Outlining Debt & Investment Management (1WV)

The debt and investment management process helps you to secure short-term liquidity at the best interest rates, and manage your medium- to long-term debt and investments optimally. The functionality helps you to automate labor-intensive processes, such as confirmation of financial transactions and accounting postings, giving you more time to focus on value-added activities.

You can manage operational and accounting requirements. The process includes the products fixed-interest investments and borrowing, variable-interest investments and borrowing, commercial paper purchase and issue, deposit at notice and facilities.

Business benefits of the Debt and Investment Management process in SAP S/4HANA Cloud include the following:

• Review the financial status
• Automate the management of investments and borrowings, including creation of the financial transaction, confirmation of contracts with counterparties, payments, interest rate adjustments, and accounting
• Take better operational and strategic decisions using the comprehensive reporting and analysis tools
• Improve internal operational compliance, such as by setting counterparty limits
• Increase your focus on value-added activities instead of on manual procedures

Manage your financial investments and borrowings, like fixed or variable interest rate deposits, loans, commercial papers, or investment certificates. Straight-through processing of financial transactions from front office, middle office, back office, and accounting.

The debt and investment management process helps you to secure short-term liquidity at the best interest rates and manage your medium- to long-term debt and investments optimally. These functions help you to automate labor-intensive processes, such as the confirmation of financial transactions and accounting postings, giving you more time to focus on value-added activities. You can manage operational and accounting requirements.

Key process flows covered:

• Create and process financial transactions
• Automated correspondence (external and/or internal confirmations)
• Process payments including condition-based incoming payments such as dividends
• Transfer values to the general ledger
• Adjust interest rates and update planned records for securities
• Perform month-end accounting processes
• Monitor and report your treasury positions and financial transactions

The financial instruments from the Debt and Investment Management process are covered in SAP S/4HANA Cloud through several scope items.

Money Market transactions are covered with the Best Practice Scope item

• 1WV - Debt and Investment Management
• 1YI - Intercompany process for Debt and Investment Management

Derivatives, and in more detail Interest Rate Derivatives are covered in:

1X3 - Interest Rate Derivatives Management

When it comes to Securities, the two main components highlighted through the SAP Best Practice scope items are:

• 2UN - Money Market Mutual Fund Management
• 3WY - Bond Management

Through this learning asset, we only cover the Money Market Debt and Investment Management part. The other areas are described through their respective SAP Best Practice scope item.

A deposit at notice is an investment or borrowing without defined due dates. Therefore, the deposit at notice does not only include the functions available in the fixed-term deposit area, but also a function for giving notice; in other words, in addition to entering the amounts and conditions, you enter the notice period and the interest payment date and frequency.

The product type to create a Deposit at Notice is closely linked to the Interest Rate Instruments.

This product type is based on product category 550 Interest Rate Instrument, which has the term category At Notice and allows to enter Fixed, Variable, Scaled (Incremental), and Scaled (Interval) interest conditions.

If you need to create a Deposit at Notice with variable or scaled interest in product type 52B please use the app Create IR Instrument (TM_51).

When you are trading with deposits at notice, investments, and borrowings are made without defined due dates. The period of notice, the payment date, and the interest payment cycle are entered in addition to the amounts and conditions.

Enter the period of notice in days or months. The period of notice is the period between termination agreement and when it comes into effect.

The General valuation classes classifies financial transactions across all valuation areas. You set this General Valuation Class using the Administration tab for the Deposit at Notice transaction.

Examples of this are as follows:

• Short-term investments
• Medium-term investments
• Liabilities

Special valuation classes classify financial transactions/positions based on a valuation area. They represent the areas of a balance sheet as well as the differentiation terms in the system.

Examples:

• At Fair Value through Profit or Loss
• Trading
• Available for Sale (AfS)
• Held to Maturity (HtM)
• Liabilities
• Current Assets

In the payment details of a financial transaction, you enter the data that is required for making transactions with your business partner.

Note

When you create a transaction, the system provides these payment details by default based on the product type, transaction type, and currency. Alternatively, you can also specify the payment details for the individual transactions. The details are stored in the system at the same time when you save the transaction.

You have entered the payment details in the Standing Instructions. For this, launch the Manage Business Partner app.

Through the main menu option More -> Extras or under More -> Environment you can calculate the effective interest rate.

You use this function when you process transactions in the Money Market area to calculate the internal interest flows and update these to the database. You can also use the effective interest for evaluations as part of reporting.

To see the detail view of a transaction in the Money Market area and for OTC interest rate instruments, you can either use a pushbutton on the Structure tab or in the upper toolbar. On the details screen, you can make more in depth entries for the interest calculation that you have already entered on the basic screen.

Choose one of the lines to see the full Condition Details per Condition Type.

Processing a Deposit at Notice is accomplished with the Process MM Transactions - Collective Processing (TM_00) app. The app provides some generic features for the financial instrument Deposit at Notice.

• Set a processing indicator by selecting an entry from the list.
• Display the related correspondence from the processing screen of the individual financial transaction.
• Display the conditions of the money market transaction from the processing screen of the individual transaction.
• Display the effective interest rate of the transaction from the processing screen of the individual transaction.
• View the details of a specific money market transaction by selecting a row in the table and choosing the Details icon in the header bar.

The key features of the Process MM Transactions - Collective Processing (TM_00) app will be highlighted in more detail in the following interaction. Use the buttons in the menu bar to learn more:

If you want to learn more about the collective processing for a deposit at notice use the boxes in light yellow of the interactive graphic below.

Use the Update Cash Flow - Deposit at Notice app to update the cash flow of a deposit at notice.

The system displays an overview of the cash flows of the transactions concerned. The new flows are marked in a different color to distinguish them from the flows that already existed.

Since the end of the term of a deposit at notice is not known until notice is given on it, the cash flow of such transactions can only be created for a certain period in the future. This means that the cash flow has to be periodically updated for deposits at notice on which notice has not yet been given.

There is also the possibility to download the result list to your computer using the menu ribbon (under More…)

With cash flow-based transactions, you can manage transactions whose structural characteristics cannot be mapped by the standard product categories. You can enter and process transactions by entering their cash flow. A cash flow is a chronological sequence of flows: you enter the term alongside the cash flow that results from the transaction structure. This enables you to map your financial transactions flexibly.

On the basis of this, the system not only supports the processes for entering and processing these types of transactions in the trading area, but also the processes that build on these in the back office and accounting areas.

To create a new Cash Flow Transaction in the SAP S/4HANA Cloud system, use the Create Cash Flow Transactions app from the SAP Fiori launchpad.

Use your required company code and the product type 54A - Cash Flow Transaction. Depending on the direction of your Cash Flow Transaction, choose the transaction type 100 - Investment or 200 - Borrowing.

