AC825 - 46C - Money Market - Foreign Exchage and Derivatives

AC825 Money Market, Foreign Exchange and
Derivatives
AC825
Money Market,
Foreign Exchange and
Derivatives
SAP AG 1999
SAP AG
R/3 System
Release 4.6C
December 2000
Material number 5004 1945
Copyright
Copyright 2000 SAP AG. All rights reserved.

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be copied or reproduced in any form or by any means,
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consent of SAP AG. The information contained in this
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All rights reserved.
SAP AG 1999
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Treasury
Level 2
Level 3
AC815
5 days
Loans Management for
Financial Services
AC030
3 days
Treasury Overview
AC810
3 days
Basic Functions in
Treasury Management
AC816
3 days
Loans Management for
Corporates
AC820
4 days
Securities Management
AC825
3 days
Money Market, Foreign
Exchange and Derivatives
AC830
3 days
Market Risk Management

AC805
AC010
5 days
Financial Accounting
and Reporting
SAP AG 1999
3 days
Cash Management
AC215
Cash Budget
Management
1 day
Course Prerequisites
Mandatory
AC030 - Treasury Overview
AC810 - Basic Functions in Treasury
Management
SAP AG 1999
AC825 will provide you with detailed knowledge, procedures and the corresponding system
configuration.
Target Audience
Participants:
Project teams
Project leaders
Administrators
Duration: 3 days
SAP AG 1999
User notes
The training materials were not made for self-study, but rather as a supplement to the information
provided by the trainer. Thus, space is available for your own notes.
The exercises are in addition to the examples used in this course. There may not be sufficient time to
complete all exercises. In this case, you can use the materials afterwards to enhance your learning.
Course Overview
Contents:
Course goals
Course objectives
Course content
Course overview diagram
Main business scenario
SAP AG 1999
SAP AG
AC825
1-1
Course Goals
This course will enable you to:

Conclude and manage transactions in the Money
Market, Foreign Exchange and Derivatives areas
Configure and carry out the typical business
processes in these areas
SAP AG 1999
SAP AG
AC825
1-2
Course Objectives
At the conclusion of this course, you will be able to:

Perform the trading and processing activities in
Money Market, Foreign Exchange and Derivatives
Use the tools that support processing and
Integrate the above areas with Accounting and Cash
Management
SAP AG 1999
SAP AG
AC825
1-3
Course Content
Preface
Chapter 1 Course Overview
Chapter 5 Foreign Exchange
Chapter 2 Treasury Management

Overview
Chapter 6 Derivatives
Chapter 3 Basics
Chapter 7 Transaction Currency

Changeover
Chapter 4 Money Market
SAP AG 1999
SAP AG
AC825
1-4
Course Overview Diagram
Treasury Management Overview

Basic Principles
Money Market
Foreign Exchange
Derivatives
Transaction Currency Changeover
SAP AG 1999
SAP AG
AC825
1-5
Main Business Scenario
You have successfully installed or are already using

the SAP R/3 FI module. Now you wish to implement
SAP R/3 Treasury Management.
As preparation, you have already made the basic
settings in SAP R/3 Treasury Management.
You would now like to use Money Market, Foreign
Exchange and Derivatives.
SAP AG 1999
You are a member of a project team that will make both the basic settings and all settings necessary
for displaying financial transactions in SAP R/3 Treasury Management.
SAP AG
AC825
1-6
Contents:
SAP Treasury Overview
Selection of Relevant Product Types
Identifying Treasury Processes
Treasury Management Functions
SAP AG 1999
The AC825 training course shows how transactions in the areas of money market, foreign exchange
and derivatives are concluded and managed. The main focus is on typical transaction processes and
their implementation using appropriate Customizing settings.
The courses AC030 "Treasury Overview" and AC810 "Basic Functions of Treasury Management"
are prerequisites for this course.
SAP AG
AC825
2-1
Treasury Management Overview:

Unit Objectives
At the conclusion of this unit, you will be able to:

Provide an overview of SAP R/3 Treasury
Provide an overview of the relevant product types
Explain the different Treasury processes and standard
functions of SAP Treasury Management
SAP AG 1999
SAP AG
AC825
2-2

Basic Principles
Money Market
Foreign Exchange
Derivatives
SAP AG 1999
SAP AG
AC825
2-3
Treasury Management Overview: Business

Scenario
Before beginning your work in the project team, you

would like to acquire an overview of SAP R/3 Treasury.
Which basic settings form the basis for representing
financial transactions?
Which products and processes can be portrayed by
the new Treasury system and what functions are
available?
SAP AG 1999
SAP AG
AC825
2-4
SAP Treasury Overview

Download
Market data
TM
Business
partner
Derivatives
Securities
Loans
Cash
Foreign exchange
Bank data
Logistics
D
100
Market Risk Management:

Interest/currency
exposure
Sensitivities
Mark-to-market value
Risk analysis/simulation
Value at risk
Transaction Management:
Managing financial
transactions and positions
Transfer to Financial
Accounting
Flexible reporting and
portfolio analysis
Datafeed interface
Cash Management:
Electronic banking
Liquidity status
Integration of the operating
systems
Control functions
C
100
SAP AG 1999
The objective of the SAP Treasury module is to ensure efficient liquidity, transaction and risk
management.
SAP Treasury comprises three areas:
Cash Management (CM) covers electronic banking and provides functions for liquidity analysis.
Treasury Management (TM) and Loans (LO) support the management of financial transactions
and positions.
Market Risk Management (MRM) provides methods and procedures for analyzing interest rate
and currency positions.
SAP AG
AC825
2-5
Financial Instruments Available

Product types
Investment/borrowing
instruments
Money Market
Fixed-term
deposits
Deposits at
notice
Commercial
paper
Securities
Stocks
Bonds
subscription
rights
Investment
certificates
Bonds
Convertible
bonds
Warrant bonds
Warrants
Hedging tools
Loans
Foreign Exchange Derivatives
Mortgage
loans
Borrower's
note loans
Policy loans
Other loans
Forex
spot
transactions
Forward
exchange
transactions
Forex swaps
CAP/Floor
FRA
Swaps
- Interest rate
- Currency
OTC
Options/Futures
- Currency
- Interest rate
- Stocks
- Swaption, IRG
Futures
SAP AG 1999
In the short-term area, money market transactions and foreign exchange transactions allow you
to bridge liquidity deficits or surpluses. In the mid- to long-term area, investments and borrowings
are represented by securities transactions and loan transactions.
Derivative financial instruments, on the other hand, help you hedge against interest rate and
currency risks.
SAP AG
AC825
2-6
Identifying Treasury Processes
Revenue /
risk goals
Feedback
Corrective
measures
Revision of planned
targets
Analysis
(planning)
Decision
Financial
Analysis and
trading process
transactions
Transaction and position
management process
SAP AG 1999
Documentation and control functions
From a strategic point of view, the analysis and trading process is the starting point for the various
Treasury processes. At this stage, you identify and analyze the liquidity and risk positions on the
basis of the risk and revenue targets you have defined. Special tools and methods are available in
SAP Treasury. You can use these to perform an integrated analysis of your enterprise's financial and
risk situation.
Once you have decided to complete certain financial transactions, you enter the trading processes for
these transactions in Treasury Management (TM/LO). Treasury Management also contains functions
for the subsequent management of these transactions and the related financial positions.
A range of documentation and control functions are available for all Treasury activities. These allow
you to perform evaluations for specific instruments or across the whole system and ensure that the
various tasks are documented and controlled properly for Treasury and Financial Accounting.
SAP AG
AC825
2-7
Transaction and Position Management Process
Release
Trading
Create offer/order/contract
Exercise/Expiration
Terminations
Rollovers
Exercise of rights
Back office
Settlement/control
Interest rate adjustment
Netting
Referencing
Confirmation letters
Account transfer postings
Corporate actions
Accounting
Postings
Payment
transactions
Reverse
Accrual/deferral
Valuation
User authorization
Limit management
SAP AG 1999
As part of the processes for transaction and position management, we distinguish between the
following areas:
In the trading area, you create transactions and exercise rights.
In the back office, the settlement of the business transactions is completed. This includes checking
them and transferring relevant posting transactions to Financial Accounting. Here, you also manage
processes relating to position management such as securities account transfers.
The accounting area includes posting activities that do not result directly from trading and back
office processes. Examples of these are incoming payments postings (such as interest earned or
dividends) or depreciation postings which result from a position valuation.
SAP AG
AC825
2-8
Treasury Management: Functions
Complete management of financial transactions and positions

Support of trading and back office functions
Functions to track, check and release transactions
Data transfer to Financial Accounting
(including accruals/deferrals and valuations)
Flexible settings to accommodate companyspecific transactions and position management

processes
Assignment of financial transactions to portfolios or
managing them in securities accounts
Flexible reporting and portfolio analysis
Datafeed interface
SAP AG 1999
SAP AG
AC825
2-9
Treasury Management Overview: Unit Summary

SAP Treasury comprises
Cash Management
Treasury Management and Loans Management
Market Risk Management
As far as short-term financial instruments are concerned,

the SAP System differentiates between Money Market
and Foreign Exchange.
Derivative financial instruments are used to hedge
exchange rate and interest rate risks.
The functions of Treasury Management incorporate
managing transactions, assigning financial transactions
to portfolios, and also reporting, analysis and the
datafeed interface.
SAP AG 1999
SAP AG
AC825
2-10
Basic Principles
Contents:
Basic Settings - Financial Transactions
Business Partner
SAP AG 1999
SAP AG
AC825
3-1
Basic Principles: Unit Objectives

Explain the most important terms and basic
settings for financial transactions in Money Market,
Foreign Exchange and Derivatives
Explain the data structure setup for business
partners
SAP AG 1999
SAP AG
AC825
3-2

Basic Principles
Money Market
Foreign Exchange
Derivatives
SAP AG 1999
SAP AG
AC825
3-3
Basic Principles: Business Scenario
Before you can create your financial transactions, you

must define your products in the system settings and
manage these according to the circumstances in your
enterprise.
You must also make entries in the system concerning
your business partners.
How can you automatically receive proposals for
business partner-specific settings when you are
creating transactions?
SAP AG 1999
SAP AG
AC825
3-4
Basic Settings - Financial Transactions
Product types/categories
Financial transaction types/categories
Activity categories
Processing categories
Flow types/categories
Condition types/categories
SAP AG 1999
SAP AG
AC825
3-5
Customizing Structure: Money Market, Foreign

Exchange and Derivatives
Prod. cat.
Transaction cat.
(Activity cat.)
Processing cat.
Flow category/
condition cat.
Calculation cat.
Condition type
Flow type
SYSTEM LEVEL
Product type
Trans. type
USER LEVEL
SAP AG 1999
SAP AG
AC825
3-6
Product Categories - Product Types

Product cat.
510
600
610
620
Fixed-term deposit
Foreign exchange
CAP/FLOOR
SWAP
:
010 Stock
:
040 Bond
:
SYSTEM LEVEL
Product type
- Fixed-term dep.
(overnight)
- Fixed-term deposits
(term)
:
- Interest rate swap
- Currency swap
:
- Fully paid stock

- Partly paid stock
- Floating rate
bond
- Fixed-interest
security . . .
USER LEVEL
SAP AG 1999
Product categories cover the basic categories of the various financial investment or borrowing
transactions and also serve to classify financial instruments. Product categories are relevant in all
company codes and are determined by the system, that is, they cannot be changed by the user.
Product types serve to further refine the product categories at the user level and, unlike product
categories, they can be defined by the user. The product type definition contains the business
framework that applies to financial transactions involving this product type. A product type is
assigned to one product category only. Multiple product types may refer to a single product category.
The user creates and processes individual financial transactions on the basis of product types.
Using the product type,
you can assign various back office practices
you can make selections in Reporting
you can assign various structure characteristics
you can assign various valuation parameters in Market Risk Management (for example, different
yield curves)
SAP AG
AC825
3-7
Product Categories - Product Types - Examples

Finan. instruments
Product cats
Product types
Money mkt
510
520
530
540
Fixed-term deposit
Deposit at notice
Comm. Paper Paper
Cash flow trans.
Foreign exchange
600
Foreign exchange
Derivatives
610
CAP/FLOOR
620
SWAP
630
700
FRA
Futures
FRA
Currency futures
750
Tradeable options
Stock option - No release

Index option - No release
760
OTC Option
Swaption
Currency option (OTC)
Currency barrier option
IRG
SAP AG 1999
Fixed-term dep. (overnight)

Fixed-term dep. (term)
Forex
EXTERNAL
INTERNAL
CAP
FLOOR
Interest rate swap
Currency swap
The product types are predefined by the system. The user can assign product types to each of the
individual product categories.
SAP AG
AC825
3-8
Product Type Customizing: Fixed-Term Deposit
Product type
51A
Text
Fixed-term deposit
Product cat.
510
EXTERNAL
Fixed-term deposit
Default value for transactions

