (such as changes in value and revenue) on a certain object. „ After you identify the risks, the next step is to decide which of the identified risks to analyze and which key risk figures to calculate. „ Risk management focuses on limiting taking undue risks and distributing the sum of risks taken optimally among the individual sources of risk. „

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Unit 6 Market Risk Analyzer

1

Course overview

2

Price parameters

3 4 5

Analysis structure and basic settings

NPV/sensitivity analysis

Value-at-risk evaluations

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Price Parameters: Business Scenario

z To evaluate transactions in risk analysis, you must fill out market data tables in the SAP system. z You can do this in the following ways: „

Manually

„

Excel interface

„

File interface

„

Datafeed z

FTP access (Internet)

z

Datafeed server

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Reference interest rates z Yield type Reference interest rates (EUR, USD, GBP, etc)

z Intraday indicator z Interest calculation method

(360/360, actual/360, ...) z Quotation type (bid, ask, middle)

GBP USD

z Currency

EUR 3 months

29.11.04 30.11.04 01.12.04 02.12.04

6 months

1 year

z (Interest) term (days, months, years) z Calendar ID z Exchange z Type of curve for forward

calculation z Fixing period z Working day rule

¤ SAP AG 2006

To store market interest rates in the system, you first have to create reference interest rates. You can define reference interest rates in the system that correspond to the parameters above. You can define as many reference interest rates in as many currencies as you like. „ The reference interest rates are defined by currency, interest calculation method (such as 360E/360, Act/360), quotation type (such as bid or ask), term, and yield type. „ The definition of the forward calculation of the curve type is especially significant for risk analysis. When you assign an interest rate to a yield curve, you define what interest rate structure is used to calculate forward interest rates in case that interest rate is used as the reference interest rate in products such as floating rate bonds, swaps, or caps. Then you can decouple the calculation of the forward interest rates from the curve that is used as a basis to calculate the zero bond discounting factors. „ The reference interest rates compose the supporting points of the yield curves of various currencies. The reference interest rates also are assigned to yield curve types. „ „

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Yield Types

Yields of coupon bonds vs. Zero bond yields 7 6 5 Interest (%)

Yields of Coupon Bonds Zero Bond Yields

4 3 1

2

3

4

5

6

7

8

9

10

Years

¤ SAP AG 2006

You can define par yield curves from securities with all-year coupon payment (securities having this coupon yield are quoted at par). „ Zero bond yields are derived with finance mathematics from the par yield curves (bootstrapping). „ Zero bond discount factors are calculated from the zero bond yield curves and are used to discount the payment flows. „

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Yield Curve Maintenance

Interest Rate

interpolated values

t Support points (reference interest rates) Reference interest rates are transferred Remaining values are interpolated by the system ¤ SAP AG 2003

„

„ „

„

„

You need the relevant yield curves to determine the net present values. You can adjust the reference interest values to the support points daily. The SAP system uses the support points to calculated all the necessary values according to the type of interpolation for the yield curve by using linear or cubic spline interpolation. Linear interpolation uses two known values to determine a value on a line between the two known values. The annual support values are interpolated for curves of the par rate yield type up to the last reference interest rate (support point) defined in the yield curve for a maximum of 30 years. If the term of a calculated interest rate is outside the support points on a yield curve, the interest rate present at the upper or lower end is used instead. Yield curves that are similar on a business level can be grouped into yield curve types. Then you can set the interest rate calculation method for each currency. You can define the valuation rule for transactions regardless of currency, since the system uses the yield curve needed when specifying the yield curve type in relation to the currency of a single transaction. A yield curve type can indicate a market segment (swap market, government bond market) or the determination of the opportunity interest (in the sense of an internal market of the central fund manager).

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Yield Curve Type

Yield Curve Type GBP USD EUR %

Defining Yield Curve Types valid for the yield curve type

z

Yield type

z

Quotation type

z

Intraday indicator

z

Read procedure

z

Interpolation procedure

z

Basis of interpolation

z

Currencies

z

Interest calculation method by currency

z

Reference interest rates by currency

Years

identified yield curve

¤ SAP AG 2006

„

„

„

„

„

Yield curve types are described by attribute yield type, read and interpolation procedure, and many currencies. For each yield curve, the yield curve types have a grid point structure upon which the yield curves are formed. A yield curve is constructed from the reference interest rates or grid points that have the following characteristics in common: y Reference interest rates are assigned to the same yield curve type. y Reference interest rates are defined for the same currency. On the basis of this information, the expanded yield curve or interest table is constructed and contains the following values: y The interest rates of the grid points y The interpolated interest rates of the annual support values (for par rate yield type only) y Zero coupon rates and zero coupon discounting factors of the grid points and the annual support values for par rate yield type. The interest calculation methods of the yield curves and the reference interest rates may be different. When the set interest rates in the expanded interest table are saved, the conversion to the interest calculation methods of the yield curves occurs. For enabled continuous compounding zero interpolation, zero rates with continuous interest calculation and the Act/365 interest calculation method are calculated from the zero bond discounting factors regardless of yield type.

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Searching for Interest Rates Through Read Procedures Example: "Read back" read procedure

Today's yield curve (14.9.)

1 Month

1 year

2 years

3 years

4,3%

5%

5,7%

7%

maintained reference interest rates 14.9.

4,3%

5,7%

13.9. 12.9.

4,2%

5%

11.9.

4,2%

5%

10.9.

5,6%

7%

5,5%

¤ SAP AG 2006

If not all the reference interest rates are adjusted daily, you can define in the SAP system which previous interest rates to use as a reference. You can use the following alternative procedures: y Read back: The last maintained interest rate is used for each grid point. y Read directly: The present values for the condition date are used. Missing grid points are interpolated. y Read back directly: All grid points are read to a date. The system reads far enough into the past until all grid points have interest rates for a condition date. „ Example y 14.09 Read directly returns interest rates of 4.3% (