On the Structure screen, set the start and end date of the Cash Flow Transaction. Since you can use the Cash Flow Transaction in a more flexible manner, you set the flows, for example, the principal increase or repayment according to your needs for the transaction.

Depending on the transaction characteristics, you must also set the according General Valuation Class. Derived from the product category, the system already suggests a set of values for the General Valuation Class.

Further assignments to a portfolio would be possible on this tab.

In case the Cash Flow Transaction does include nominal interest, you need to define the calculation base for this interest flow.

You can achieve this by clicking on the nominal interest flow to open the additional window where the metrics for the calculation, like dates, calculation method or base amount are defined.

When creating a Cash Flow Transaction, you can also individually set the Position Indicator for the transaction.

Choose More from the ribbon bar at the top and go to Environment and pick the value Position Indicator from the list available.

Set the Position Management Procedure and the Account Assignment Reference per Valuation Area.

If all of the desired values are set, save the Cash Flow Transaction.

Launch the Process MM Transactions - Collective Processing app from your SAP Fiori launchpad to further process the Cash Flow Transaction.

Select the cash flow transactions to be processed.

From the worklist, you can select a transaction and perform one of the following functions.

You can use this function to change an activity, provided that it is not relevant for posting. The last activity in the activity chain is relevant for posting. When you save an activity that is relevant for posting, the transaction is fixed (the flows become actual records in the Treasury subledger) and the flows are flagged for posting.

You can display the structure characteristics of the Cash Flow Transaction. The entry fields are not active.

When you reverse a transaction, you reset the most recent change made to the transaction, which is identified by the system as an activity.

If postings are linked to the reversed activity, these are flagged for reversal.

To reverse a transaction, you have to enter a reversal reason in the corresponding field. Enter the key for the reversal in the Reversal Reason field.

The history displays the sequence of previous activities related to a selected transaction.

When you save a settlement activity, the system changes the activity category of the transaction in order to record how it is monitored and processed in the back office area. Using the Settle Cash Flow Transaction function, you can mark the transaction to document that it has been processed in the back office.

At this stage, the system checks the financial transaction data and adds any missing data. Also, when you save the transaction, the system fixes the transaction (actual records) and marks the transaction flows as Flagged for Posting.

This function enables you to settle financial transactions that belong to the Contract activity. The flows for the purchase/sale of transactions with status Planned become actual flows. The back office area, like the trading area, enables you to call up information on existing transactions and make changes to them at a later date. You can monitor and check transaction activities with the settlement function. You can also add any missing data, such as payment instructions or posting details.

Commercial Paper transactions are transactions on which no interest payments are made during the term of the transaction. Instead, two business partners agree on a repayment amount to be repaid to the investor by the borrower at the end of the life of the contract.

Example:

A company requires 1 million for three months. The amount is discounted using a pre-defined yield. The company receives the discounted amount, 980,000 from an investor. At the end of the term, the company repays the full amount of 1 million.

The commercial paper as a commonly unsecured, short-term debt instrument is usually issued at a discount from the nominal value. 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 discounting.

Interest can also be determined based on 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 shown. As a second variant, you can show the discounted principal increase at the start of the term, and then the repayment of the cash value and the interest rate flow at the end of the term.

Therefore, there are different options on how to create a commercial paper in the SAP S/4HANA Cloud system.

• Net present value with interest
• Nominal with interest
• Nominal without interest

The three options and especially the payment flows for the commercial paper transactions are described in the following examples.

When creating a commercial paper that is based on the Net Present Value with interest calculation, the SAP S/4HANA Cloud system is creating three payment flows.

1. A principal increase with the discounted amount (Flow Type 1100)
2. A final repayment of the discounted amount (Flow Type 1120)
3. The interest flow as a separate position, as the difference between Nominal Amount and Payment Amount (Flow Type 1201)

If you create a commercial paper purchase and use the transaction type 100 (NPV with interest), you have to set the nominal amount for the purchase and the term conditions (dates). If you choose the Net Present Value with interest, you also set the interest rate, interest calculation method, and NPV Calculation method for your transaction.

This way, the system derives the payment amount at the start of the term.

Go to the Cash Flow tab to see the flows that the system creates for the commercial paper transaction.

It is creating a principal increase of negative 999,195.09 for the start of the commercial paper. At the end of the term there is the final repayment with the exact same amount positive and on top of that the nominal interest for the period, in this case leading to the overall nominal amount of 1 million EUR.

When creating a commercial paper that is based on the Nominal with interest calculation, the SAP S/4HANA Cloud system is creating three payment flows.

1. A principal increase with the nominal amount (Flow Type 1100)
2. A final repayment of the nominal amount (Flow Type 1120)
3. The interest flow as a separate position (Flow Type 1201)

If you create a commercial paper purchase and use the transaction type 101 (Nominal with interest), you have to set the nominal amount for the purchase and the term conditions (dates). If you choose the Nominal with interest, you also set the interest rate, interest calculation method, and NPV Calculation method for your transaction.

This way, the system derives the structure of the payment amount at the start of the term.

Go to the Cash Flow tab to see the flows that the system creates for the commercial paper transaction.

The SAP S/4HANA Cloud system is creating a principal increase of negative 1 million EUR, plus the nominal interest (positive) for the start of the commercial paper. At the end of the term, there is the final repayment with the nominal amount of 1 million EUR.

When creating a commercial paper that is based on the Nominal without interest calculation, the SAP S/4HANA Cloud system is creating only two payment flows.

1. A principal increase with the calculated payment amount (Flow Type 1100)
2. A final repayment of the nominal amount (Flow Type 1120)

There is no separate flow for the interest in this scenario.

If you create a commercial paper purchase and use the transaction type 102 (Nominal without interest), you have to set the nominal amount for the purchase and the term conditions (dates). If you choose the Net Present Value with interest, you also set the interest rate, interest calculation method, and NPV Calculation method for your transaction.

This way, the system derives the principal increate for the start of the term.

Go to the Cash Flow tab to see the flows that the system creates for the commercial paper transaction.

The SAP S/4HANA Cloud system is creating a principal increase of negative 999,195.09 for the start of the commercial paper. At the end of the term, there is the final repayment with nominal amount of 1 million EUR. There is no separate flow for the interest. Flow type 1201 Nominal Interest for Commercial Paper is not used in this scenario.

To get a better understanding of the condition details, select the Conditions button from the upper-menu bar.

The condition details shows the structure of calculation, like the effective from dates for the condition or interest calculation methods. Due to the nature of the commercial paper, you cannot change values on this view, only the structure screen.

Processing commercial papers in the SAP S/4HANA Cloud system is possible with the Process MM Transactions - Collective Processing. With the app, you can change, display, settle, or reverse commercial paper transactions.

Another useful feature for commercial papers is the Calculate Amounts - Commercial Paper app. The application helps to calculate the payment amount by calculating the discounted amount and the interest amount from structural information you maintain for a commercial paper.