Int. calc. method
act/360
Effective interest calculation

Eff. int. meth.
AIBD/ISMA
SAP AG 1999
Product types represent the typical financial transactions that are carried out in your company.
Examples of product types in the Money Market area include fixed-term deposits or deposits at
notice. If the standard product types delivered with the system are not used, you can define other
product types. This allows differentiated evaluations or different processing rules for external and
internal transactions. The product types contain information about structure characteristics.
The product type definition contains a description of the business framework that applies to financial
transactions of this product type.
You then create and manage financial transactions and manage positions on the basis of these
product types.
SAP AG
AC825
3-9
Financial Transaction Types

Product
category
510 Fixed-term dep.
600 Forex
610 CAP/FLOOR
620 SWAP
:
Trans. cat.
100 Investment
200 Borrowing
:
SYSTEM LEVEL
Product type
- Fixed-term dep.
(overnight)
- Fixed-term dep.
(term)
:
- Currency swap
:
Trans. type
- Investment
- Borrowing
- Spot
- Forward
- Purchase
- Sale
- Swap
:
USER LEVEL
SAP AG 1999
The financial transaction type determines what type of transactions can be carried out with a certain
product type and, at the same time, controls the transaction and position management process.
Examples of financial transaction types include the investment or borrowing of fixed-term deposits,
and both spot and forward transactions with foreign exchange.
You can use the basic transaction types provided by SAP or you can modify these to suit the
financial transaction categories specific to your company.
You can set up user-specific versions of the transaction types for each of the Money Market, Foreign
Exchange and Derivatives areas.
SAP AG
AC825
3-10
Customizing: Financial Transaction Types

Product type
51A
Fixed-term dep. EXTERNAL
Transactn type
100
Investment
Trans. category
100
Number ranges
Transactions
Offers
01
02
Simulations
03
Back office
Processing cat. 00002
! Automatic posting release
Limit management
Limit group
Commercial Paper
Deposit at notice ...
SAP AG 1999
The combination of a product type with a financial transaction type - for example, product type "fixed-term deposit (overnight deposit)" with the transaction type, "investment", - uniquely
determines a financial transaction.
This financial transaction undergoes various activities in the company. You determine how the
transaction is processed, that is, you establish the sequence of these activities, when you choose a
processing category as part of the definition of the transaction type.
SAP AG
AC825
3-11
Number Ranges for Transaction Types
Number range obj.

Company code
Fin. transaction
1000
IDES AG
Intervals
No
From number
To number
Number status
01
0000000000001
0000000099999
13
02
0000000100000
0000000JJJJ99
100000
03
0000000200000
0000000299999
200001
04
0000000300000
0000000399999
300028
05
0000000400000
0000000499999
400014
Ext.
SAP AG 1999
Each transaction entered in the application is recorded in the system with a transaction number.
When you are defining transaction types in Customizing, you maintain a number range interval. The
system assigns the numbers in the application according to this interval. You must define this
interval in advance and you also determine whether the number allocation is carried out internally
(by the system) or externally (by the user).
SAP AG
AC825
3-12
Activity Category
Product cat.
510
600
610
620
Fixed-term dep.
Forex
CAP/FLOOR
SWAP
:
Transaction cat.
Activity cat.
10 Contract
100 Investment
200 Borrowing
:
11 Rollover
:
SYSTEM LEVEL
Product type
- Fixed-term dep.
(overnight)
- Fixed-term dep.
(term)
:
- Currency swap
:
Transaction type
- Investment
- Borrowing
- Spot
- Forward
- Purchase
- Sale
- Swap
:
USER LEVEL
SAP AG 1999
Activity categories in the Money Market, Foreign Exchange and Derivatives component areas
control which activities are possible for a particular financial transaction category.
Example:
Product category
Transaction category
Activity category
510 Fixed-term deposit
100 Investment
10
11
20
21
Contract
Rollover
Contract settlement
Rollover settlement
600 Foreign exchange
101 Spot exchange transaction
10
15
20
30
Order
Order expiration
Contract
Settlement
The activity categories are displayed in the financial transaction - under status - for information
purposes.
The activity category provides the basis for the history, and it also controls the correspondence.
SAP AG
AC825
3-13
Transaction - Activity Categories: History
Company code
Product type
Transaction type
1000 IDES AG
Transaction
51A Fixed-term dep. EXTERNAL
100 Investment
1501
Acty
Activity category
Status
Transition function
0001
0002
0003
0004
0005
Contract
Contract settlement
Replaced New contract

Active
Activity transition
SAP AG 1999
During its processing in your company, a financial transaction goes through various activities. These
activities, in turn, have different statuses.
Example: With the completion of the "contract" activity, a transaction is identified as legally
binding.
The completion of the "settlement" activity is a sign that the recorded transaction data has been
checked.
SAP AG
AC825
3-14
Processing Categories
Product cat.
510
600
610
620
Fixed-term dep.
Forex
CAP/FLOOR
SWAP
:
Transaction cat.
Activity category
Processing cat.
100 Investment
200 Borrowing
:
10 Contract
1 With settlement
activities
11 Rollover
:
2 Without settlement
activities
SYSTEM LEVEL
Product type
- Fixed-term dep.
(overnight)
- Fixed-term dep.
(term)
:
- Currency swap
:
Trans. type
- Investment
- Borrowing
- Spot
- Forward
- Purchase
- Sale
- Swap
:
USER LEVEL
SAP AG 1999
The processing sequence of a financial transaction is determined either by the processing categories
(Money market, Foreign exchange, Derivatives, Securities) or by status transitions (Loans).
Processing categories and status transitions establish the sequence of the individual activities in a
financial transaction. They describe the processing steps that are carried out in the respective
company areas from the order entry in trading, via processing, right up to the transfer of the data to
Financial Accounting.
In this way, you determine the company-specific chain of activities that must be gone through for a
financial transaction of a certain product type.
SAP AG
AC825
3-15
Customizing Transaction Types - Processing

Categories
Product type
51A
Trans. type
100
Investment
Trans. cat.
100
Number ranges
Transactions
Offers
01
02
Simulations
03
Back office
Processing category
Processing cat. 00002

! Automatic posting release
00001 = without settlement activities

00002 = with settlement activities
...
SAP AG 1999
Processing categories are predefined by the system based on the product category and transaction
category. From a range of alternative processing categories predefined in the system, you choose a
processing category for each individual financial transaction.
Example:
Fixed-term deposit
Foreign exchange
SAP AG
Product cat.
Processing category
510
00001 Without settlement rules

00002 With settlement rules
600
00101 Order - Contract- Settlement

00102 Order - Contract
AC825
3-16
Flow Types
Product
category
Trans. cat.
Condition cat.
Flow cat.
AA - Inflow
TD - Dividend
Interest
Calculation cat.
AA - Inflow
TD - Dividend
Repayment
:
SYSTEM LEVEL
Product type
Trans. type
Condition type
- Expected dividend
- Bonus paid
- Variable interest
- Repayment
- Interest rate adj.
- Repayment rate
:
Flow type
1000 - Security purch.
5013 - Dividend
1100 - Principal
increase
USER LEVEL
SAP AG 1999
Flow types describe various changes in cash flows. All the flows involved in a transaction are the
basis for generating the cash flow in financial mathematics and also further processing such as
posting. The cash flow contains all flow records in chronological order and is used as the basis for
updating transaction data in FI, Cash Management and Market Risk Management. Typical flow types
are fixed or variable interest, increases in principal, and commissions.
Each flow type is assigned to exactly one flow category, while several flow types may belong to one
flow category. For example, both fixed and variable interest are assigned to the "interest" flow
category.
The payment flows for both the Cash flow and Accounting are controlled by two indicators that must
be assigned to each flow type. The calculation category controls the finance-mathematical
processing of the flow for the cash flow. The flow category controls the accounting treatment of the
flow.
Flows can result from conditions (e.g. interest rate flows), from manual entries (e.g. charges), from
accrual/deferral runs (e.g. interest accruals/deferrals) or from valuation runs (e.g. depreciation). Flow
types include accounting flows such as inflow (e.g. purchase of securities), outflow (e.g. repayment),
expenditure, or earnings. Cash flow-related flows include purchase/sale of securities, interest,
repayment or charges.
SAP AG
AC825
3-17
Customizing Flow Types
Flow type
1100
Name
Principal increase
Control
Classification
Flow cat.
Calculat. cat.
Structure characteristics
Principal increase
10
AA Inflow (generic)
! Relevant to CM
! Relevant to posting
! Relevant to position
Rel. To P/L
! Rel. To valuation
Rel. for acc./defer.
Payment management ...

Effective interest calculation ...
SAP AG 1999
Flow types are defined in Customizing:

The classifications are fixed in the system and distinguish the flow types according to business
criteria such as structure characteristics, accrual/deferral, valuation, etc.
Relevant to Cash Management: indicates whether the flow is to be updated in Cash Management.
Relevant to posting: indicates whether the flow is transferred to FI.
Relevant to position/relevant to profit/loss: refers to selection for display in drilldown reporting.
Relevant to valuation/relevant to accrual/deferral: indicates whether the flow is included in a
valuation run/accrual/deferral run.
Effective interest rate calculation: indicates whether this flow is included in the effective interest
rate calculation.
Payment request: indicates whether this flow is permitted for the generation of a payment request.
Individual payment: indicates whether this flow may only be settled individually in a payment
request.
SAP AG
AC825
3-18
Assignment of Flow Types to Transaction Types
Product type
51A
Fixed-term deposit EXTERNAL
Transaction type
100
Investment
Flow type
1100
Principal increase
SAP AG 1999
SAP AG
AC825
3-19
Condition Types
Product cat.
Condition cat.
Transaction
cat.
Nominal interest
Final repayment
:
SYSTEM LEVEL
Product type
Transaction
type
Condition type
- Expected dividend
- Bonus paid
- Variable interest
- Nominal interest
- Repayment
- Interest rate
adjustment.
- Repayment rate
:
USER LEVEL
SAP AG 1999
Financial transactions are represented within SAP Treasury on the basis of the flow and condition
concept. Conditions are contractually agreed components of a financial transaction. You can define,
for example, various interest rate, dividend or repayment provisions as condition types. By assigning
condition types to product/transaction types, you ensure that each product type has its specific
structure characteristics assigned to it. This way you can define different conditions for a condition
type (for example, interest) over a time period.
Condition categories are the basis for processing the condition types and they further refine the
classification of flows and conditions. Examples of condition categories are principal increases, final
repayments or nominal interest.
The user defines condition types on the basis of condition categories and assigns them to the
respective product/transaction type.
SAP AG
AC825
3-20
Customizing Condition Types
Condition type
1200
Name (short)
Nominal int.
Cond. type text
Nominal interest
Name (long)
Nominal interest
Control
Classification
Structure characteristics
Cond. category
20
Nominal interest
Calculat. cat.
TZ
Nominal interest
Generated flow type
1200
Nominal interest
SAP AG 1999
The main task of conditions is the automatic generation of flows. The flow types that you assign to
the condition types are elements of the cash flow and, therefore, of accounting.
Note that there are condition types that do not produce flow types (for example, interest rate
adjustments, repayment settlement).
SAP AG
AC825
3-21
Assignment of Condition Types to Transaction

Types
Product type
Transaction type
51A
100

Investment
Condition type
1200
Nominal interest
Direction
Incoming and outgoing
SAP AG 1999
By assigning condition types (and flow types) to product/transaction types, you can structure them
very flexibly.
SAP AG
AC825
3-22
Exercise - Basic Settings
SAP AG 1999
SAP AG
AC825
3-23
Business Partner
Roles of a business partner

Standing instructions
Transaction authorizations
Payment details
Correspondence
Derived flows
SAP AG 1999
SAP AG
AC825
3-24
Business Partner - Basic Principles

Creation of Customizing
Control
data
Roles
Relationships
General
Prerequisite
for
Creation of business partners
Prerequisite
for
Creation of financial transactions

