Describing Money Market Mutual Fund Management (2UN)

The scope item helps you to better manage your Money Market Mutual Fund instruments.

The Money Market Mutual Funds (MMMF) are traditionally traded at a stable 1.00 Currency Unit. An SEC rule in the U.S. for investment companies requires the MMMFs to declare their Net Asset Value (NAV) to be floating on a daily basis. This scope item incorporates the processes to manage both traditional and floating NAV MMMFs.

The scope item covers the processes to create a securities class, and to purchase, bookkeep, and receive dividends of and sale of a money market mutual fund.

The scope items helps to review the status for Money Market Mutual Fund instruments easily. It supports the user in the management of Money Market Mutual Fund, including creation of security class, security accounts and the transactions, payments, or to recognize and capitalize dividend distribution.

You will be able to make better operational and strategic decisions using the comprehensive reporting and analysis tools and thereby improve internal operational compliance.

Use the app, Manage Securities Accounts, to create a new Security Account with the broker.

The Security Class, on the other hand, supports both Floating and Stable NAV scenarios.

Two types of Security Class are supported in current version. For these two types, the condition items will be different, which are as follows:

• 02A Investment Certificate
• 02B Investment Certificate with Accrued Dividend

Use the Create Securities Transaction tile to create a new Money Market transaction.

Set the General Valuation Class for your transaction according to the following principles:

• If it is a stable-NAV MMF, choose a GVC only with FX Valuation.
• If it is floating-NAV MMF, choose a GVC with FVTPL or FVOCI, because floating-NAV MMF needs to mark to latest floating NAV (security price), so it is evaluated at fair value thru P/L or OCI from accounting perspective.

Customers can use the Post Flows tile to generate Payment Requests. It is also possible to schedule background job according to your required frequency for this step.

The Treasury back office uses the "Pay Only" functionality to create the payment request for outflows, it will not create a posting in financial accounting. After executing, the Payment Log screen displays, which shows that the payment request has been generated.

Following this tasks, use the app, Automatic Payment Transactions for Payment Requests, to process the item. The payments are not based on open items (vendor/customer items) but on payment requests generated in the previous step. A payment document will be created after finishing this step.

Finally, the posting to the General Ledger is performed with the Process Business Transactions app. This step can also be scheduled as a background job according to your needs.

With the posting functionalities, the posting related cash flows are transferred to the Financial Accounting interface that generates the relevant postings in financial accounting. There are two apps available for posting flows:

Post Flows: you use this app to generate the posting for incoming payment.

Process Business Transactions: You use this app to generate the posting for outgoing payment which has been processed in previous step Generate Payment Request with the Pay Only option.

It is common for Money Market Funds to declare their earned profit at a frequency that is different than the actual distribution of them. For example, a Money Market Fund can declare their profit on a daily basis at their website, but make such distribution at a monthly basis, usually at the last business day of a month.

Based on the product types (with and without Accrued Dividend), the Factor Type should be set.

Use the two tiles Enter Factor Values to set these values and Update planned records for Securities to update the items.

With the tile Run Accrual/Deferral, customers can accrue profit distribution based on the dividend factors. This step is only applicable for Product type 02B: Investment Certificate with Accrued Dividend.

This step provides instructions on how to capitalize the dividend to increase the units held. The process is different for these two types of product types (without and with Accrued Dividend).

To capitalize the Dividend Distribution for an Investment Certificate, use the Execute Debit Position app.

Check the posting log to see all of the transactions for the capitalized dividend distribution.

Use the Automatic Debit Position and Posting app and the Execute Debit Position tile to capitalize the Dividend Distribution for Investment Certificate with Accrued Dividend.

The posting log shows you the Capitalized Dividend Positions and the Accruals.

With this feature, you can transfer your securities positions at their book values from one securities account to another using the Execute Securities Account Transfer app. The securities account transfer can affect the general ledger as well as the subledger since, by changing the securities account for a position (= change in the subledger accounting), you can change both the valuation class and the account assignment reference if the target securities account has a different account assignment reference in the position indicator to that of the source securities account (= changes in the general ledger accounts).

You can reverse the securities account transfer using the Reverse Securities Account Transfer app.

The securities account transfer takes the transfer amount at book value from the source securities account and posts it to the target securities account. The system generates the associated flows depending on the position management procedure.

You can display the quantities of the security ID number in the source and target securities account before the securities account transfer. You can display the source and target securities account cash flows including the securities account transfer.

Note

There can not be any fixed, condition-based transactions (such as repayment) after the key date of the securities account transfer for the positions involved.

A certain class of Money Market Funds in the US market is required to disclose its floating Net Asset Value (NAV) at four decimal places.

By entering the latest floating NAV of a MMF into the SAP system as securities price, the system can recognize its latest position value and perform the relevant journal posting when running key date valuation. The Stable NAV MMFs may not require this step to enter the latest securities price.

Running a key date valuation with the Run Valuation app allows the customer to value the positions of securities based on Floating Net Asset Value, as well as to reflect latest foreign currency exchange rate for the investments other than the company reporting currency.

Make use of the Display Securities Account Class Positions tile to review your funds position. Create the fund redemption transaction with the Create Securities Transaction app.

The Post Flows tile gives you the possibility to deal with the payment from the depository bank.

Account assignment references are assigned to each treasury position.

You use the account assignment reference to determine the G/L account in which the position is managed.

You make the assignments of the G/L accounts dependent on the account assignment reference for the relevant account symbols (position and interest revenue) for posting the positions, dividend payments, interest payments, accruals and deferrals, incoming payments, and repayments in the general ledger.

