valuation of foreign exchange forward with NPV split for interest vs FX impact?

[Former Member]

Hello,

I have the following business requirement regarding the accounting treatment of the valuation of a foreign exchange forward deal :

1. during the lifetime of the deal

step1. valuation

          the deal should valued at its NPV using the swap points curve (table AT15) => that gives the "VALUE"

     BUT

step 2. the posting of the deal's value should be SPLIT into TWO components

               a) component 1 = linearly amortized swap points since deal date +2   until valuation date     => to be classified to interest result

               b) component 2 =  VALUE - component 1                                                                                => to be classified to unrealized fx result

Comment.

So, in fact it is some hybrid combination of the two SAP standard valuation methods

               a) spot/spot + swap accrual + swap valuation (but NO NPV calculation) 

               b) NPV calculation (without any split in components)

2. at maturity

     realized fx result :     calculation based on deal spot rate versus spot rate at maturity

     interest result :          calculation based on deal spot rate vs deal forward rate

Don't see how this "mixted behavior" can be achieved by customizing the valuation process.

Please help.

Best regards,

Carl

[Former Member]

Hi,

In your first step of PMP, have rate valuation for forward exchange transactions.  In the forward rate valuation type, specify the forward category as NPV to be picked from risk module and in the MRA valuation settings specify that the NPV is to be calculated based on forward points.  This would enable to calculate the NPV and perform valuation against the NPV.  You will have to do NPV calculation in TPM60 prior to running TPM1.

As a second step, you can have swap accrual which will result in two postings - valuation based on NPV and then swap accrual.

Regards,

Ravi

[Former Member]

Hi Carl,

In order to use the 2step valuation during the lifetime of forex contracts, you need to combine 2 valuation steps in your Position Management Procedure:

1. step 6 Rate valuation for forward exchange transactions: spot-spot

2. step 4 Security valuation

Additonally, if the NPV should be calculated based on swap points from AT15, you need to apply BAdI JBA_SFGDT that is able to adjust TPM60 or/and reports in MRA if needed. See SAP note 0000940562 for details (and also 1941874 for extrapolation issues).

As far as i know, at maturity you can only have 1flow of gain/loss by using standard SAP Solution.

Best regards,

Piotr