SAP AG 1999
Based on the analysis of the liquidity situation (CM) or the risk situation (MRM), certain financial
transactions are carried out with business partners taking the pre-determined risk and revenue
objectives into account.
Example:
Due to a cash surplus, an amount is invested as a fixed term-deposit with business partner bank A.
The recording of the financial transaction is based both on Customizing settings regarding the
transaction architecture (product types, financial transaction types ... ), and also on certain
application data, for example, business partner details (address, bank details ...).
In SAP Treasury each financial transaction is recorded as a transaction with a (specific) business
partner. For this reason the business partner data must be maintained before the transaction is
recorded.
The options available to you when you create a business partner depend on the settings you have
made in Customizing.
SAP AG
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3-25
Business Partner - Roles and Functions
Natural
person
Organization
Borrower
Agent/Counterparty
Notary
Surveyor
Interested party
Treasury partner
Beneficiary
Issuer
Depository bank
Trustee
Payer/ee
Assigning institution
Guarantor
SAP AG 1999
A business partner is either

a natural person or
an organization or
a group of persons or organizations with which you have a business interest.
Financial transactions are concluded with the business partner within SAP Treasury. Typical
business partners include banks, brokers, or a central Treasury department.
You create a master record for each business partner.
You can assign several roles/functions to a business partner.
A role (= a role category) is a set of properties that a business partner must have in order to carry out
certain business transactions with you. The functions of the business partner in financial transactions
are described in business partner roles (categories).
Example:
A business partner can act as a borrower or as a Treasury partner.
SAP AG
AC825
3-26
Business Partners: Standing Instructions
Transaction
authorizations
Payment
details
Business partner A
Derived
flows
Correspondence
SAP AG 1999
Standing instructions are general agreements made with a business partner for processing similar
types of transactions. You can access the business partner standing instructions for payment details,
correspondence, authorizations and derived flows using the tabs on the business partner maintenance
screen. The integration of the standing instructions with the business partner data means that the
release workflow for business partners can also be applied to the standing instructions. You can also
access the standing instructions using a separate menu path.
Agreements can cover:
Authorizations
Which financial transactions may be concluded with this partner?
Payment details
For transactions with business partner A ==>
Correspondence
Derived flows
SAP AG
AC825
The system proposes the payment details for

business partner A in the transaction
Fixed setting: Which correspondence is
generated for which transactions?
Fixed setting: If the transaction with business
partner A contains flow X, add taxes
amounting to y% of X.
3-27
Business Partner - Transaction Authorization
Partner
authorization
Business partner A
Assign
Treasury
Authorization
Money market
Fixed-term dep.
51 A
100
200
Fixed-term dep.
Investment
Borrowing
Deposit at notice
52 A
100
200
Dep. At notice
Investment
Borrowing
SAP AG 1999
In order to make use of a business partner (BP), you must

create the BP,
release the BP for use and
authorize the BP as a partner for specific financial transactions.
You can only grant transaction authorizations if the business partner - once set up - is released and
is not designated for deletion.
The transaction authorizations control which financial transactions are permitted with a business
partner. You can assign transaction authorizations at the following levels:
Contract type
Product category
Product type
Transaction type
Each business partner must be authorized explicitly in each company code.
SAP AG
AC825
3-28
Basic Principles: Unit Summary
The definition and creation of master records is an

important prerequisite for the processing of Money
Market, Foreign Exchange and Derivatives
transactions.
You determine, for example, the authorizations,
payment details and correspondence requirements.
You can assign different roles to the business
partner.
By means of the transaction authorization, you
determine which financial transactions can be
carried out with a business partner.
You can create standing instructions for specific
business partners. These include payment details,
different methods of correspondence, and derived
flows.
SAP AG 1999
SAP AG
AC825
3-29
Data for the Exercises

Explanation of the symbols used in the exercises and solutions
Exercises
Solutions
Unit objectives
Business scenario
Tips & tricks

Warning or attention
Data in the exercises

Data
Data in the training system
Data in the IDES system
Company codes
TR00 to TR20
1000
G/L accounts
113100, 113105, 113113

113200, 113205, 113213
113100, 113105, 113113

113200, 113205, 113213
Treasury business
partners
DEUBA Deutsche Bank

CITI
Citibank
1000 Deutsche Bank
Grouping (CM)
BANKS, BANK-ACTUAL,
PERSONS, TOTAL
BANKS, BANK-ACTUAL,
PERSONS, TOTAL
Note:
Create transactions in UNI, CHF or USD. Exchange rates are maintained only in these
currencies.
Do not delete/change existing entries in Customizing. You must make new entries in
each case.
SAP AG
AC825
3-30
Exercises
Unit: Basic Principles
Topic: Basic Settings - Financial Transactions
At the conclusion of these exercises, you will be able to:

Set up a forward exchange product in SAP R/3 Treasury Management.
You would like to trade a new product in your Treasury department. To

do this, you need to introduce the product to your system.
1-1
Create your own product type - FOREX TRANSACTION.

The forex product type has the following ID: DXX (XX = Your group number), text
and short text: FOREXXX.
The new product type is assigned to the product category, 600 - Forex.
1-2
1-3
Based on your new product type, define a new transaction type for a forward exchange
transaction under the ID, GXX (XX = your group ID) FORWARDXX.
Transaction category is 100 - Forex transaction.
The back office processing category is Order-contract (00102).
The number range for the forward exchange transaction is 01.

Choose number range '02' for offers and number range '03' for simulations.
Posting release should be automatic - this means that the transaction does not have
to be released by a second user.
Check the predefined flow types for forex transactions.

Take a special look at charges, buying and selling.
Double click on a line to see the relevant details screen.
SAP AG
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3-31
1-4
Assign the following existing flow types to your transaction type, GXX (in
combination with your product type DXX):
Charges - Forex transaction (Incoming and outgoing)
Purchase - Forex (Incoming)
Sale - Forex (Outgoing)
F8 takes you to the next entry .
SAP AG
AC825
3-32
Solutions
Unit: Basic Principles
Topic: Basic Settings - Financial Transactions
1-1
Solution to the step: Defining your own foreign exchange transaction - product
type.
Customizing:
Treasury
Treasury Management
Foreign Exchange
Transaction Management
Product Types
Define Product Types
Button: New entries
Field name or data type
Values
Product type
DXX
(XX = Your group number)
Text
FOREXXX.
Short text
FOREXXX.
Product category
600
Save
1-2
Solution to the step: Defining your own foreign exchange transaction type.
Customizing:
Treasury
Treasury Management
Foreign Exchange
Transaction Types
Define Transaction Types
Button: New entries

SAP AG
Values
AC825
3-33
Product type
DXX
Transaction type
GXX
Transaction category
100
Number ranges - Transactions
01
Number ranges - Offers
02
Number ranges - Underlyings
No entry
Number ranges - Simulations
03
Processing category
00102
Automatic posting release
Set the flag
Limit group
602
Save
1-3
Solution to the step: Checking the predefined flow types.

Customizing:
Treasury
Treasury Management
Foreign Exchange
Flow Types
Define Flow Types
Take a special look at charges, buying and selling.
Double click on a line to see the relevant details screen.
SAP AG
AC825
3-34
1-4
Solution to the step: Assigning flow types to the new transaction type.
Customizing:
Treasury
Treasury Management
Foreign Exchange
Flow Types
Assign Flow Types to Transaction Type
Button: New entries
Values
Product type
DXX
Transaction type
GXX
Charges:
Flow type
0010
Direction
Purchase:
Flow type
1000
Direction
Sale:
Flow type
2000
Direction
F8 takes you to the next entry.

Save
SAP AG
AC825
3-35
Money Market
Contents:
Topic 1 Introduction to Money Market
Topic 2 Trading functions
Topic 3 Back office functions
Topic 4 Accounting functions
Topic 5 Special functions
Topic 6 Special Features of Deposit at
Notice/Commercial Paper/
Cash Flow Transactions
Topic 7 Information system
SAP AG 1999
SAP AG
AC825
4-1
Money Market: Unit Objectives

Perform trading and back office activities in Money
Market using the example of a fixed-term deposit
transaction
Use the tools that support processing and
Carry out the integration with Financial Accounting
and Cash Management
SAP AG 1999
SAP AG
AC825
4-2

Basic Principles
Money Market
Foreign Exchange
Derivatives
SAP AG 1999
SAP AG
AC825
4-3
Money Market: Business scenario
After you have made the necessary Customizing

settings and created the business partners in the
system, you would like to get an overview of the
functions in Money Market.
As a user, what must you enter in the trading area in
order to create a financial transaction?
How can you map your back office department in the
SAP R/3 System?
What additional functions exist?
How can you ensure the integration of Treasury
transactions in Financial Accounting?
SAP AG 1999
SAP AG
AC825
4-4
Introduction to Money Market (Topic 1)
Product types in Money Market

Analysis and trading process
SAP AG 1999
SAP AG
AC825
4-5
Money Market - Overview
Information system - evaluation reports
Money Market
management in R/3
Execution
of
Master data:
Basic settings
financial transactions
Business partners
Payment details
R/3 Financial Accounting
Correspondence
Currencies
SAP AG 1999
Before using money market management, you must maintain master data. You must
create your business partners, assign specific roles to them, and maintain transaction
authorizations,
set up standing instructions (correspondence, payment details) and, if necessary, release the
business partner.
You can then define money market transactions in the system.
There are numerous functions at your disposal in the system for position management of these
transactions.
All activities that lead to changes in the G/L accounts are automatically transferred to SAP R/3
Financial Accounting.
SAP AG
AC825
4-6
Money Market Product Types

Product types
instruments
Money Market
Securities
Hedging instruments
Loans
Fixed-term
deposits
Deposits at
notice
Commercial
Paper
SAP AG 1999
Money Market transactions are used to invest or borrow liquid funds in the short to medium term.
On the basis of surpluses or deficits determined in Cash Management, you can implement the
planning decisions in Money Market. The effects of these transactions on liquidity (with the
appropriate value date at the time of investment/borrowing and due date) are then shown directly in
Cash Management.
The product types in Money Market include:
fixed-term deposits (overnight deposits, time deposits)
deposits at notice
Commercial Paper
cash flow transactions
Cash flow transactions in Money Market enable you to represent a wide range of transactions. You
enter the term manually and also the cash flow that results from the particular structure of the
transaction. This includes position changes, expenses, revenues, and payments.
SAP AG
AC825
4-7
Time Deposits
Fixed-term deposits
Due date arranged from the outset
Fixed interest for the whole term (at least 30 days)
Rollover facility
Overnight Money
Term only lasts one day (current practice until further notice)
Deposit at notice
Concluded for an unspecified time period
Due date depends on the period of notice
SAP AG 1999
Fixed-term deposit trading (including overnight money and euro money) incorporates the transaction
types, fixed-term deposit investment and fixed-term deposit borrowing. If the authorized business
partners and corresponding payment details are already defined in the system, the only necessary
entries are structure characteristics and conditions.
When trading with deposits at notice, you carry out investment and borrowing without defined due
dates. The period of notice, the payment date, and the interest payment pattern are entered in addition
to the amounts and conditions.
SAP AG
AC825
4-8
Commercial Paper
Short-term, discounted bearer bond

No interest payments during the term
Term: 1 week to 1 year (on average 2 months)
Issuer and investor enter directly into a business relationship and
agree on a repayment amount which the debtor pays to the creditor
at the end of the term.
This repayment amount is discounted to the start of the term using
the required yield. The investor pays the amount calculated to the
debtor at the start of the term.
Banks act as 'DEALERS' without assuming the placing risk.
SAP AG 1999
Commercial Paper trading includes the purchase and sale of individual Commercial Paper tranches.
A characteristic of Commercial Papers is that no interest payments arise during the term. By entering
a nominal amount and the yield to be achieved, the payment amount that the investor has to pay to
the debtor at the start of the term is determined via discounting. The interest calculation can
alternatively be determined on the basis of a given rate.
At the start of the term, the cash flow shows the principal increase as the nominal amount together
with the discounting amount. At the end of the term, the repayment of the nominal amount is 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 .
SAP AG
AC825
4-9
Trading Functions (Topic 2)
Transaction and position management process

Financial transaction - initial screen
Additional functions
SAP AG 1999
SAP AG
AC825
4-10
Transaction and Position Management Process:

Fixed-Term Deposit
Release
Trading
Create order/contract
Rollovers
Reversals
Transaction history
Back office
Settlement/
checking
Netting
Reversals
Transaction history
Accounting
Postings
Payment
transactions
Accrual/deferral
Valuation
Reversals
User authorization
Limit management
SAP AG 1999
The organizational procedures of Treasury transaction management can be split up into several
levels:
You can create a Money Market transaction either as an offer or directly as a contract.
The activity sequence to be followed is dependent on the processing category you selected in
Customizing (with/without settlement).
Within transaction management, you can branch into partner management from each application in
order to create, display or change business partners and also to maintain their payment details.
Each activity within transaction management (contract, processing, etc.) can be analyzed in Cash
Management.
SAP AG
AC825
4-11
Trading: Entering a Fixed-Term Deposit
Financial transactions
are allocated to the related organizational unit
(company code) within your company.
various organizational structures possible for corporate groups
are concluded with a business partner

internal and external (banks) business partners
are concluded for a specific product/transaction type

product type and transaction type can be defined to suit the company
may be created with different processing methods
SAP AG 1999
In the Trading area, the main functions for entering and changing financial transaction data are
grouped together. To organize your financial transactions more efficiently, you first need to enter the
following basic data:
Which organizational entity (company code) is carrying out the financial transaction? Especially
in more complex organizational structures - such as central Treasury management - this assignment
allows you to distinguish between different corporate areas.
Which financial transaction is being carried out? This determines the product type and
transaction type as well as relevant processing rules.
Who are you concluding the financial transaction with? Each financial transaction is linked to a
business partner. The data stored for the business partner offers considerable scope for
rationalization. For example, if the business partner always uses the same bank and payment details,
these details can be automatically linked to the financial transactions. You can also restrict the
product types that may be traded with a particular business partner.
SAP AG
AC825
4-12
Trading Support
Partner
Business partner
management
Payment details
Correspondence
Derived flows
optional:
optional: Offer
Market data
Market
database
Contract
Entry and processing aids

- Standing instructions
- Copying functions
- Abbreviations
- Fast entry
- Collective/fast processing
Automatic checks
- Working day check
- Trader and partner
authorization
Valuation tools
- NPV calculator
- Option price calculator etc.
Dealing slip
Change document
Field selection control

SAP AG 1999
Within transaction management, there are various support tools available.