For example, you can define different account determination settings for an update type, depending on the valuation area. You could, for example, assign posting specifications to an update type in valuation area 002 that differ from the posting specifications for the same update type in valuation area 003. Alternatively, you could use the same posting specifications, but assign different G/L accounts to a account symbol for each valuation area.

In order to derive the correct account assignment reference, the following requirements are set in the system:

• You have defined the chart of accounts and all the required accounts in Financial Accounting.
• You have defined all account assignment references in the step Define Account Assignment References.
• In the Define Account Symbols configuration step, you have defined abstract account symbols.
• You have defined your update types.
• The system posts flows in the parallel valuation areas only if an update type is set as relevant for posting in the Indicate Update Types as Relevant to Posting configuration step, and if posting specifications have been defined, for the corresponding update types in this configuration step.

The determination process of account assignment references starts when an over-the-counter (OTC) transaction or security purchase is created.​

During the determination process of account assignment references, the system runs through the following sequence:

1. The system searches for a suitable substitution rule. If it finds a suitable substitution rule, it uses it to determine the account assignment reference.
2. If the system can not find a suitable substitution rule, it searches for a suitable determination rule. If it finds a suitable determination rule, it uses it to determine the account assignment reference.
3. If the system can not find a suitable determination rule either, it derives the account assignment reference using predefined rules in the content.

The single items and dependent Fiori apps will be analyzed in more detail below.

The Account Assignment Reference - OTC Transactions (Substitution Rules) app helps you to display, change, and create substitution rules to determine the account assignment references of OTC transactions. Account assignment references are assigned to each treasury position. ​You use the account assignment reference to determine the G/L account in which a treasury position is managed.

The substitution rules are executed during the automatic process for determining account assignment references when an OTC transaction is created.​

Rules for the determination of account assignment references can be defined by you and are predefined in the content:

• You can define rules in the Account Assignment References - OTC Transactions (Substitution Rules) and Account Assignment References - Securities (Substitution Rules) configuration apps
• If you have the Define Determination Rules - Account Assignment References in use, the settings are still relevant for the determination process of account assignment references.
• The predefined content also contains derivation rules that are also still relevant for the determination of account assignment references.

During the determination of account assignment references, the system runs through the previously described sequence.

The table exemplifies the different fields for available defining preconditions by business context. This enables you to substitute values of target fields dependent on attributes specific to the business context. The target field is the Account Assignment Reference of Position Management.

Using the Account Assignment Reference - Securities (Substitution Rules) app, you can display, change, and create substitution rules to determine the account assignment references of securities. Account assignment references are assigned to each treasury position. ​You use the account assignment reference to determine the G/L account in which a treasury position is managed.

The substitution rules are executed during the automatic process for determining account assignment references when a securities transaction is created.​

You manage substitution rules by business context. A context represents the circumstances in which the substitutions are defined and applied. It determines the fields that are available for the definition of rules.

At runtime, business users create financial transactions. This triggers the automatic determination of the account assignment references for the corresponding treasury positions, and the rules that you have defined are applied automatically. In case of a substitution the system derives, replaces, or clears values for the relevant fields defined in the substitution rules. The substitutions take place at the time of data entry with no system messages.

View the previous example to learn about how the target field (account assignment reference) is derived.

Using the Define Determination Rules - Account Assignment References app, you can define rules for the automatic determination of account assignment references for parallel valuation areas. You define the rules for each product group and subledger position that enables you to make postings to a position. Business rules for OTC Transactions and Securities are available.

Note

The Account Assignment References - OTC Transactions (Substitution Rules) and Account Assignment References - Securities (Substitution Rules) apps replace this app. The Define Determination Rules - Account Assignment References app is deprecated and will soon be deleted from the launchpad. We recommend that you switch to the successor apps.

Note

The Define Determination Rules - Account Assignment References app is deprecated and will soon be removed from the launchpad. However, if you have the Define Determination Rules - Account Assignment References app already in use, the settings are still relevant for the determination process of account assignment references.

Various account assignment references are predefined in the Define Account Assignment References configuration step under the following: Manage Your Solution → Configure Your Solution → Finance → Treasury and Risk Management → Treasury Accounting.

As outlined above, the predefined account assignment references are used if otherwise no suitable rule can be found and applied in the SAP S/4HANA Cloud system.

Differentiation terms are used to determine how the positions are created. Some differentiation terms are defined by the system for each product group, and others can be selected additionally. The differentiation SEC. ACCOUNT is defined and assigned for all company codes and valuation areas that do not have a specific differentiation assignment. For Securities, the following is predefined:

• Valuation area
• Special valuation class
• Accounting code
• Security class ID number
• Securities account

In addition to that, you can define and assign your own differentiation in the Define and Assign Differentiation configuration activity. This enables you to use account assignments of other areas, such as Cost Center, Profit Center, WBS Element, and Functional Area, to differentiate treasury positions in Treasury and Risk Management. When the flows are posted to Financial Accounting, the account assignment values for a treasury position are also transferred to Financial Accounting.

Use the Enter Book Values for Manual Valuation app to enter the new book values for treasury positions for a specific key date.

After you have entered the new book values, you can start the valuation of the treasury positions using the Run Valuation app executed with the valuation category, Manual Valuation With Reset or Manual Valuation Without Reset.

This valuation categories allows you to write-up or write-down a position to the book values entered in position currency and valuation currency in the Enter Book Values for Manual Valuation app, independent of the valuation rules defined.

The following valuation steps support manual valuation:

• Security valuation
• Foreign currency valuation
• One-step price valuation
• Index valuation