Launch the Process MM Transactions - Collective Processing app from your SAP Fiori launchpad to further process the Cash Flow Transaction.

Select the cash flow transactions to be processed.

From the worklist, you can select a transaction and perform one of the following functions:

Select an entry from the list and choose the Change icon from the header bar of the app.

The screen for changing basic data appears. You can use this function to change an activity, provided that it is not relevant for posting. The last activity in the activity chain is relevant for posting. When you save an activity that is relevant for posting, the transaction is fixed (the flows become actual records in the Treasury subledger) and the flows are flagged for posting.

Select an entry from the list and choose the Display icon from the header bar of the app.

The screen for displaying the structural characteristics appears. The entry fields are not active.

When you reverse a transaction, you reset the most recent change made to the transaction, which is identified by the system as an activity.

The reversal function reverses the last active activity and reactivates the previous activity.

Select an entry from the list and then choose the History icon from the header bar of the app.

The system lists the activities that are active, that have been reversed, or that have been replaced by a follow-up activity. From this list, you can display the individual activities. You also see their status and the user who processed them.

The history function displays the sequence of previous activities for a selected transaction.

Select an entry from the list and then choose the Settle icon from the header bar of the app.

The Contract Settlement screen appears.

When you save a settlement activity, the system changes the activity category of the transaction to record how it is monitored and processed in the back office area.

The Calculate Amounts - Commercial Paper app helps you to calculate the payment amount, that is, the discounted amount and the interest amount. You can also display the price as a percentage and the term (number of days) for commercial papers.

When calculating the commercial paper with interest, set the nominal amount, calculation method, and the interest rate. Choosing the By Interest Rate button at the top gives the calculation result at the bottom.

The second option on calculating the commercial paper is by setting the price in percent. This way, you set the nominal amount, indirectly the payment amount, and the interest amount. The system calculates the interest rate for this particular combination.

A facility is a type of loan made to a corporate customer. It allows the borrowing business to take out money (drawings), against a pre-defined credit line, rather than reapplying for a loan each time it needs money.

In the current SAP S/4HANA Cloud environment, only bilateral facilities are supported. Syndicated facilities are not available at this time.

Facilities are agreements between a lender and a borrower, which control the general conditions for a series of drawings against a credit line. The lender can give drawing authorization to several people (= borrowers), who are entitled to draw varying amounts at any time up to the total approved credit line.

The utilization of this credit option for a facility is called a drawing.

The lender calculates charges for the borrower (commitment interest). The charges that incur are calculated according to different methods.

• Confirmed facilities

  The lender guarantees the availability of a limited credit amount at any time. The borrower has to pay a charge for this.

• Unconfirmed facilities

  The lender does not guarantee a credit limit. No charges are made for this.

The Create Facility (TM_61) app from the SAP Fiori launchpad is the starting point to set up the facility master record.

On the Structure tab of the bilateral facility, you set the partner plus the start and end date of the facility.

The lender charges the borrower for the provision of a credit facility. You define this on this tab.

Note

• Charges are calculated periodically for a facility once this facility has been settled and drawings have been made on it.
• The charges of a transaction do not depend on each other. No interest is calculated for charges.

There are four types of facilities charges, which can all be structured in a different way. The different condition types are explained in more detail below.

Also, the frequency of the fee and its effectiveness dates can be set.

The four facility condition types available are geared towards different elements of the facility.

This way, you can calculate interest for the utilized credit line amount (1241), for the not utilized amount (1240), but also for the amount that exceeds the credit line (1242).

If there is a general fee for the overall credit line amount, this can be mapped to condition type 1243.

From the Profiles tab of the Facility Master Record, you get an good idea of the facility amounts.

There are several different options to list out the amount composition of the facility. We focus on the two options shown in the figure.

1. List of Drawings - In the list of drawings, you can display the transactions that were already posted against the facility. You see the transaction number, the dates, and amounts of the items.
2. Credit Line not Utilized - A different perspective is achieved with this profile. The list outputs the overall changes to the facility, starting from setting a credit line posting drawings against it and dissolving the amounts after the underlying transaction does not existing anymore. This way, the not utilized credit line amount is also calculated.

In the Rules tab, there is the possibility to set rules specifying which of the following can post against the facility:

• Company Code
• Business Partner
• Transaction Type
• Transaction Currency

According to these filters, only a specified number of company codes or transaction types are allowed to post for example, drawings against the credit line.

Launch the Process MM Transactions - Collective Processing app from your SAP Fiori launchpad to further process Facilities.

Select the cash flow transactions to be processed.

From the worklist, you can select a transaction and perform one of the following functions.

You can use this function to change an activity, provided that it is not relevant for posting. The last activity in the activity chain is relevant for posting. When you save an activity that is relevant for posting, the transaction is fixed (the flows become actual records in the Treasury subledger) and the flows are flagged for posting.

You can display the structure characteristics of the Cash Flow Transaction. The entry fields are not active.

When you reverse a transaction, you reset the most recent change made to the transaction, which is identified by the system as an activity.

If postings are linked to the reversed activity, these are flagged for reversal.

To reverse a transaction, you have to enter a reversal reason in the corresponding field. Enter the key for the reversal in the Reversal Reason field.

The history displays the sequence of previous activities related to a selected transaction.

After settling the transaction, the facility can be used for drawings.

Within the Debt and Investment Management - Money Market area, we also cover the financial instrument Interest Rate Instrument.

An interest rate instrument is a money market transaction with more structural characteristics, such as Fixed, Variable, Scaled (Incremental), and Scaled (Interval) interest conditions.

You must specify the product type when starting to process a Interest Rate Instrument. According to the product type, the screen layout is adjusted to fit the specific needs of each instrument.

In order to start processing Interest Rate Instruments, launch the Create IR Instrument app from your SAP Fiori launchpad.

Enter the company code, product type, transaction type, and the business partner.

Optionally, you can make entries in the Limits area:

• Currency: If you do not specify a currency when you create a financial transaction, the company code currency is applied automatically.
• Portfolio: If you want to assign the transaction to a portfolio, enter a portfolio in the corresponding field.

Enter the required data for creating the interest rate instrument on the Structure tab.

In the Invest area, enter the flow type (automatically derived from transaction type, such as 1100 Principal Increase for 100 Investment transaction type) and the (payment) amount in a specific currency.

If the nominal amount and the payment amount are not the same, you can enter either the nominal amount or the payment rate (%) and then the system calculates the nominal amount.

In the Term area, you enter the start date for the interest rate instrument.

Also check the Term Category field. This field is predefined for the different product types. 51A, 55A, and 55I have the term category Fixed-Term. For these interest rate instruments, you can enter the end date of the financial transaction.

For product type 52B Deposit at Notice (Variable), the term category is set to At Notice and you cannot enter an end date for the financial transaction. Therefore, the Repayment area is also not available on the Structure tab.