Using the Field selection control, you can control many of the visible fields. You can adapt the
"look" of TR Transaction Management to suit your business.
You group the visible fields into field groups according to different business criteria. Each of the
field groups available can be assigned an attribute. This then determines how the screen appears for
the user. This means that you can specify whether you want field groups to be suppressed, displayed,
or to be defined as required entries.
SAP AG
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4-13
Accounting Example
IDES
Bank
FTD
5 10m
10m
Curr. acct - IDES

1
1 10m
10m
FTD
1 10m
10m
1m
10m
6 10m
11m
10m
1m
11m
Interest paid
3
10m
Curr. acct - Bank
Interest earned Bank clearing account
1m
1m
2 10m
10m
1m
1m
5 10m
10m
1m
1m
SAP AG 1999
Initial assets - 10m

Fixed-term deposit 10m
Interest earned 1m
1. Fixed-term deposit
2. Bank statement for fixed term deposit amount / flow - clearing bank clearing account
3. Interest Payment
4. Bank statement for interest payment amount - clearing bank clearing account
5. Repayment
6. Bank statement for repayment - clearing bank clearing account
SAP AG
AC825
4-14
Creating a Financial Transaction: Initial Screen
Company code 1000
IDES AG
Product type
51A
Trans. type
100
Investment
Partner
Deuba
Deutsche Bank
Specifications
Currency
instead of currency of company code
Mast. agreement
Portfolio
External number assignment
Transaction
SAP AG 1999
To get to the Money Market start menu, choose Accounting -- Treasury -- Treasury Management -Money Market.
When you create a Money Market transaction, you represent a contract for the investment/borrowing
of short term funds. You enter which trading object (product type) should be invested or borrowed
with which partner in which currency.
SAP AG
AC825
4-15
Trader Authorization in the Company
As with trader authorizations for business partners

(external), you must assign trader authorizations
(internal) at the following levels:
Contract type
Product category
Product type
Transaction type
SAP AG 1999
By assigning transaction authorizations to traders, you can restrict trading authority to certain
financial instruments (e.g. Money Market), product categories, product types or transaction types.
Authorization for a higher level implies that a trader is authorized to create all transactions below
this level. A trader with authorization for the Money Market area, for example, is automatically
authorized to conclude a fixed-term deposit or deposit at notice. The assignment of an authorization
at the product category level, for example, thus includes the lower levels, product type and
transaction type.
To allocate trader authorizations, you must have created the trader in Customizing.
In order to perform evaluations on the transactions or positions of a specific trader, you can either
enter the trader's name manually on conclusion of a transaction or you can have it proposed
automatically depending on the user name. You can assign specific user data to the traders so as to
speed up the creation of transactions. This allows easier data entry and automatic checking of
transaction days and exchange rate entries.
Authorizations are assigned using the same logic as applied with business partner authorizations.
SAP AG
AC825
4-16
Creating a Fixed-Term Deposit Structure

Company code
1000
IDES AG
Product type
51A
Transaction type 100

Structure
Admin.
Tabs for
navigation
Investment
Payment details
Other flows
Cash flow
Memos
Status
Business partner ...

Investment
Term
Flow type
1100
Amount
1M
Principal increase
UNI
Start
08/10/YY
End
++2
Interest structure
Percentage rate 2,6
Int. calc. method act/360
...
...
SAP AG 1999
Flows are automatically generated when a financial transaction is created. For example, principal
increase, nominal interest, and final repayment are generated following the creation of a fixed-term
deposit.
The structure contains only product type-specific information such as the amount, term and interest
structure. You can use abbreviations for the amount and date entries (for example, m =million, t =
thousand, 0 = today, and ++2 = 2 months)
From here you can branch to the entry screens of general transaction management. Tab pages help
you navigate between the screens.
Administration:
Information on the portfolio assignment, on the account assignment reference for posting to the
asset balance sheet account.
Other flows:
The flows generated automatically can be added to by other flows (charges, commissions, etc.).
Status:
Information on correspondence, activity, and release status
...
Under payment details, you enter the relevant details for this transaction. If the payment methods are
maintained as standing instructions for a specific business partner, they appear as default values and
can be modified manually.
SAP AG
AC825
4-17
Fast Entry: Money Market
Financial transaction
Initial screen
Fast entry
Financial transaction
Basic data
SAP AG 1999
Using fast entry, you can create a financial transaction directly without having to access the initial
screen.
You can still branch to the the details screen as with normal entry.
SAP AG
AC825
4-18
Interest Structure
360E / 360
act / 360
:
360 / 360
Interest structure
Percentage level
2,6000
Int. calc. method
act/360
Frequency
At end of term
At end of term
On last day of month
Monthly
Daily
Every
Days/months
Capitalize interest
Shift due date back to end of term
WrkgDaysDueDate
WorkingDaysCalc
Calculat. period
Round
For rollover
Customizing
SAP AG 1999
The SAP R/3 System contains the most frequently used international interest rate calculation
methods for the trading area.
When defining the product type, you can make a corresponding Customizing entry for the interest
rate calculation method.
The Frequency specifies the time of the interest payment.
When you enter "Daily" or "Monthly ", the frequency in days or months must also be stated (for
example, monthly frequency = every three months).
In the transactions for (fast) entry and processing of fixed-term deposits and deposits at notice, you
can trigger the capitalization of interest using a checkbox. However, this checkbox is only displayed
if a condition of the type "interest capitalization" has been assigned to the relevant transaction type.
Optional suppression and displaying of detailed information as necessary.
(Suppression or display of the interest structure)
You can also calculate interest amounts exponentially. You can use exponential interest calculation
for the following product types:
* Money Market (fixed-term deposits, deposits at notice, cash flow transactions)
* Derivatives (Cap/Floor, Swap)
SAP AG
AC825
4-19
Interest Calculation Methods (1)
Example:
Example 360
03/31 incl. to 04/02 incl. = 2 days.
The 31st is not included.
12/01 incl. to 12/31 excl. = 30 days.

The 31st is normally not included so the addition of excl.
has no effect.
Example:
Example 360E
03/31 incl. to 04/02 incl. = 3 days.
03/31 is treated as the 30th and included because of the addition incl.
12/01 incl. to 12/31 excl. = 29 days.

12/31 is treated as the 30th but is not included because of the addition
excl.
SAP AG 1999
The interest calculation method is defined by the ratio DAYS/DAY BASIS and, as a factor of the
percentage calculation, results in the percentage calculation for the specific period.
The methods for calculating DAYS (number of days of each calculation period) are:
1. 'act'
The actual number of days (calendar days) between the two dates are calculated.
2. 'actW'
The number of working days in an interest calendar between the two dates is calculated.
3. 360
The number of days between the days M1/D1/Y1 und M2/D2/Y2 is provided by (Y2 - Y1) * 360
+ (M2 - M1) * 30 + (D2 - D1).
The month is calculated using 30 days and the 31st of each month is ignored for the purposes of
interest calculation.
4. 360E
The number of days between the dates M1/D1/Y1 and M2/D2/Y2 is provided by (Y2 - Y1) * 360
+ (M2 - M1) * 30 + (D2 - D1).
The month is calculated using 30 days, and the 31st of each month is seen as the 30th, that is, the
31st in D1 and D2 is reset to the 30th. This method is used on the Euromarkets.
SAP AG
AC825
4-20
Interest Calculation Methods (2)
Method
Characteristics
Counter
(Tage)
Denominator
(day basis)
Example
06/16 12/31/99
360/360
actual/360
actual/365
actual/366
30 days/month
360 days/year
360 days
per year
actual
calendar days
360 days
per year
actual
calendar days
365 days
per year
actual
calendar days
366 days
per year
195 days
198 days
198 days
198 days
Method
Characteristics
Counter
(Tage)
Denominator
(day basis)
Example
06/16 12/31/ 99
360E/360
actual/actualP
actual/actualY
actualW/252
30 days
per month
31. - > 30.
actual
calendar days
actual
calendar days
working days
of interest
calendar
360 days
per year
actual
calendar days
of a period
194 days
198 days
actual
252 working
calendar days of
days per year
a calendar year
198 days
141 days(*)
(*) eg..: Factory calendar Germany

SAP AG 1999
The following are defined as DAY BASIS:

1. "360"
Based on a year with 360 days.
2. "365"
3. "366"
4. "252"
Based on a year with 252 days (working days).
5. "actP"
"P" stands for "period" and means that the actual number of days in a period is used to calculate
the interest. The number of days in the period are multiplied by the number of periods in the year
to arrive at the rate for one year.
6. "actY"
"Y" stands for "year" and means that the actual number of days in a calendar year (365 days in a
normal year and 366 in a leap year) is used. If a calculation period comprises two calendar years,
and one of them is a leap year, the calculation is done in two parts.
SAP AG
AC825
4-21
Payment Details
Business Partner - Standing Instructions: Payment Details
Currency Payment
details - ID
House Account Payment

ID
bank
trans.
UNI
01
DB
GIRUN
......
USD
01
DB
GIRUS
......
Settler
Partner- Pmnt
bank-ID mthd
......
Fixed-term deposits: Payment details

Company code
Product type
Transaction type
D
+
-
Curr. Effective
UNI
UNI
FType
HBank Account ID Payment Payment reqt

DB
GIRUN
DB
GIRUN
SAP AG 1999
The bank and the bank clearing account to be posted to is determined using the house bank and the
account ID stored in the business partner's payment details.
The system supports multiple level payment methods. By entering a bank chain, you can process
payments via several banks. Up to three intermediate banks are supported.
SAP AG
AC825
4-22
Conditions of a Financial Transaction
Example: Fixed-term deposit:

Nominal interest 4% Interest / Frequency: 6 months
Final repayment
Changes in conditions:
Nominal interest
Nominal interest
Payment date
Int.
Amount
10/31/YY
04/30/YY+1
4%
5%
3,333.33
4,166.67
SAP AG 1999
The representation of financial transactions in SAP Treasury is carried out on the basis of the flow
and condition concept. Conditions are contractually agreed components of a financial transaction.
Condition types include different interest, dividend or repayment terms and these ensure that each
product type is allocated its appropriate structure characteristics. Condition types thus control which
structure characteristics are displayed when you create transactions of a specific product type.
Depending on its type, a condition position is characterized by amounts or percentages and
calculation bases as well as calendar data and date recording.
The principal task of conditions is the automated generation of flows. Therefore, the flow types that
you assign to condition types should show changes in the payment flows and should be elements of
the cash flow.
SAP AG
AC825
4-23
Cash Flow for a Fixed-Term Deposit

Variant
Description
1SAP01
Basic view
1SAP02
Due date view
1SAP03
Calculation view
1SAP04
Local currency view
1SAP05
Payment view
1SAP06
Accounting view
Select layout
Example:
Example Fixed-term deposit 1m
4% interest
Payment
date
Payment
amount
10/01/YY
12/31/YY
12/31/YY
12/31/YY
12/31/YY
1,000,000.00
225.00
3,000.00
10,000.00
1,000,000.00
Direction
Curr.
Flow type
+
+
UNI
UNI
UNI
UNI
UNI
1100
1801
1800
1200
1120
Principal increase
Reunification tax
Interest income tax
Nominal interest
Final repayment
SAP AG 1999
The cash flow provides the basis for

Postings
Effective interest rate calculation
Accrual/deferral of expenses and revenues.
Display of the cash flow:
Direction of the flow
Sorting the flows according to different criteria
Search and selection functions
Display of sums
Export functions
Direct selection of the desired view
(basic view, due date view, calculation view, local currency view, payment view, posting view)
Facility to store layouts
Direct editing of flows in the cash flow
SAP AG
AC825
4-24
Financial Transactions: Cash Flow
Basis for
Transaction
Transaction
Investment/
Investment/
borrowing
borrowing amt
amt
Actual
Updating cash management

