Foreign Exchange accounting in TRM

[Former Member]

Dear Experts,

To give you brief intro, i am a finance person and user of SAP Treasury module. my knowledge of the module is of user level and not of functional or technical level.

i need your help on my below query.

for foreign exchange trades (60A), what should be the right accounting practice thru TRM (1) at time of of entering into deal (2) at time of maturity of transaction and also at time of (3) pre mature or part settlement of the transactions.

currently, i do not post any entry at time of creating 60A/102 deal.

at time of maturity, i does cash settlement in deal, put the cancellation rate, date of cancellation in date box to generate gain / loss and post the same (only cash settlement entry) thru TBB1

in case of part or early utilization or forward contract, i does the pre mature settlement from ftr_edit and copy paste 102 deal details in 105 and 103 deals including contract date and value date except for amount. thereafter, i settle both deals and cash settle 105 deal with cancellation rate and transaction date in date box to generate gain / loss. this gain / loss is posted thru TBB1. in this case, when i have taken early delivery, i have to add or subtract swap points in final rate to arrive at correct rate. also, i have to to cash settle 102 and all 103 deals when there's final amount settlement whether on due date or before it.

in my case, buy sale position of two currencies are shown in cashflow tab as "not rel. for posting" and is not posting even on maturity.

i know i have given bit lengthy details but i really wants to understand

1. is above practice of recording fx transaction is correct?

2. is there any better way to capture early deliveries?

3. in case of early delivery, is it right & necessary to replicate 102 deal details in 105 and 103?

4. what is role of TPM18 which i am not using at all in above scheme of fx set up?

your valuable reply will be of great help to me.

Thanking you all in advance

Kapil     

[former_member198450 · Accepted solution]

Hello Kapil,

Your questions has covered most of FX process.

I'll try to answer few of your question.

Answer 1) The process is correct, Its based on what your company required consultant has customized the system in that fashion, As you said there is not posting even during maturity of deals, that because in customization setting is missing for posting. Incase its required please consult you consultant to make the changes in system for Flow type-(here relevant for posting is unchecked).

Answer 2 & 3, I'm not sure why consultant has suggested to use such a lengthy process to settle early deliver deal, There might be some reason for the same. Please check,

But the same process can also be addressed, throught FTR_edit  and settle the single deal through cash settlement.

Also note, 103 is only used for netting which means you are trying to settle couple of deal together and that can be excluded if you have only single deal.

Answer 4) TPM18 is used to do the valuation after the deal has been closed.Realized gains and losses  are determined according to single valuation of transactions principle. This is calculated by taking the difference between the forward rate based on the conclusion of the contract and the posted rate on value date.

Let me know in case you need more information.

Regards,

Jaiin

[Former Member · Accepted solution]

Dear Jaiin,

really grateful to you for sparing time to answer my confusions in details.

for question 2 & 3, i wish to highlight that we create 103 & 105 deal only in case there's part settlement e.g. if we have usdinr fwd of usd 1mn maturing on 31.08.2014 with final rate as 62 and if we need to take early delivery of usd 0.4 mn on 18.08.2014 we create 103 & 105 deals of 0.40 mn and capture all other details (spot rate, premium, liquidity, value date i.e. 31.08.2014 and contract date) from 102 deal. thereafter we cash settle 105 deal and we will put cash settlement rate as 62.50 (sum total of original final rate as 62 and swap points received let's say 0.50 paise).

i beg your help to have your opinion as to is there any other way to handle these transactions in more efficient way?

thanknig you in advance

rgds/kapil

[former_member198450 · Accepted solution]

Dear Kapil,

I looked into your issue, Its seems the process you are following is standard and SAP best Practice.

I'm not pretty sure whether you are following below process or not. Incase, No then please have a look below steps and let me know whether its helps.

You have a deal created for 31.08.04, need to settle early(Early Delivery), Please use FTR_EDIT  and enter company code and deal number(deal created for  31.08.2014) then select Premature settlement, it will automatically take the system for both transaction(103 & 105)

Rest process hold the same.

let me know in case you have any further query.

Regards,

jain

[Former Member · Accepted solution]

Dear Jain,

we follow above process to create 105 & 103 deal. my specific query is

what date should be put in value date field of 105 & 103 deal, original value date (i.e. 31.08.2014 in above example) as has been put in 102 deal or the date of actual delivery (i.e. 18.08.2014 in above example).

Secondly what date should be put in contract date field of 105 & 103 deal, original contract date (i.e contract date put in 102 deal) or date when this early delivery swap points has actually been covered with counterparty (i.e. 18.08.2014 in above example)

thirdly, whether exchange rate break up of 102 (i.e. spot + premium + liquidity) should be replicated in 105 and 103 deal or not?

what is the SAP best practice for above three?

thanks / kapil