Set the Inclusive indicator to define whether the entered start and end date are included in the term of the financial transaction.

In the Interest Structure area, you enter the settings for the interests. Interest rate instruments allow fixed and variable forms of interest calculation to be entered and performed. Besides the option of entering the amount of interest, it is possible to enter the interest conditions Scaled (Interval) and Scaled (Incremental).

In the Repayment Structure area, you can choose between installment repayment and full repayment upon maturity (final repayment).

In the case of final repayments, no further entries are necessary. The system automatically sets the interest period update to Final Repayment.

If you have opted for installment repayment, the structure of the screen is changed. Enter the repayment amount and the frequency. By default, the currency in the Currency field is the same as for the interest rate instrument. In this area, you can also use the button to expand or close the repayment structure.

On the Administration tab, you can determine and call up administrative data for a financial transaction.

You can do a portfolio assignment, set the General Valuation Class or enter the Hedge Request ID field for all financial transaction created due to a hedge request.

There is also the possibility to assign the relevant credit rating institute, rating, and valid-from date of the business partner to the financial transaction.

In the Payment Details tab of a financial transaction, you enter the data that is required for making transactions with your business partner.

As a prerequisite to get the desired information, you need to enter the payment details in the Standing Instructions in the Manage Business Partner app.

Note

When you create a transaction, the system provides these payment details by default based on the product type, transaction type, and currency. Alternatively, you can also specify the payment details for the individual transactions. The details are stored in the system at the same time when you save the transaction.

The Cash Flows tab contains all flows of a financial transaction, classified by flow types, in chronological order. Typical flow types include nominal amount increases, fixed or variable interest, and repayments. The investment amount, the interest payment, and repayment amount are concentrated on one or several flow records through this.

As the cash flow of financial transactions forms the basis for all trading, management, and evaluation activities within Treasury, the flows have particular significance. They are generated by financial mathematics from the general data on the transaction, the structural characteristics, and the conditions assigned to the transactions. The flows contain both the payment data and their calculation bases, as well as all data required for posting.

The Status tab shows you the current status of a financial transaction. The status results from the status for the correspondence, the product-specific activity category, and the processing category assigned to the transaction type.

You can make external correspondences for a transaction for which you have created business partners in the standing instructions. In these standing instructions, you specify for each product and transaction type whether a confirmation and a counterconfirmation are required for the particular transaction. You can choose from the following correspondence statuses: 0 (not required), 1 (required), and 2 (confirmation executed). After the transaction has been performed, the name of the user and the date are displayed.

Alongside the current activity category (such as order or contract), the current status of the transaction (such as active or closed), the person who entered the transaction, and the name of the last person to change it are displayed.

This area provides information about the entire transaction process (such as whether a settlement transaction is included).

The statuses predefined by the system are shown as the System Status in status management.

A condition is a contractually agreed element of a financial instrument. It describes the structure of the transaction in terms of the period and amount (interest, repayment, and so on).

You define conditions using predefined condition types. Predefined flow types are assigned to condition types. These flow types display changes to the payment flows and are part of the cash flow. On the other hand, you can choose from several condition types for each product type.

Conditions include all the data that is relevant for generating condition-based flows in the cash flow. The different entries for the individual condition types determine exactly how the flows are calculated.

On the Condition Details: Interest screen, you can make more detailed entries for the interest calculation that you have already defined.

For interest conditions with variable reference interest rates, you must also define the condition item Interest Rate Adjustment. 

In the Amount tab, you can set the interest calculation method and the type of interest calculation. The interest calculation method is a procedure for counting the days for the interest calculation. Therefore, it is also often called the days count method. This is defined by a quotient of days method and a base days method.

The interest calculation types will be described in more detail in the following figure.

The Interest Calculation Types specifies the type of interest calculation within the calculation period.

The following options are available for interest calculation:

Interest amount = capital * percentage rate / 100 * days / base days

In the case of interest rate adjustments, an interest period is divided into calculation periods.

The system calculates the interest factor according to the formula for the exponential interest calculation. However, basic factors have been introduced to calculate the calculation base amount, which is used to capitalize the capital amount within a calculation period.

In the case of interest adjustments within an interest period, the interest calculation type Exponential Interest Calculation with Factors delivers more precise values because the determination of the calculation base amount has been changed from a summation of amounts to multiplying the capital with the base factors.

Interest amount = Base amount x percentage rate / 100

Interest amount = Base amount x percentage rate per day / 100 x days

In the case of interest rate adjustments, an interest period is divided into calculation periods. The compound interest calculation uses the formula for linear interest calculation to calculate the interest amount of a calculation period.

The system calculates the interest amount using an average interest rate. This is determined per calculation period from the average product of the previous interest factors of the interest period.

The Average Interest Rate area contains specific settings for the average interest rate calculation:

To determine the average interest rate, the reference interest rates of a period are weighted.

You can choose from the following two weighting categories:

• S = Based on Interest Rate Fixing Date

  The weighting corresponds to the number of calendar days from the interest fixing date to the next working day.

• L = Based on Interest Rate Adjustment Date

  The weighting corresponds to the number of calendar days from the interest rate adjustment date to the next working day.

• You can define the rounding decimal places for the average interest rate.
• The average interest rate can contain a spread (S). This is added after the rounding of the average interest rate.
• The rounded average interest rate including the spread can be restricted by an upper limit and a lower limit.

A condition item comprises entries (dates and amounts) for the condition type, such as the entries in the following fields: Effective-From Date, Calculation Date, Due Date, and Percentage Rate.

The Amounts, Dates, and Payment Data / Other tabs show you exactly how the conditions are structured. The screen contains more fields than the initial Conditions screen, depending on which fields you select for the condition.

• Amounts

  This tab includes entries for the amounts and/or the amount of a condition type.

• Dates
  • Calendar

    If you always want to shift the due date to a working day, enter up to five calendars you want to use to calculate the working day.

  • Calculation Date/Due Date

    The calculation date is the last day of the current interest period. The due date is the day on which the interest payment is due.

    This area includes the fields for determining the exact calculation dates and due dates of the condition item.

  • Calculation Modes

    Here, you define the method used to determine the next calculation date or due date.

  Using the Create Parallel Condition Gr. button, you can enter parallel condition items of the same condition type.

There are two types of scaled conditions:

• Scaled (Interval)

  You define different scales for the balance amount by a lower limit amount, an upper limit amount, and a corresponding interest rate. Then the balance amount is divided into scales and the corresponding interest rate is applied for the amount interval of each scale.

• Scaled (Incremental)

  You define scales for the balance amount by a lower limit amount, an upper limit amount, and a corresponding interest rate. Then the balance amount falls into one scale and the corresponding interest rate is applied for the total balance amount.

Define the frequency with which you want the variable interest to be adjusted, and the corresponding interest rate fixing date.