Updating financial accounting by
flexible account determination
Triggering payments
Condition
Condition
Plan
Updating positions
Deferred interest
Foreign currency valuation
Cash flow (Example)
Yield calculation
Investmt 4/1/YY 1m
UNI occurred
Interest
7/1/YY 10 t
UNI expected
Return
7/1/YY 1 m
UNI expected
SAP AG 1999
The cash flow of financial transactions forms the starting point for all trading, transaction and
position management processes as well as evaluation activities within Treasury.
Financial mathematics is used to determine cash flows in Treasury.
The system provides a range of formulas and you can use these as "building blocks" to organize the
Treasury application flexibly.
In Treasury Management, application-specific control programs call up centrally-stored financial
mathematics function modules to calculate interest and repayment schedules etc.
On the basis of the conditions applying to a financial transaction, and also for a specified calculation
period, these financial mathematical function modules generate and (if appropriate) calculate a
sequence of flows called a cash flow (payment flow) for a financial transaction in the application (for
example, a stock purchase or SWAP).
SAP AG
AC825
4-25
Other flows
Flow type
Description
1901
Charges
1902
Commission
...
Direction
Payment amount
Currency
Payment date
Posting status and description
SAP AG 1999
The concept of flow types allows you to define additional flows - such as charges and commissions
(absolute or percentage) - for the individual product types. These are then recorded with the
individual transactions.
SAP AG
AC825
4-26
Derived Flows (Interest Income Tax)
From some original flows, you can generate new flows by

defining derivation rules.
Flow 1200 Interest
Derivation rule
Int. Income Tax
UNI 1,000.00
Int. 1800 Int.IncomeTax

Int. 1801 Soli
UNI
UNI
300.00
16.50
SAP AG 1999
On the basis of the flow types, further derived flows can be generated. In the case of nominal
interest, for example, tax flows can be generated automatically. These can then be shown in the cash
flow. In Cash Management, they lead to the display of the net cash flow.
You define the above derivation process 'IIT' (Interest income tax) in Customizing.
Example: Interest income tax of 30% (tax 1) is deducted from the nominal interest (flow type 1200),
and a local tax of 5.5% (tax 2) is deducted from tax 1 (that is, 1.65% of the nominal interest amount).
The interest condition in the transaction generates an interest flow of type 1200. At the same time,
the system adds other derived flows to the cash flow:
Interest income tax (flow type 1800)
Interest income tax (flow type 1801)
The derived flows are created separately for each business partner.
SAP AG
AC825
4-27
Collective Processing: Money Market

Overview of money market transactions that correspond to
the selection criteria entered
Processing the relevant transactions
Create
Change
Display
Roll over
Give notice
Settle
Reverse
History
Branch directly to the individual transaction

Link to the SAP List Viewer
SAP AG 1999
Collective processing facilitates the systematic management of transactions. All business activities
that you select according to common criteria are displayed with a list of short descriptions of each
transaction, and the necessary processing functions are available.
From the processing list, you can branch directly to an individual transaction at any time.
The connection to the SAP List Viewer provides you with a range of display options. You can
determine the columns or rows to be displayed, sort and sum as you wish.You can save these layouts
to use them again.
When you have finished processing a transaction, a Processing indicator is set.
SAP AG
AC825
4-28
Transaction Management:
Worklist and Collective Processing
Processing financial transactions for all product
categories
User-specific managing of financial transactions

Selecting and displaying Treasury financial transactions
Branching to individual transaction processing
Representing transactions using the SAP List Viewer
SAP AG 1999
You can process financial transactions across all of the following product categories:
Fixed-term deposits and deposits at notice
Commercial Paper
Cash flow transactions
Forex spot transactions and forward exchange transactions
Interest derivatives
OTC options
Futures
Securities
You can store any number of selections as variants and manage these in a tree structure either userspecifically or for all users.
The layout controls the structure of the list. You can store various information in a layout including
the following:
Column structure
Sorting criteria
Filter conditions
SAP AG
AC825
4-29
Utilities: Date Check
Calendar
Calendar
Standard factory calendar Germany
Date to be checked
Previous working day
Next working day
Start of term
End of term
04/04/YYYY Fr.
04/07/YYYY Mo.
04/05/YYYY Sa.
10/05/YYYY Fr.
SAP AG 1999
You can use the date check to establish whether a particular due date falls on a working day or not.
SAP AG
AC825
4-30
Financial Transactions in Cash Management

Assign planning levels
1000
IDES AG
51A
Fixed-term deposits
TB
Time deposits - banks
10
Contract
Cash Management: Display Levels

Banks
Lev
TB
...
Description
10/02
later
10/02 10/03
10/03 10/03
10/04 10/05
10/05 later
Time deposits
132,323 Xxx,xxx Xxx,xxx Xxx,xxx Xxx,xxx
...
...
...
...
...
...
OB Currency options Xxx,xxx Xxx,xxx Xxx,xxx Xxx,xxx Xxx,xxx

...
...
...
...
...
... ...
DB
Forex
Balance
Xxx,xxx Xxx,xxx Xxx,xxx Xxx,xxx Xxx,xxx

xxx.xxx xxx.xxx xxx.xxx xxx.xxx xxx.xxx
SAP AG 1999
Each activity (status) within a transaction (order, contract, settlement, etc.) is displayed automatically
in Cash Management. You can then view and analyze each activity using a separate level.
This way, the cash flows from Treasury transactions that have not yet been posted but whose values
are known can also be used for the cash manager's planning.
In Customizing, you must maintain the planning levels for the G/L and subledger accounts for the
display of the relevant product and activity types (or status). This is so that you can display a
contract, for example, at different levels corresponding to each activity.
SAP AG
AC825
4-31
Cash Flows in Cash Management

Cash Flow Treasury Management
Sept 01
Oct 01
Oct 01
1000- Fixed-term deps inv. 1,000

1120+ Final repayment
1,000
1200+ Nominal interest
200
Business partners
Planning groups
Business partners / Financial transaction

Payment details and house banks
E2 Domestic customers
Subledger accounts
TP F-term dep. Pers.
+ UNI
- UNI
Sept 01
- 1000
Oct 01
+ 1200
E2 Domestic customers
DB
DB
GIRUN
GIRUN
Bank accounts
TB F-term dep. Bank
DBGIRUN
Alternative 1
Alternative 2
Payment details
not known
Payment details
known
SAP AG 1999
Even when the payment details of a business partner are still unknown when you create a transaction,
and are only entered in back office, for example, the information relating to the transaction in Cash
Management is not lost.
The prerequisite, however, is an entry in the business partner's master data (financial planning
group). The transaction then appears under the grouping "persons" and not "banks".
SAP AG
AC825
4-32
Money Market - Exercise

Fixed-Term Deposit 1 and 2
SAP AG 1999
SAP AG
AC825
4-33
Offers For Fixed-Term Deposits and Foreign

Exchange
Offer
No.1
2.4%
Offer
No.2
2.7%
Offer
No.3
2.5%
Sorting by quality
Contract
Offer
No.2
2.7%
SAP AG 1999
Using the activity category Offer, you can group and store quotations from different banks with a
reference.
The offers are sorted according to their quality. You have the option of creating a contract directly
from an offer.
You have to create a separate number range for the transactions with the activity category Offer. In
Customizing for the transaction types, you assign this number range to the relevant transaction type
in the field "number range for offers".
You can use this function in the Money market area for fixed-term deposits and in the Foreign
exchange area for forex spot transactions and forward exchange transactions.
A special Evaluation report for offers, which you can configure to suit your company, tells you how
many offers were submitted, and how many of these resulted in a contract.
You can display offers using the Journal.
SAP AG
AC825
4-34
Simulation of Fixed-Term Deposits/Forex

Transactions
MRM
Creating simulated financial transactions

A business partner is not required for simulation
You manage simulations using a separate number range
You can create a contract from a simulation
Adding a business partner
SAP AG 1999
For forex transactions and fixed-term deposits, you can create simulated transactions with the
activity category Simulation.
You use simulated transactions for analysis purposes in Market Risk Management.
You can create a contract from a simulated transaction using the change function. To do this,
however, you must add a business partner, since simulated transactions are created without business
partners.
You manage simulations using a separate number range.
In Customizing for the transaction types, you assign this number range to the relevant transaction
type in the field "number range for simulations".
You can display simulations using the Journal.
SAP AG
AC825
4-35
Back Office Functions (Topic 3)
Transaction process
Settlement/checking
Correspondence
Confirmation/Counterconfirmation
Netting
Customizing settings
SAP AG 1999
SAP AG
AC825
4-36

Fixed-Term Deposit
Release
Trading
Rollovers
Reversals
Transaction history
Back office
Settlement/
checking
Netting
Reversals
Transaction history
Accounting
Postings
Payment
transactions
Accrual/deferral
Valuation
Reversals
User authorization
Limit management
SAP AG 1999
Control and change functions are brought together in back office processing - this means that the
entries can be checked and, if necessary, be changed here. When a financial transaction is settled, it
is completed and checked.
A contract is settled in back office. Here, the contract data can be supplemented with posting and
payment-relevant information.
By saving the settlement activity, the system changes the activity category of the transaction in order
to document its control and processing in back office processing.
If a transaction has activity category 'WITH settlement activities', the contract can only be posted
after the settlement.
The company-specific characteristics refer to the modeling of activity chains whereby the processing
order of a financial transaction is controlled via processing categories or status transfers.
SAP AG
AC825
4-37
Back Office
Accounting
Back office
Correspondence
Confirmation
management
(incoming/
outgoing)
Confirmation
Managing
positions
Collective processing
Netting
Referencing
Interest rate changes
Securities account
changes
Capital change
activities
Transaction
processing
Settlement/Check
Payment details
Payment details
Curr.
...
Bank
...
Acct
...
Confirmation
SAP AG 1999
Depending on the way in which your company is organized, financial transactions can be forwarded
to the Back office area once they have been created in Trading. Back office processing contains
checking and change functions - any entries made can be checked here and changed if necessary.
Post-processing includes the following functions:
Enhancing transaction data, for example, adding information that is relevant for the back office.
Preparing postings and payments, for example, checking the accounts that are used later on in the
automated processes. If you have not already done so, you must now assign an account
assignment reference and payment details to the financial transaction. Without this information,
the Treasury flow cannot be posted in Financial accounting (see account assignment reference).
Generating correspondence in the form of dealing slips, letters of confirmation, or confirmation
files.
By saving the settlement activity the system changes the activity category of the transaction to record
that it has been checked and processed in the back office.
SAP AG
AC825
4-38
Transaction Settlement / Checking
Account assignment reference

DB000001 Deutsche Bank
Fixed-term deposit
G/L account: 113113
Transaction: Payment details

Company code
ZahlungsProduct type
verbindungsTransaction
type
ID
D 01
Curr.
- UNI
+ 01
UNI
1000
51A
Regu100
lierer
Zahl- Zahlungs- Haus- KontoFixed-term deposit

Partnerweg vorgang bank ID
Investment
bank-ID
Effective FType HBank

Deuba
Deuba
Acct ID Pmnt Pmnt req. DB

GIRUN
GIRUN
DB
GIRO
USD
SAP AG 1999
Just as in Trading, you can call up information on entered transactions or make corrections to them.
You can check, change, or add information that is relevant for posting and payment. If you have not
already done so, you must now assign an account assignment reference and payment details to the
financial transaction. Without this information, the Treasury flow cannot be posted in Financial
accounting (see account assignment reference).
You can have the account assignment reference or the payment details for the particular business
partner appear as default values. You can then change or add to these.
SAP AG
AC825
4-39
Transaction History
History: Acitvity sequence
Activity
Verwaltungsdaten
Bukr 0001 SAP AGGeschft4711
Vorgang 1
Part 51a
Grunddaten
Vorg.TypOrder
Gart 100
Bukr 0001 SAP AG Geschft 4711
Vorgang 1
Part 51a
Vorg.Typ Order
Gart 100
Active
status
Order
10/01/YY Replaced
Contract
10/02/YY Replaced
Settlement
10/02/YY Replaced
Rollover
Settlement
...
Order
Date
Act. category
Contract
Verwaltungsdaten
Bukr 0001 SAP AG Geschft4711
Vorgang 1
Part 51a
Grunddaten
Vorg.Typ Vertr.
Gart 100
Bukr 0001 SAP AGGeschft4711
Vorgang 1
Part 51a
Vorg.Typ Vertr.
Gart 100
10/31/YY Replaced
11/30/YY
Active
...
...
...
Settlement
Verwaltungsdaten
Bukr 0001 SAP AGGeschft 4711
Vorgang 1
51a
Part
Grunddaten
Vorg.Typ Abrech.
Gart 100
0001 SAP AGGeschft 4711
CC
Vorgang 1
Part 51a
Vorg.Typ Abrech.
TType 100
Rollover
Verwaltungsdaten
Vorgang 1
Part 51a
Grunddaten
Vorg.Typ Prol.
Gart 100
Vorgang 1
Part 51a
Vorg.Typ Prol.
Gart 100
Settlement
Verwaltungsdaten
Vorgang 1
51a
Part
Grunddaten
Vorg.Typ Abrech.
Gart 100
Vorgang 1
Part 51a
Vorg.Typ Abrech.
Gart 100
SAP AG 1999
The History function enables you to view the previous activity sequence for a selected transaction.
You can call up a list of the activities and these are either active, reversed, or have been replaced by a
subsequent activity.
The transaction history allows you to trace each activity (status) and its corresponding details.
The system also stores significant changes to transactions in change documents. This provides a
record of how and when a specific user has corrected or changed the structure characteristics of any
transaction.
SAP AG
AC825
4-40
Correspondence
Confirmation
Confirmation
Internal
External
Fax
E.g. Confirmation
letters, via fax, e-mail,
SWIFT, Idoc
E.g. Dealing slips
SAP AG 1999
Correspondence serves to document and reconcile financial transactions that have been concluded.
You can define internal correspondence types (such as dealing slips) and external correspondence
types (such as confirmations). By performing a correspondence run, you can confirm all the financial
transactions you have concluded with a partner in a given period. You can print the correspondence
data or have it sent directly from the system by fax. You can also use e-mail and Idoc. To send emails, you must set up the communication interface SAPconnect. For money market and foreign
exchange transactions, you can generate SWIFT files MT320 (fixed-term deposits) and MT300
(forex). A user exit allows you to use the FX Match function for outgoing confirmations.
You can control the correspondence types for external correspondence in the partner-specific
standing instructions for correspondence. The control of internal correspondence types is
independent of the business partner.
You determine exactly when correspondence is carried out via the Customizing settings for product
and transaction types and activities. You can also specify whether correspondence should be
generated automatically when a transaction is created, changed, or reversed (that is, as soon as the
transaction is saved). All correspondence is recorded in the financial transaction data.
The system also keeps a record of the confirmation status in the transaction. This includes
information about when the confirmation was sent/received, the relevant activity, the clerk, the form
used, and the output type of incoming or outgoing confirmations.
SAP AG
AC825
4-41
Confirmation Management
Distinction between outgoing confirmation and