Two types of condition items are required to represent the variable interest rate condition.

• A condition item Nominal interest, where you enter details for the variable interest condition such as, the reference interest rate, the interest calculation method, and the interest calculation type. In addition, the details for the interest period are entered here.
• A condition item Int. rate adjustment, where you define the frequency with which you want the variable interest to be adjusted, and the corresponding interest rate fixing date.

As a prerequisite, the relevant reference interest rate needs to be defined and you must ensure that current data is available for interest rate fixing.

On the Condition Details window, the screen is divided into Amounts and Dates tabs.

The Dates tab is divided in two areas: Interest Rate Adjustment and Interest Rate Fixing Date:

• In the Interest Rate Adjustment area, you enter the frequency with which you want the variable interest to be recalculated or become effective. 
• In the Interest Rate Fixing Date area, you define when you want to determine the interest rate value from the market data table.

Lockout Period in working days: Period at the end of the interest period where the reference rate is not adjusted anymore. For these last days of the interest period the last reference rate adjusted one day before the lockout period is used.

On the Int. Rate Adj. tab in the financial transaction data, you obtain an overview of all the data relevant for interest rate adjustments for the variable interest conditions. The data is grouped according to due date, adjustment date, reference interest rate, interest rate, and the date of the rate fixing.

At the interest rate adjustment dates, you must fix the interest rates for the interest flows.

Current account-style instruments are similar to interest rate instruments. The differences between the two kinds of instrument are as follows:

• The current account-style instruments support negative nominals while the interest rate instruments do not.
• The current account-style instruments support final repayment only whereas interest rate instruments support installment repayment and annuity repayment in addition to final repayment.

To manage current account-style instruments, you can use the standard functions and processes for entering, editing, and processing transactions, managing their status, and transferring data to Financial Accounting.

The following product types are available:

Current account-style instruments are similar to interest rate instruments. The differences between the two kinds of instrument are as follows:

• The current account-style instruments support negative nominals while the interest rate instruments do not.
• The current account-style instruments support final repayment only whereas interest rate instruments support installment repayment and annuity repayment in addition to final repayment.

Current account-style instruments are similar to interest rate instruments. The differences between the two kinds of instrument are as follows:

• The current account-style instruments support negative nominals while the interest rate instruments do not.
• The current account-style instruments support final repayment only whereas interest rate instruments support installment repayment and annuity repayment in addition to final repayment.

This product type is available for the intercompany trading process.

If you create a new transaction use the SAP Fiori app Create CA Style Instrument.

In this example, we have used a scaled interest for the interest structure. This means that for a certain amount range, a specific percentage interest rate is calculated. We have set the borrowing amount to 5 million EUR so we will get three interest flows for this transaction (see the Cash Flows in the following figure).

The repayment structure is automatically set to Final Repayment as this is the only option that is supported for Current Account-Style Instruments.

Due to the scaled interest, from the Structure tab, we receive three nominal interest flows.

• One flow for the amount range from 0.00 to 1,999,999.99 Euro valued at 0.15%
• A second flow for the amount 2,000,000 to 3,999,999.99 Euro valued at 0.17%
• A third flow for the range 4,000,000 to 5,000,000 Euro that is valued with 0.18%

From the details, the condition details can be derived (for example, the number of days, percentage rate, calculation method, and so on).

Launch the Process MM Transactions - Collective Processing app from your SAP Fiori launchpad to further process the Cash Flow Transaction.

Select the cash flow transactions to be processed.

You can roll over a financial transaction with changed conditions and use the same transaction number.

You can display the current business transaction along with its history and detailed information. With the memo book function, you can enter additional information for each activity.

By choosing Extras → Amount Overview, you can see a list of all transaction-related capital and interest flows sorted according to amounts that are due prior to/on the respective key date.

When you roll over the transaction, you add a new activity to the transaction. The activity is processed in accordance with the determined transaction and position management process.

You can change the end of term of a financial transaction until repayment. You have to make sure, however, that interest flows that have already been released, posted, or manually changed are not affected by shortening the term. You can make no further changes to the lent number of units or the nominal amount.

Note

A rollover is only possible for interest rate instruments with final repayment. This is the case for Current Account-Style Instruments.

The Debt and Investment Maturity Profile provides an overview of the maturity profile of the nominal amounts and their time left to maturity of debts and investments.

The Debt and Investment Maturity Profile app provides you with a quick visual overview of the outstanding debts and investments in your company and subsidiaries. The maturity profile illustrates the nominal amounts and their time left to maturity. It gives a summary of breakup of the value of the debts and investments with different specific maturities. You can also customize your analysis with several filtering options. This allows the corporate treasury to monitor their debt and investment maturity profile closely and precisely.

The following product types are available:

• 02A Investment Certificate
• 02B Invest. Cert. Accrued Dividend
• 51A Fixed-term Deposits
• 52A Deposit at Notice
• 52B Deposit at Notice(variable)
• 53A Commercial Paper
• 54A Cash Flow Transaction
• 55A Interest Rate Instrument
• 58A Current Account Style Instrument

The calculation logic is based on repayment flows that contain the payment date, payment amount, and currency. In addition to the repayment flows, nominal decrease should also be considered for the following product types:

• 52A/Deposit at Notice
• 52B/Deposit at Notice (variable)
• 54A/Cash Flow Instrument
• 55A/Interest Rate Instrument

In addition to the repayment flows and nominal decrease, nominal increase should also be considered for the product type 58A/Current Account Style Instrument.

Select the play button to watch the video about the Debt and Investment Maturity Profile in the SAP S/4HANA Cloud, public edition.

In the Debt and Maturity Profile app, there are several filters available to find the exact information that you need.

In the upper filter bar, the system displays in a graphical way the filter criteria for the debt and investments made. Thereby, it also shows the distribution of the involved attributes on a high level.

In the lower part, you can use the chart view to have a visual overview of the profile.

• Break out each period in the chart with drill-down options. For example, you can drill down to the year month view to display the profile by calendar month.
• Display the profile with other chart types, such as line chart, bar chart, and so on.
• Select a value in the chart and display the maturity flows in the table within the chart.

Several chart types exist to show the information on debt and investments in the most meaningful way. In combination with the table information, the Treasury Department is able to track and monitor all data accurately.

The available chart types include, for example:

• Bar chart
• Line chart
• Pie chart
• Heat map
• Bullet chart
• Waterfall chart

To go even deeper, you can add additional dimensions to the Maturity Profile chart.

Use the View By button from the ribbon to add information on the following, for example:

• Company Code
• Counterparty
• Payment Date
• Product Type
• Portfolio
• Transaction Type

The information in the chart is automatically updated to reflect the current filter criteria.

There is also the possibility to just show the maturity profile data in a table view for a more granular analysis.

From this view, you can go even further, and start to:

• Display the profile in a table of a list of maturity flows, with line item details such as the transaction number and payment date.
• Navigate to the original transactions to check the details of the transactions.
• Navigate to the Collective Processing app to process the original transactions in case of any financing decisions.

You can use the Credit Line Analysis app to obtain an overview of the trend of the total credit line, the available amounts, and the amounts consumed by money market and trade finance transactions. These key performance indicators are displayed for a specific period, key date, company code, currency, and counterparty for the purpose of making future funding decisions.

You can view the total credit line and the available and utilized amounts in a chart or a table according to the following predefined dimensions:

• Company code
• Counterparty
• Key date
• Reporting period

In the Treasury Reporting, the Credit Line Analysis app shows the key performance indicators directly at the surface. This way, the Treasury Manager finds the most important data without the need to open the app and set filter values.

Key features of the app include:

• View the key figures Total Credit Line, Available Amount, and Utilized Amount in the display currency on the tile.
• View the trend of the total credit line, the available amount, and the utilized amount for a specified period.
• Analyze the utilization and underutilization rate, expressed as a percentage. The app calculates the utilization and underutilization rate of the total credit line.
• Adjust filtering dimensions dynamically according to your own reporting format.
• Drill down to the transaction level of a credit line to analyze the detailed information on the credit line.
• Navigate directly to another app: Display Facility.

The Credit Line Analysis app has two main areas when opening the tile: The Navigation Panel and the Analysis part.

Through the Navigation Panel, you see the current assignment of attributes to either rows or columns. Furthermore, additional available fields are shown. You can drag and drop these fields to a row or column to extend the data analysis information shown on the right.

The logical relationship among these key figures is as follows:

Credit Line = Utilized Amount + Available Amount

Note

In some cases, the credit line is overdrafted, meaning that the utilized amount is greater than the total available amount of the credit line, the available amount is set to zero instead of setting it to minus. The sum of the utilized amount and the available amount is greater than the credit line.

In these cases, the utilization rate and underutilization rate do not equal 100 percent.

The Credit Line Analysis app displays three numbers that represent the credit line, the utilized amount, and the available amount (in display currency) in two different ways.

For the defined filter parameters, the system shows the three main numbers in the following ways:

• Data View
• Graphical display

You switch to this view from the two buttons above the table or chart.

The graphical display can be customized according to the requirements of the business user. Several different chart types are available to present the data in the most meaningful way.

Hovering over the bar chart provides more information on the specific entry.

In Treasury and Risk Management, financial data is analyzed based on the financial objects created automatically for each object you want to analyze. Additional information that is required for risk analysis is also entered into the financial object.

Financial objects are created for the following:

• Money market transactions
• Foreign exchange transactions
• Over-the-counter (OTC) derivatives
• Security transactions
• Security class positions in securities accounts
• Trade finance transactions
• Exposure positions

Bank accounts

The structure of financial objects mainly consists of three parts:

General part: General data (such as the product type) for the financial object

• Company Code
• Transaction
• Product Type
• Source System

Analysis: Data that is relevant for Market Risk Analysis

• Transaction Start
• Transaction End
• Contract Type
• Security Class ID
• Securities Account

Default Risk Limit: Data about the Default Risk and Limit System

• Credit Risk (CR) Active
• Limit Product Group
• Monitoring Unit
• Default Risk Rule

If you are creating a new financial transaction, you can set the values for the Counterparty Risk - for example, here with a Fixed-Term Deposit on the tab Default Risk Limit.

Set the indicator Counterparty Risk Active (CP Risk Active), so that an attributable amount is calculated for the transaction.

Enter the following limit characteristics:

• Limit Product Group (the limit product group you enter here overwrites the default limit product group)
• Monitoring Unit (freely definable reporting characteristic)
• Rating (the rating you enter here overwrites the rating for the business partner, but this is not the case for the integrated external business partner).

Enter the following evaluation parameters:

• Default Risk Rule (the default risk rule you enter here overrides the one set in Customizing)
• Recovery Rate

In the next end-of-day processing run, the system calculates an attributable amount for the transaction to which you assigned this financial object.

The financial objects are created automatically by the system when you create financial transactions, exposure positions, and bank accounts. The field values are derived according to predefined derivation rules and customer-defined substitution rules. When you create a financial transaction, you can change the derived financial object data manually. Financial objects are created immediately following the creation of financial data. 

Financial objects are created for the following reasons:

• Treasury and Risk Management
• Cash Management

When you create financial transactions, the system offers dialog entry screens in which you can change the financial object data manually. If you do not enter the data manually, they are derived automatically by the system. For exposure positions and bank accounts, the financial objects are always derived automatically by the system. When you save the transaction, the system checks the information in the various parts of the financial object.

During the derivation process, the predefined derivation rules are executed first. The predefined derivation rules do not overwrite any field values. Therefore, a field value that is entered manually, for example, is not overwritten by the predefined rules. In the second step, the substitution rules are executed. When the system executes the substitution rules for the market risk data, the system first executes the rules for the specific business contexts and then the rules for the general context. The substitution rules can overwrite the fields that have already been filled manually - either by predefined derivation rules or by an earlier executed substitution rule - if the Overwrite indicator was set in the definition of the substitution rule. Note this when you define your substitution rules.

With the Financial Objects Substitution Rules - Default Risk Data app, you can display, change, and create substitution rules for some fields of the financial objects that are relevant for default risk limit management. The rules are executed during the automatic derivation process of financial objects, whereby you can replace the field values that have already been filled, for example, from the predefined derivation rules.

Using the Financial Objects Substitution Rules - Default Risk Data, your business configurations expert can define substitution rules for the values of the following fields of the financial object data that are relevant for default risk limit management:

• Business Partner as Limit Characteristic
• Default Risk Rule
• Transaction End Date for CL Counterparty/Issuer Risk
• Transaction Start Date for Counterparty/Issuer Risk
• Limit Product Group
• Counterparty/Issuer Risk Active indicator

The fields available for defining preconditions are different for each business context. This enables you to substitute values of the target fields dependent on attributes specific to the business context.

You can define substitution rules to fill the following fields:

• CR Active
• Business Partner as Limit Characteristic
• Limit Product Group
• Default Risk Rule
• Start Date
• End Date

If you changed or created new substitution rules, business user can start the Update Financial Objects app to update the data of all existing financial objects.

The Financial Objects Substitution Rules - Market Risk Data app facilitates the display, change, and creation of substitution rules for some fields of the financial objects that are relevant for market risk analysis. The rules are executed during the automatic derivation process of financial objects, whereby you can replace the field values that have already been filled, for example, from the predefined derivation rules.

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 in the rule definition. There are several applicable business contexts defined by SAP. It is important to note that those can not be changed. Examples of these are as follows:

• Bank Accounts: Market Risk Data
• Derivatives: Market Risk Data
• Exposure Positions: Market Risk Data
• General: Market Risk Data

When the system executes the substitution rules for the market risk data, the system first executes the rules for the specific business contexts and then the rules for the General: Market Risk Data context.