counterconfirmation
You can view the confirmation status for
correspondence within the transaction under the Status
tab
You can control status management for
counterconfirmation for each business partner in the
standing instructions and in Customizing
Monitoring of overdue counterconfirmations
Optical archiving of correspondence
Correspondence overview and correspondence monitor
SAP AG 1999
You can define for each business partner (in the standing instructions) whether or not
counterconfirmation is required for external correspondence.
The system updates the confirmation status of the business transaction on the Status tab page:
executed, reconciled (counterconfirmation has been received and matched).
You can archive correspondence letters optically. To do this, you must have set the 'Archiving
(Optical archiving)' indicator in Customizing (choose "Define Correspondence Types") for each
correspondence type you require. However, you need to use an external optical archiving for this.
You access the archived correspondence from the transaction display. If you are in the
display/change mode for a transaction, you can also display the correspondence activities by
choosing Goto. By double-clicking a line, you activate the archive link monitor and display the
document.
Besides the existing correspondence overview, the correspondence monitor provides new processing
and monitoring functions.
You have an overview of the current processing status
You have the option of setting the counterconfirmation status to "matched" directly from the
monitor (manual match)
You can execute planned correspondence directly from the monitor
You can repeat correspondence that has already been generated ...
SAP AG
AC825
4-42
Customizing Correspondence
1.) Defining correspondence types
Correspondence Type
Field Label
001
Confirmation
General
Internal Correspondence Type
E Archiving (Optical Archiving)
E Suppress Initial Reversal Correspondence
Language
...
2.) Defining correspondence activities

Company Code
1000
Money Market: Forms
...
PType
Ptype name
TTyp ACat Corresp.typ
51 A
51 A
51 A
51 A
Fixed-term deposit Ext.

100
100
100
100
10
10
11
11
001
002
001
002
Form
F_TR_CONFIRM_ALL
F_TR_DEALER_ALL
F_TR_CONFIRM_ALL
F_TR_DEALER_ALL
Aut.C
CCon.
E
E
3.) Changing message control

for example, 6 Confirmation and counterconfirmation not yet carried out
SAP AG 1999
You define the relevant correspondence types (such as confirmation, dealing slip) in Customizing
under Functions --> Correspondence --> Define Correspondence Types.
The Internal correspondence type indicator determines whether the correspondence type should be
external (allowing partner-specific settings in the standing instructions) or internal (independent of
the partner).
You then define the correspondence activities for the respective area and company code. In this
Customizing step, you also specify whether counterconfirmation is required.
You can change the correspondence forms using the SAP word processing program SAPscript. If
you change the existing forms in SAPscript and save them under a new name, you must maintain the
new forms in the Customizing step Define Correspondence Activities.
Message control enables you to influence transaction processing. You can set up the system to ignore
messages or checks depending on the user, or to block further processing by defining error messages
(E messages).
SAP AG
AC825
4-43
Confirmation Letters
Creating correspondence on the basis of planned records
Selections
Company code
Transaction
Correspondence type
Product type
Product category
Transaction type
...
Business partner
Portfolio
Trader
End of term/due date
Entered/changed on
Entered/changed by
1000
to
?
to
to
...
SAP AG 1999
The generation of correspondence is built up from planned records. These are created on the basis of
your Customizing settings and standing instructions for correspondence when you create, change, or
reverse transactions, for example.
You go to the selection screen for calling up confirmation letters by choosing Back office -Correspondence -- Outgoing Correspondence.
You can select transactions to be confirmed.
The confirmation letters that are generated appear in the display in order. You can print them out if
required.
SAP AG
AC825
4-44

Settlement and Correspondence
SAP AG 1999
SAP AG
AC825
4-45
Netting 1
In the case of transactions with business partners that are
not house banks (that is, they require an exchange of
payments), situations can arise where several transactions
are to be settled at once.
Example: Fixed-term deposit investment in UNI and fixed-term deposit
borrowing in UNI
You balance the amounts to be paid and only pay or receive the net
amounts
Advantage: Saving transaction costs or bank charges
For this purpose, transactions can be summarized in

netting transactions".
SAP AG 1999
You can net transactions in the money market, foreign exchange, derivatives and securities areas, or
across several of these areas.
As a result of the integration of securities into Treasury Transaction Management, you can now
create netting transactions with securities. These transactions can be netted with each other or in
combination with other Treasury transactions from the money market, forex or derivatives areas.
SAP AG
AC825
4-46
Netting 2
When netting is used

All netting transactions are explicit arrangements
between the business partners in order to simplify
the handling of payments.
When transactions are confirmed (correspondence)
they are linked to the other related transactions.
Confirmation
Result of netting
Transactions are blocked against changes to relevant fields
(especially due date, amounts, house bank and payment data).
The transactions (or their payment requests) receive a matching
grouping term.
SAP AG 1999
Payment requests have a special "Grouping term" field. You can use this field to control which
payment requests are to be kept separate.
All payment flows and/or their payment requests belonging to the same netting transaction are
assigned the same unique grouping term and are, therefore, separated from other payment requests.
These are not to be combined with other payment requests.
Transactions linked by netting are referenced to each other by way of object links (reference key:
CMP).
SAP AG
AC825
4-47
Netting and Payment Requests
Contract
Verwaltungsdaten
Bukr
Part
Gart
Bukr 0001
SAP AG
51a
Part
Grunddaten
100
Gart
SAP AG Geschft
0001
Vorgang
51a
Vorg.Typ
100
Netting
Settlement
Verwaltungsdaten
Geschft
Vorgang
Vorg.Typ
4711
1
Vertrag
4711
1
Vertrag
Bukr
Part
Gart
SAP AG
Bukr 0001
51a
Part
Grunddaten
100
Gart
SAP AG Geschft
0001
Vorgang
51a
Vorg.Typ
100
Geschft
Vorgang
Vorg.Typ
4711
1
Abrech.
Posting
Kompensation anlegen: Daten

4711
1
Abrech.
Typ
Nr
Partn
KMP
001
DB
Komp.
Valuta 01.01.97
Deutsche Bank
Netting
Transactions
TR
TR
Treasury: Buchung von Bewegungen

Testmandant
Walldorf
Accounts
FI
Treasury: Buchungen
Protokoll
Payment
requests
FI
SAP AG 1999
The decision to create a netting transaction is usually made shortly before the due date of payment
flows, often on the same day the transactions involved are posted. Only then do you know which
transactions (e.g. forward exchange and spot exchange transactions) are suitable for net payment.
SAP AG
AC825
4-48
Business Partner - Payment Details
Business partner
Standing Instructions
Currency ......
Payment
details
UNI
......
USD
......
Individual
payment
X
Same
Pmnt Group
direction mthd determ.
X
Determinegrouping (text)
Combine all
Combine only within

netting transaction
SAP AG 1999
Using the "Payment request" flag, you control whether transactions can be settled together.
The "Determine grouping" field controls which restrictions are to apply to the grouping of
transactions - for example:
all transactions
all transactions within a netting
all transactions within the Foreign Exchange module.
SAP AG
AC825
4-49
References Between Treasury Transactions
Transaction 1
BID
EUR
KMP
OPT
PRL
REF
SWP
Transaction 2
Offer
Euro transaction curr. changeover
Netting
Option reference - derivatives
Rollover of forex transactions
General reference
Foreign exchange swap
SAP AG 1999
To document the links between Treasury transactions or objects, you can define links in the
administrative data of a transaction. To do this, you use fields in which you can enter any reference
terms or numbers and then select these for subsequent evaluations.
A reference between Treasury transactions documents a relationship between "n" transactions. The
reference category establishes the meaning of a reference.
Some references are formed automatically. These include relationships between transactions that are
a result of processing activities (rollover) or that are elements of a transaction (currency swap).
Other references are created by the user (netting).
You can create and process all references under Collective processing: References. Using the SAP
List Viewer, you can flexibly modify layout and sorting and, if necessary, store different layouts.
SAP AG
AC825
4-50
Automatic / Manual Posting Approval
Product type
Transaction type
X
Posting approval
Automatic !
Approval
Trading
Settlement
Accounting
SAP AG 1999
For organizational reasons, manual posting release must be carried out by a second user.
If the "x" is flagged, the posting release occurs automatically, that is, the transaction does not have to
be released by a second user.
SAP AG
AC825
4-51
Money Market - Netting Exercise
SAP AG 1999
SAP AG
AC825
4-52
Accounting Function (Topic 4)
Transaction process
Posting
Posting overview
SAP AG 1999
SAP AG
AC825
4-53

Fixed-Term Deposit
Release
Trading
Rollovers
Reversals
Transaction history
Back Office
Settlement/checking
Netting
Reversals
Transaction history
Accounting
Postings
Payment
transactions
Accrual/deferral
Valuation
Reversals
User authorization
Limit management
SAP AG 1999
After the transactions are entered in Trading and checked and completed in Back office, their
accounting processing takes place. Functions for the transfer to Financial accounting - such as
posting reports or posting in position management are brought together here. Treasury relies on some
Financial accounting functions. Financial transactions and positions must be handled accurately to
guarantee the correctness of the final accounts. Accounting, therefore, incorporates tasks such as the
periodical accrual/deferral of expenses and revenue as well as valuation activities.
You can only post transactions that have achieved contract or settlement status (depending on the
back office processing category) at internal level (system level).
If you do not yet wish to post certain flows caused by the financial transaction, you can block the
posting of these flows.
SAP AG
AC825
4-54
Accounting
Fixed-term deposit 1 Month 4.5
Sept 01
1100 -
F-term deposit inv.
1,000,000
Oct 01
1120 +
Final repayment
1,00,000
Oct 01
1200 +
Nominal interest
3,750
Selection of the financial

transactions or flows to
be posted
Interface FI
Financial accounting
SAP AG 1999
The Treasury information required for posting is transferred to Financial accounting via an interface.
The posting logic is based on the flow types generated, the account assignment reference taken from
the financial transaction, and the account determination defined by the user.
Individual flows can be posted either via customer accounts or G/L accounts. Payment transactions
are generally posted to corresponding clearing accounts. You can then process the items on these
clearing accounts using the functions provided by Cash Management (account statements) or
Financial accounting (payment program). For Money Market, Foreign Exchange and Derivatives,
you have the option of using an extended payment program (payment requests). In this case,
Treasury first generates payment requests which are then paid individually or jointly using the
payment program. The following four combinations are possible:
G/L accounts without payment requests
G/L accounts with payment requests
Customers without payment requests
Customers with payment requests
SAP AG
AC825
4-55
Processing Payment Transactions
... via clearing accounts

Fixed-term deposit account
(Deuba)
House bank account

(Deuba)
100 m
100 m
IDES
F-term
deposit inv.
inv.
House bank
DEUBA
Bank clearing account

100 m
F-term deposit investment
100 m
Account statement from

bank
SAP AG 1999
In the case of financial transactions that are concluded with business partners that are also the house
bank of the company, active payments are not usually made.
Rather the corresponding postings on the business partner side (= the house bank) are posted to the
bank account. The flows "preposted" to the bank clearing accounts are then cleared with the aid of
the electronic account statement.
SAP AG
AC825
4-56
Postings: Account Assignment Reference
FT dep. transactionDate
Sept 01
1,000,000.00
Term 1 month
Deutsche Bank Nominal int. 3.5%
UNI
Company code 1000