The fields available for defining preconditions are different for each business context. This enables you to substitute values of the target fields dependent on attributes specific to the business context.

The same fields are also available as source fields for the substitution.

Note

You are responsible for ensuring that the data used in the substitution rule is used in accordance with the applicable legal or business requirements. The results, which substitution rules were applied, and the values of the target fields are visible in the apps for users with treasury business roles and must therefore not contain any sensitive data.

With this app, you can update the data of your existing financial objects. The report starts the derivation process of financial object data for the selected financial objects and updates the values, if needed.

You use this report in the following cases:

• If your business configuration expert created new substitution rules for specific fields of the financial object using the Financial Objects Substitution Rules - Market Risk Data and Financial Objects Substitution Rules - Default Risk Data configuration apps
• If your business configuration expert changed the settings in the Assign Product Categories and Default Risk Rules and Assign Product Categories and Limit Product Groups configuration steps
• If an error occurred during the automatic integration process of financial objects and the data could not be derived

You execute the report for a specific financial object type, whereby you can also restrict the number of financial objects according to financial object type-specific selection criteria.

You can execute the report as a test run or as an update run.

To get an objective impression of the financial and risk situation of a company, you have to be able to view all financial assets and liabilities in terms of their current market value. The Market Risk Analysis offers apps with which you can calculate online the mark-to-market values. Using the released CDS query views of the virtual data model for market risk key figures, you can also calculate the value at risk your company is exposed.

If you want to calculate market risk key figures based on a specific scenario and/or based on a market data shift, you must first define the scenarios and market data shifts.

Further, you need to create the Risk Factor set to be used in the Market Risk Key Figure Set if you choose to calculate the Value at Risk. Finally, you should consider the effects of changing or deleting a Market Risk Key Figure Set.

Create, change, display, delete, or copy market data shifts with the Manage Market Data Shift app.

You use market data shifts (also known as external rules) to change current market prices as well as scenario market prices. For this, a market data shift can include risk factor shifts that are distinguished from one another within the system by a rule index.

A market data shift relates to one or more factors that affect the price. In this way, you can use market data shifts to make a fictitious change to values of the following factors:

• Exchange rate
• Yield curve
• Volatility
• Basis spreads
• Credit spreads

For each of these factors, you can define an absolute risk factor shift or a percentage-based risk factor shift.

Market data shifts are used as characteristics in the NPV evaluation. They are used to represent in simple form the effects of price changes on the NPV. The NPV evaluation displays all fictitious NPVs for each risk factor shift as well as the current NPV. Further key figures can be calculated from the NPV evaluation.

A scenario is a market data record that can contain current market data, exchange rates, exchange rate volatilities, yield curves, interest rate volatilities, and so on. You create scenarios that represent probable or possible market situations (for example, a high interest rate scenario with an inverted yield curve).

You can create, change, or delete market risk key figure sets with the Manage Market Risk Key Figure Sets application. In a market risk key figure set, you define the parameters – evaluation currency, evaluation type, scenario, shift rule – that are relevant for the calculation of market risk key figures using the Schedule Treasury Middle Office Jobs app. You also determine whether and how (value-at-risk type, risk factor set) the value at risk is calculated.

If you want to calculate the value-at-risk key figures (VaR and MEL) in addition to the NPV key figures, you must mark the Calculate Value at Risk indicator.

If you set this indicator, you cannot choose a market data scenario or a market data shift. If you set this indicator, you must specify the value-at-risk type (which defines the value-at-risk calculation method) and the risk factor set (which defines the relevant risk factors).

The VaR type specifies the valuation parameters for value-at-risk calculation in Risk Management. The following VaR types are available:

SV1 VaR – Historical Simulation

If you choose this VaR type, the mean excess loss key figure is calculated in addition to the value at risk.

SV2 VaR – Monte Carlo Simulation

If you choose this VaR type, the mean excess loss key figure is calculated in addition to the value at risk.

SV3 VaR – Variance/Covariance

Set this indicator if you want changes made to objects covered by the market risk key figure set (such as when a financial transaction, a security position, or an exposure position are changed or new ones are created) to trigger an automatic adjustment run of the Calculate Market Risk Key Figures report.

Note

The adjustment run uses the same parameters (derived from the market risk key figure set) as the basic run. Even if you have changed the market risk key figure set in the meantime, the adjustment run uses the same parameters as the basic run. This ensures that all financial objects are processed according to the same parameters on a key date.

If you selected the VaR calculation, you must choose a Risk Factor Set. The risk factor set defines which kinds of risk need to be considered (FX risk and/or interest rate risk) and the specific risk factors relevant for the calculation of the value at risk. You also define the risk factor set in this app.

To create a new Risk Factor set, choose the New Entries button. Create the entry considering the following:

If you choose the FX risk, FX spot rates are used as risk factors. In this case, you must also specify the Risk Currencies in the risk factor set.

If you choose the IR risk, the grid points of the yield curves are used as risk factors. A grid point is identified by the yield curve type, the currency, and the reference interest rate. The yield curves used for discounting as well as the yield curves for the forward calculation are considered. The yield curves for discounting are taken from the evaluation type, while the yield curves for forward calculation are taken from the specific reference interest rates.

Dependent on your settings in the Scenario and Shift Rule columns, the market risk key figures are calculated as described in the table.

Note

If you also calculate the value at risk within a market risk key figure set, you cannot use scenarios or shift rules.

You should consider the following when working on Market Risk Key Figure Sets:

Even if market risk key figure values based on this market risk key figure set exist, it is nevertheless possible to change the market risk key figure set. Note that such a change in the calculation parameters can lead to a break within the historical time series of the calculated values, with the result that these values are no longer consistently comparable.

If market risk key figure values based on these market risk key figures exist, it is not possible to delete the market risk key figure set.

You use the Calculate Market Risk Key Figures app to calculate and display online market risk key figures, such as NPV and sensitivity key figures for the selected financial transactions.

You can calculate market risk key figures using key figures defined for the available key figure categories or formula-based key figures based on the key figure categories, and then display them together.

By specifying the evaluation date and horizon date, you define for which date the financial transactions and market data are selected.

You use the key figure analysis to calculate certain market risk key figures online for a small portfolio of transactions. The advantage of the Calculate Market Risk Key Figures app is that you can display NPV key figures and sensitivity key figures together, and relate them to formula-based key figures.

The value at risk (VaR) represents the potential loss in value of a position (expressed as a net present value) that could – with a certain probability – be realized before the position is hedged or liquidated. The VaR evaluation is thus an extension of NPV analysis and has the benefit of enabling a standardized approach to risk quantification. The difference between the two types of evaluation is that VaR takes into account the uncertainty of future market developments.