Acct asst ref. Short text
Deutsche Bank Deposit at notice
DB000002
DB000001
.
.
.
Deutsche Bank FT deposit

Detail info
Business area
Cost center
.
.
General ledger
113113
SAP AG 1999
The account assignment reference determines the G/L account (balance sheet account) to which the
financial transaction is to be posted. Different account assignment references allow you to have a
differentiated balance sheet structure.
As well as entering the account for position management in the account assignment reference, you
can also assign a cost center (only relevant for posting category 4) and a business area.
The account assignment reference is part of account determination, which you can set up in
Customizing according to the currency and/or account assignment reference. This flexibility enables
you to structure postings in different ways. For example, in the account determination for revenue
and expense postings for securities (depending on the account assignment reference), you can see
whether the securities were issued by affiliated or unaffiliated companies.
For Money Market, Foreign Exchange, Derivatives and Loans, the account assignment reference is
defined directly for each financial transaction. For Securities, however, the account assignment
reference is included in the position indicator in each case.
SAP AG
AC825
4-57
Customizing Account Determination
Money Market
Functions
Accounting
Application
Chart of accts
Account determination
Define Settings
Check
3
4.1.1
4.1.3
4.2.2
4.2.3
4.2.4
Accounts Symbols
0105
Treasury: Money market
Flow type
1100
Payment transactn +
1
3
+
+
+
+
+
+
++++++++++5
273100
220000
479100
465000
465001
...
Comp.
40
50
SA
+
+
+
+
+
+
Account symbol
Acct symbol Description
Posting specifications
Direction
Debit
Credit
Document type
Treasury: Money market

Chart of accounts - International
Account assignment
Acct symbol Acct assignment ref. Currency G/L account
Chart of accounts
Application
0105
INT
Balance
Bank clearing
Posting cat. 13
Bank clearing
4.1.1
Interest received
...
SAP AG 1999
You define Account determination for the relevant application in Customizing.

You use the account determination function to specify which accounts you want to use for posting
activities. It includes the posting specifications, the account symbols used for this, and the accounts
assigned to the symbols.
The following requirements must be met before you can post transactions to Financial Accounting:
You must have created all the necessary accounts and made the correct settings
The document types must appear in the document types table and allow the required account types
to be posted to
The number range linked to the document type must have an internal number assignment in
The posting period must be open for posting.
SAP AG
AC825
4-58
Transferring Data to Financial Accounting using

the Posting Function
Application
Foreign exchange
Money market
Derivatives
Securities
POSTING LOG
General selections
Company code
Transaction
Product type
Transaction type
Portfolio
Currency
Flow classification
Up to and including due date
Only post flow acc. to currency
...
Posting control
Posting date
Document date
Test run
SAP AG 1999
Through posting, the settled financial transactions are transferred to Financial accounting. You can
only post transactions that have achieved contract or settlement status (depending on the back office
processing category) at internal level (system level).
Prior to posting, the transaction flows and/or positions to be posted are selected. The user can let the
system carry out a test run in order to check the accuracy of the posting entries in the posting log.
When posting is carried out, the transfer of flows and corresponding documents to Financial
accounting takes place.
Posting in SAP R/3 Financial Accounting occurs online.
The FI document numbers are also displayed.
With posting, a posting log is generated. By double-clicking on a posting line, you access the
respective posting document.
If you do not yet wish to post certain flows caused by the financial transaction, you can block the
posting of these flows.
SAP AG
AC825
4-59
Posting a Transaction: Summary

Fixed-term
Fixed-term deposit
deposit 11 month
month 4.5%
4.5%
Sept 01
Oct 01
Oct 01
1100 1120 +
1200 +
Fixed-term deposit
Final repayment
Nominal interest
Acct
Acct assignment
assignment ref.
ref. DB000001
DB000001
1,000,000
1,000,000
3,750
Balance
Balance sheet
sheet account
account
acc.
acc. to
to acct
acct assignment
assignment reference
reference
Posting
Posting specifications
specifications
Flow
Flow type
type
Fix.-term
Fix.-term dep.
dep. acct
acct 113113
113113
Deposit
D
1,000,000
Final
repayment
1100 -
Deb bal. sheet Credit bank
1120 +
Debit bank
Credit bal. sheet
1200 +
Debit bank
Credit int. earned
Interest
Interest earned
earned 273100
273100
Bank
Bank clearing
clearing acct
acct 113105
113105
C
1,000,000
D
FT deposit
Nominal int.
Final
repayment
3,750
C
1,000,000
D
Nominal
interest
C
3,750
1,000,000
SAP AG 1999
When financial transactions (Money Market, Foreign Exchange, Derivatives, Securities, Loans) are
processed, they result in business transactions which have to be entered in the accounting system.
These automatic postings and the corresponding offsetting entries in FI accounts may be carried out
online.
The posting of individual business transactions is controlled by the posting specifications. These
specifications contain the rules for posting and account determination for each flow type. You make
these settings during Customizing.
The flow type determines the correct posting specifications for each flow that is to be posted.
The document type and the posting keys for the debit and credit side of the posting included in the
posting specifications represent control information which is passed on directly to the Financial
Accounting module. In addition, the posting category and the account symbols in the posting
specifications are used to determine the actual G/L and subledger accounts via the Treasury posting
interface.
From the display of an accounting document (for example, FI document), you can display the
original posting in Treasury. To do this, go to the menu option Environment in the display for the FI
document in the general ledger (Display document function, Transaction FB03) and choose
"Original document". This results in an overview of the flows in Treasury which gave rise to the
posting in Financial Accounting.
SAP AG
AC825
4-60
Treasury Management and Cash Management
Fixed-term
Fixed-term deposit
deposit
Via
Via activity
activity at
at
fixed-term deposit level
Post flows to
clearing account
Change to
clearing accounts
Clearing entry via

account
account statement
statement
Change to
bank
bank account
account level
level
SAP AG 1999
Here, you can see a typical process describing the interaction between Treasury and Cash
Management and also the posting in Financial Accounting.
Payments are usually triggered by the business partner (bank) and processed further via automatic
bank statements in Cash Management.
SAP AG
AC825
4-61
Transfer to Financial Accounting Logical Sequence

1000
IDES AG Sample co.
51A
Fixed-term deposit
TB
Time deposits - banks
10
Contract

Banks
Le
Description
10/02
later
10/02 10/03
10/03 10/03
10/04 10/05
10/05 later
Time deposits
TB
...
...
B5
...
...
F0
...
Clearing
Balance
...
...
...
...
Banks
...
...
...
...
...

Xxx,xxx Xxx,xxx Xxx,xxx Xxx,xxx Xxx,xxx
SAP AG 1999
Cash flows resulting from the transactions - whether already posted or not - become apparent for
planning in Cash Management as soon as the transactions are entered.
In Customizing, for each product type and activity category (or status), you must maintain the
planning levels for G/L and/or subledger accounts where the information is to be displayed.
Example:
Concluded deposit at notice transaction:
Level TB - Deposit at notice
(pre-)posted deposit at notice transaction:
Level B5 - Bank clearing account
After receipt of the bank statement:
Level F0 - Bank account
SAP AG
AC825
4-62

Accounting
SAP AG 1999
SAP AG
AC825
4-63
Posting Using the Payment Program

Current
parameters
Payment
control
Master
Payment
request
Proposal
Proposal run
run
Documents
Proposal data set
Edit
proposal
Payment
Payment run
run
Print data set
Print
Print program
program
Check
Bank transfer
Eurocheck
Advice
note
Payment
summary
Idoc
SAP AG 1999
In connection with account determination in the Treasury posting interface, you can control whether
payment activities involve a flow of funds.
The payment program has the following functions:
Automatic selection of payment requests
Generation of payment lists and logs
Generation of payment documents (vendor accounts/customer accounts/G/L accounts)
Generation of payment media (forms, advice notes, disks).
Usually, your first step is to activate a payment proposal run. The run creates a proposal data set
which you can check and edit before the actual run.
There are two different payment programs available:
The standard Financial Accounting payment program settles the open items in the debtor/creditor
area whereas
The extended payment program handles not only the postings in the debtor/creditor area, but also
covers G/L accounts.
SAP AG
AC825
4-64
Processing Payment Transactions
...using a clearing account for payment requests

Fixed-term deposit
Fixed-term deposit
account (broker)
House bankaccount (Deuba)
100 m
50 m
House bank
DEUBA
100 m
50 m
Broker
Payment
order
150 m
Payment request
clearing account
150 m
IDES
Payment

150 m
1st fixed-term deposit

2nd fixed-term deposit
150 m
Payment
(trigger payment request run)
Bank statement
SAP AG 1999
If you conclude transactions with a partner for whom you do not have a house bank account, you can
generate payment requests which are processed by a special payment program. This option applies to
cases where the payment details are known, but where you do not want each transaction to result in a
physical payment. This function also enables you to make joint payments for groups of transactions.
Examples of use of the extended payment program:
Several transactions are concluded with a business partner that is not a house bank
When a fixed-term deposit is posted, a payment request is generated simultaneously
All transactions are managed in the payment request clearing account
Payments can be grouped together/netted
When payment is due, a payment run is triggered in Accounting and the payment amount is
transferred to the bank clearing account
A payment medium is generated simultaneously and is passed on to the house bank
When the bank statement is received a day later, the payment amount is posted to the bank
account.
SAP AG
AC825
4-65
Posting Overview
Transaction data
Posting data
Transaction number
Flow type
Due date
Document number
Product type
Fiscal year
Transaction type
Posting date
Amount
Account assignment
reference
...
Currency
Direction
...
SAP AG 1999
In the transaction data area, the posting overview contains information about the underlying financial
transactions. In the posting data area, the overview contains data on the flows and, if applicable, the
posting document numbers.
Besides using the Money Market, Forex, and Derivatives posting journal to analyze posted flows,
you can also use it to evaluate reversed flows and those designated for reversal.
determine the columns or rows to be displayed, sort and sum as you wish.You can save these layouts
to use them again.
SAP AG
AC825
4-66
Special Functions (Topic 5)
Changes in capital structure

Effective interest rate calculation and update
Archiving financial transactions
Rollover / fast processing
Reversal
Accrual/deferral
Workflow
SAP AG 1999
SAP AG
AC825
4-67
Fixed-Term Deposits and Deposits at Notice:

Changes in Capital Structure
Capital structure changes
at start of term
at rollover
during the term

w
Ne
Advantage:
Greater flexibility when representing the transactions

(e.g. creating repayment schedules)
Button behind the amount field
Automatic inclusion in cash flow
SAP AG 1999
For fixed-term deposits and deposits at notice, you can enter other principal increases and decreases
during the term in addition to the main flows at the start of term or on the rollover date. This enables
you to represent repayment schedules, for example.
SAP AG
AC825
4-68
Effective Interest Rate Calculation and Update
The effective interest rate

is determined by the system and
updated in the database
Condition: You must specify an effective interest

method when you define the product type
You can use the effective interest rate for
evaluations in reporting
Calculation and display of the effective interest
rate (using all available effective interest methods)
when processing transactions
SAP AG 1999
Definition of effective interest rate:

Expression of the profitability/costs of a capital investment or borrowing. Besides the nominal
interest, the effective interest rate calculation also takes account of charges, clearing dates,
discount/premium, and repayment modalities.
In the Money Market area, the effective interest rate is calculated and updated to the database during
transaction processing if you specify an effective interest method when you define the respective
product type. In this case, the effective interest rate can be used for evaluations in reporting.
For transactions that were entered before Release 4.6A, a report is available (RFTMEZ00) that
enables you to calculate and update the effective interest rate.
SAP AG
AC825
4-69
Archiving Basics
Background
Continual increase in the end user's volume of data
Poor performance caused by database overloading
Investment costs caused by new hardware requirements
Demands on archiving
Storing financial transactions outside the R/3 System
Deleting and reloading the archived data in the R/3 System
Automatic conversion if table structures are changed
Online archiving and archive management
Compression of data
Link to external archiving systems
SAP AG 1999
Archiving data allows you to remove mass data from the database if it is no longer required in the
system, but where it must be available for evaluation purposes. Transactions are written to archive
files via Archiving objects. These objects describe the structure and composition of the data. These
files can then be stored in other media.
SAP's archiving concept is based on the Archive Development Kit (ADK). If you start the archive
management function via the application, the special features that are specific to the application
(archiving objects, programs) are already preconfigured..
The archiving program first generates an archive file. The files to be archived are then read in
background processing and written to the archive file.
Once the archive file has been closed, a program is started - automatically or manually - which reads
the archived data from the archive file and deletes it from the database. This procedure guarantees
that only the data that has been stored correctly in the archive file is deleted in the database.
Archive files, whose contents were removed from the database by the deletion program, can be
stored externally. There are several options available (depending on the hardware you have), for
example ArchiveLink. If the archive system of a third provider is connected via ArchiveLink, this
system has to automatically store the processed file at the conclusion of a successful deletion
program. You can also store this file manually at a later date.
SAP AG
AC825
4-70
Archiving of Money Market, Forex, and Derivative