An NPV approach is used throughout the VaR evaluation, allowing the VaR to be consolidated across all sub-areas of the enterprise. You can freely aggregate the risk from products, currencies, and organizational units, and bring the results together to establish the total risk. Value-at-risk analysis is therefore of key significance for an enterprise’s global risk controlling activities.

Within the framework of risk management, VaR represents a target figure for controlling. The value at risk therefore forms the basis of the internal risk controlling models proposed by the Basle Committee on Banking Supervision.

In principle, the value at risk is determined by the value of the position entered into and the volatility of market prices. The value at risk is also influenced by the average retention period of the position, that is, the time it takes for the position to be hedged or liquidated. The following calculation methods are available for the value at risk.

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.

With this feature, you can transfer the units/nominals of a treasury position to another position with different account assignments (such as cost center, WBS element, functional area, profit center). In this internal transfer, the position component values are transferred proportionally according to the transfer category of the target position management procedure.

If you have activated Public Sector Management and use the fund and grant account assignments as differentiation criteria for your treasury positions, the account assignment transfer can also be used to transfer a treasury position from one fund to another or from one grant to another.

The simulated period-end closing uses the framework of the operative period-end closing functions. Therefore, the simulated valuation includes, for example, all relevant valuation results that are also generated by the real valuation during period-end closing.

Click on the single elements of the simulated period-end closing below to learn more.

In order to run the simulated period-end closing, the following prerequisites must be met:

• Make sure that the market data (such as exchange rates and interest rates) are up-to-date because the simulated period-end closing operations require current market data.
• Net Present Values (NPV) values need to be stored in advance of the valuation of treasury positions and of the classification. You can enter the NPVs manually (using the Enter Net Present Values app), or start the calculation of the NPVs using Calculate Net Present Values - With CVA and DVA.
• You must execute the simulated valuation before or together with the simulated classification.

Note

The system does not check the availability of current market data for the key date.

In the Simulate Period-End Closing app, key figures are used to verify how balance and P&L figures have been developing since last period end.

The simulated key figures cover all relevant Period-End Close figures, which are usually generated within the period end closing process. The idea for the simulation key figures is to call the wrapped functionality, which is used in the operative transactions, and reuse the calculated results for reporting without generating any persistent flows in and postings from the subledger.

Therefore, the simulated key figures are using the same framework as the operative procedure to assure coherence between reporting and subledger values. Based on the most recent book value from the last period end closing without reset the customer can see at a glance the balance effects, the P&L revenue and expenses as well as potential interest payables/receivables as of today.

You can use the following procedure to work on the simulated period-end closing:

1. Select the treasury positions for which you want to perform the simulated valuation. To do this, you must choose the relevant product groups. In addition, you can use the fields available under General Selections to restrict the selection of the treasury positions. The General Selections area of the interface provides selection criteria - Company Code, Valuation Area, Product Type, and Valuation Class - as relevant for all product groups, as well as selection criteria relevant for specific product groups.
2. In the Simulation Parameter area, you control how the report is run.
   • If you want to recalculate outdated simulated valuation results of the selected treasury positions, set the Recalculate Outdated Sim. Val. indicator. The recalculation can be executed for outdated treasury positions for a specific date or period, or for all outdated treasury positions. Enter the date range for recalculation according to your needs.
   • If you want to carry out simulated period-end closing, you must enter the simulation date as the key date.
3. Choose which function you want to execute:
   • Valuation
   • Accrual/Deferral
   • Classification

The result of the simulated period-end closing is composed of the following:

• For the selected treasury positions, the selected period-end closing operations are executed on the entered simulation date according to the settings of the position management procedure and the relevant configurations for the period-end closing operations based on the current market data.
• A message log is shown for the simulated period-end closing run.
• The results are shown in the results list. Each row represents a treasury position and shows the simulation results, such as the new book value in position currency and in valuation currency and also all other new position component values. You can mark a row and choose Display. In the following Details box, you see the information for the selected treasury position, the new book value of the treasury position in position currency and in valuation currency and all other position component values (empty fields are not displayed).
• The results are stored in database tables.

The Delete Results of Simulated Period-End Closing app deletes the results of simulated period-end closing for a specific date from the database tables.

Simulated Period-End Close results which are invalidated automatically by a real Period-End Close run can be deleted from the database tables in this way.

The result of this action is that simulated valuation results for the selected treasury positions and the position value date entered are deleted from the database table. A message log is shown for the deletion run of simulated valuation results.

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

The transfer of the current portion of your long-term liabilities/assets posts the amount of repayments for a treasury position that are due within a certain period (for example, within the next 12 months) to a specific G/L account for balance sheet purposes.

The current portion transfer is executed as an additional valuation step as part of the key date valuation.​ The current portion transfer posting is reset on the next day, regardless of the valuation category.​

To perform these steps you use the Self-Service Configuration User Interface Define Current Portion Transfer Procedure configuration activity, create a procedure for valuation category 012 Current Portion Transfer by entering the period for calculating the current portion. Furthermore, assign the exchange rate type for the currency conversion for treasury positions in foreign currencies.​ The valuation category is relevant for the following position management categories:

• Securities/Loans/Money Market Transactions/Listed Options Normal Style (Without Index-Linked Bonds)
• Securities/Loans with Installment Repayment (Without Index-Linked Bonds)

Treasury and Risk Management offers you a wide choice of product types with which to portray and manage your financial transactions and positions.

Depending on the product type, the financial transactions run through different activities within the transaction and position management process.

Financial Transaction Management in SAP S/4HANA Cloud mainly consists of creating transaction, managing and processing transaction in the Treasury Front and Back Office.

You can use the app Create Financial Transaction to create financial transactions. It is a central entry point for creating financial transactions of all product types.

There are certain prerequisites in order to use this app. You need to

• Create Business Partners
• Set up standing instructions
• Define and assign flow types
• Define condition types

You can use the app Manage Financial Transactions to manage all your financial transactions across all financial instrument groups in one place. From this overview, you can jump directly to the apps for displaying or processing your financial transactions.

This app shows all transactions across different instrument categories. It lets you filter easily by different attributes and save variants for a quick overview.

Use the tabstrip above the table to show only a particular instrument category. Depending on the product group chosen it will show more details in line with the product group specific data.

In the app it is also possible to group, filter or sort the information according to your requirements.

Keep in mind that the Term Start, Term End or Transaction Amount, Transaction Currency is not a fixed one-size fits all value but adjusted to the product category.

The table shows the available Product Categories and Term Start and End Dates and Relevant Amounts for Different Instruments.

You can use the function of the Process Financial Transactions app to process financial transactions created using the Create Financial Transaction app, for example. It is a central entry point for processing your financial transactions. However, you can call each function for a financial transaction from the initial screen.

Depending on the product type and the current status of the financial transaction, different processing functions are available.