Transactions
The transactions to be archived must fulfill the following
criteria before they may be archived:
They must have exceeded the minimum retention period as
set in Customizing:
Define the minimum retention period per company code
Define the minimum retention period per product type
The current transaction must already be settled (see
Customizing transaction types) or the transaction must have
been reversed.
All posting-relevant flows must be posted.
The transaction must have attained the required confirmation
status.
SAP AG 1999
You can enter the minimum retention period of financial transactions in Customizing using the
following Customizing activities:
Define the minimum retention period per company code
Define the minimum retention period per product type
Using selection criteria, you can restrict the number of financial transactions to be archived. Note
that financial transactions must have reached a certain status (for example, they have been settled or
the correspondence has been completed) before they can be archived. The archiving object
TRTM_FTR is set up so that you have to start the Deletion report manually. You can change this
using transaction AOBJ.
Transaction AOBJ allows you to make further technical settings for the archiving object
TRTM_FTR, such as the name and path of the archive file.
The financial transactions to be archived are stored in a physical file according to a platformindependent file name and path name.
Note that the archiving function deletes archived financial transactions from the R/3 System. We
recommend, therefore, that you carry out a test run before performing the update run of an archiving
activity. This way you can identify possible errors. You can only reload financial transactions that
have been archived correctly.
SAP AG
AC825
4-71
Process-Based Checking for Archiving

Product type 510/520/530 + 600
Order (600)
Contract
Expiration
Posting status
Not posted
Archive
Confirmation status
Not confirmed
Archive
SAP AG 1999
You can archive TR-TM financial transactions in the Money Market, Foreign Exchange, and
Derivatives areas. The functions available use the R/3 standard functions of the Archive
Development Kit (ADK). This ensures consistency of the data in the archive files as far as database
conversion is concerned. The ADK conveniently supports the connection of external archiving
systems via the Archive Link. The archiving of financial transactions includes the following
functions:
Archiving financial transactions, including deleting
Reloading archived financial transactions
Managing archive files
The archiving of a financial transaction is subject to a range of technical and business checks. These
ensure the consistency of the data in the system.
You can now also archive orders that have not been executed (for example, after order expiration).
This function is useful if the due date of the order has been exceeded and the transaction is no longer
relevant. To prevent orders from being archived or deleted unintentionally, the system checks the
minimum retention period of the transaction.
SAP AG
AC825
4-72
Roll Over Contract: Fixed-Term Deposit
Transaction
created
Rollover
...
1100 Investment / Increase

1110 Decrease
Principal change
Term
Flow type
Start
10.08.JJJJ
Amount
Rollover
10.10.JJJJ
End
Interest structure
...
...
SAP AG 1999
You can roll over existing transactions using the same transaction number, and also change some of
the conditions.
You can display the transaction activity in its present status or display its history with all the related
details.
Using the memo function, you can store additional information for each activity.
If you choose Extras --> Amount overview, a list appears showing the transaction's capital and
interest flows that are due before or on the relevant key date. The flows are sorted by amount.
SAP AG
AC825
4-73
Money Market - Fast Processing

Deposits at notice invested . . .
Fixed-term deposit invested
Partner
Curr.
CoCd Transaction
Deuba
1000
UNI
1,000,000.--
End of term
New
New
2,700
Int./Rollover Cap Partner

New
03/247YY Payment
New PTyp Ttyp Name
Deutsche Bank
51A 100 Fix.-term
UNI
10,000,000.--
2,900
03/25/YY
Payment
Deutsche Bank
51A 100 Fix.-term
Deuba
1000
New
Int. rate
Deuba
1000
Total amount
UNI
5,500,000.--
2,800
03/25/YY
Payment
Deutsche Bank
51A 100 Fix.-term
SAP AG 1999
Fast processing lists fixed-term deposits and deposits at notice. Here, you can change the amounts,
interest rates and the end of the terms.
This function enables the trader to easily process those financial transactions that are to be rolled
over or where notice is to be given.
This fast processing function is restricted to the necessary fields. This enables you to carry out the
most frequently recurring tasks quickly using just one screen template.
The fast processing of fixed-term deposits allows you to select and process fixed-term deposits and
deposits at notice from several company codes all in one step.
SAP AG
AC825
4-74
Roll Over Contract: Interest Payment

Example: Fixed-term deposit investment
1) Payment
t1
Interest from
original
transaction
t2
Interest from rollover
t3
Compound interest from orig. trans.
2) Capitalization
t1
t2
t3
Interest from original transaction
3) Deferral
t1
SAP AG 1999
t2
t3
Example of fixed-term deposit investment:

Investment in t1
Rollover in t2
Repayment in t3
SAP AG
AC825
4-75
Reversing a Contract: Fixed-Term Deposit
Reversal
=
Resetting of the last activity change made to the transaction
Reason for reversal
Process. error
Custom. error
Capital transfer
Cond. adjustm.
Other reasons
Customizing
SAP AG 1999
A reversal means resetting the last change made to the transaction, that is, resetting the last
transaction activity recorded by the system. If there are postings linked to the reversed activity, these
are cancelled via reverse postings. You must enter a reason for the reversal in the corresponding field
in order to execute the reversal. The reversal function reverses the most recent activity and
reactivates the previous one.
SAP AG
AC825
4-76
Reversing a Contract: Fixed-Term Deposit (1)

Case 1:
Posting has not yet been made

Possible reasons for reversal:
Business partner, currency, product type, transaction
type were incorrect
a) Status
Contract
Create
contract
b) Status
Contract
settlement
Create
contract
Contract
reversed
Reverse
Contract
settlement
Reverse 1
Reverse 2
SAP AG 1999
If only conditions data or other data was incorrect, you can correct this directly without having to
reverse the activity.
SAP AG
AC825
4-77
Reversing a Contract: Fixed-Term Deposit (2)

Case 2:
Posting already executed

Possible reasons for reversal:
a) Business partner, currency, product type, transaction type
b) Condition data, nominal amount, payment details
Post offsetting flow
a)
Settle
Create
contract contract
Post
contract
Reverse 1
Reverse 2
*
Reverse 3
Generate offsetting flow

Post offsetting flow
b)
Create
Settle
contract contract
Post
contract
Reverse 1
Generate offsetting flow
Reverse 2
Data changes in
entry screens
Settle contract
Post contract
time
SAP AG 1999
If only conditions data or other data was incorrect, you can correct this directly without having to
reverse the activity.
* Reversal Activity 3 is a report that sets the status from "to be reversed" to "reversed".
Accounting documents posted in Treasury Management can no longer be reversed directly with
Reverse document in Financial Accounting (FB08). They can only be reversed using the
corresponding function in Treasury Management. This procedure prevents inconsistencies between
the general ledger (FI) and the subledger (Treasury).
If you wish to reverse postings, for example, you can do this in Treasury Management by choosing
Posting -Reverse documents.
SAP AG
AC825
4-78

Rollover, Reversal
SAP AG 1999
SAP AG
AC825
4-79
Accrual/Deferral Procedures and Methods
Accrual/deferral procedures
Difference procedures
Reset procedures
Accrual/deferral methods
Pro rata temporis
Pro rata temporis with
linear discounting
SAP AG 1999
To determine the profit for the period, you must assign income and expenses to the period in which
they were generated/incurred, regardless of the date on which they are paid. This is done by
allocating expenses and incomes to the correct accounting period on a particular key date (for
example, the end of the fiscal year).
The Accrual/Deferral method describes how the amount to be accrued/deferred is calculated.
The Accrual/Deferral procedure, on the other hand, describes how the expense and revenue
accounts are updated:
The Difference procedure is used to transfer income and expenses arising since the last
accrual/deferral run from accrual/deferral accounts to the corresponding income statement
accounts.
The Reset or Accumulation procedure is used to adjust the income statement accounts on the
accrual/deferral date by the accrual/deferral amounts that have been determined, and then to reset
them.
SAP AG
AC825
4-80
Accrued/Deferred Interest: Customizing

When you define the flow type, you indicate whether a
flow is relevant to accrual/deferral.
The accrual/deferral procedure (reset or difference
procedure) and the flow types generated from this
procedure are specified for each flow in the
accrual/deferral definition.
Difference procedure: The accrual/deferral posting for interest is not
reset
Reset procedure: interest is accrued/deferred and the accrual/ deferral
is reset on the key date +1
You must define special accrual/deferral flow types

(accrual/deferral and resetting of same).
SAP AG 1999
The accrual/deferral is based on the flows of the selected transactions. Important criteria for
determining the amounts are the accrual/deferral period and the identification of the flow types as
relevant for accrual/deferral.
Accrual: future income/expense which is assigned to the accrual/deferral period on a pro rata basis.
In line with commercial law, these expenses/revenues cannot be reported as accruals (for example,
other rec. to revenue).
Deferral: received/billed income/expense that is assigned to the accrual/deferral period on a pro rata
basis. The amount is transferred from the expense/revenue account to the deferrals account (expenses
to deferred expenses and/or revenue to deferred revenue).
SAP AG
AC825
4-81
Interest Accrual/Deferral
Accrual / Deferral of Expenses and Revenues
Due date FType D P Flow type ...

Company code 1000
Transaction 9
Product type 51A
06/05/YYYY 1200 +
Nominal interest
4,546.6 UNI
06/05/YYYY 2100 +
Int. Accrued/deferred: Accrued. 139.03 UNI
SAP AG 1999
When you execute the accrual/deferrals, the accrual/deferral amounts are determined for user-defined
transactions/positions and time periods. The accrual/deferral amounts and the corresponding
accrual/deferral flows are generated for each flow. The accrual/deferral flows can be posted
immediately in Financial accounting - via an update run - or they can be processed using the posting
function at a later time.
You can also execute a test run in advance.
When you reverse accruals/deferrals with the reset procedure, only the accruals/deferrals made on
the key date are reversed.
Since accruals/deferrals made with the difference procedure are linked based on the sequence of
accrual/deferral key dates, when you reverse accruals/deferrals according to the difference procedure
for one key date, all subsequent accruals/deferral flows from the same transaction (where they exist)
are also reversed.
SAP AG
AC825
4-82

Interest Accrual/Deferral
SAP AG 1999
SAP AG
AC825
4-83
Release Workflow - Overview Graphic

Start WorkflowRelease
One-step
approval
Two-step
approval
1. Approval
or rejection
R
Three-step
approval
A R
Inbox
1. Approval
or rejection
1. Approval
or rejection
A
2. Approval
or rejection
Inbox
2. Approval
or rejection
R
A
R
Inbox
3. Approval
or rejection
A
A
If a transaction is rejected, it can be changed/reversed

SAP AG 1999
Treasury transaction release includes the following:

Integration of the organization management in the SAP Business Workflow (structure, task
distribution by person responsible and job descriptions, dynamic real time task distribution from
the context of the workflow and the objects being processed)
Integration of the release management in the SAP Business Workflow (release process flow,
consideration of the release strategies (during the workflow) that can be customized in Treasury)
The release procedure deals with release and checking procedures within the organizational
framework.
If a release is rejected, the previous clerk is informed by the release area and the transaction can be
changed or reversed. Following any changes, the transaction must be released.
SAP AG
AC825
4-84
Release Workflow - Customizing II
....
Release procedure
:.......
Release conditions
Company code 1000 IDES AG

Release procedure
PTyp TTyp Rel. proc.
51A 100
51B 100
60A 101
....
:........
Release procedure
Release conditions
Company code
1000 IDES AG
Product type
51B Fixed-term deposit internal
Transaction type 100 Investment
Release conditions
ACat Act. Rel. req.
10
01
Rel steps
1
Trans. process..
1
SAP AG 1999
In Customizing, you can determine that the procedure selected is dependent on the company code,
the product type, or the transaction type.
In the release conditions, depending on the activity category and activity, you enter the release step
and an instruction regarding the transaction release.
The release steps define how many people are required to release an object (for example: 1 release
step: 2 employees (1 employee, 1 person responsible for release).
The transaction release determines the application's behavior for as long as the transaction is in the
release workflow (for example: processing the transaction during the release workflow is not
permitted).
SAP AG
AC825
4-85
Release Workflow - Customizing II

Display standard role 20000034 (TRTMTR_DEAL)
Creating responsibilities
Example:
Employee assignment
Name
Product type
Transaction type
Nom. authorization level
Release stages
Company code
from
51B
100
1
2
1000
Treasury workflow
to
Stage 1 of 2
Activating event linkage
SAP AG 1999
Make the standard Customizing settings for the Workflow.

Display standard role 20000034 (TRTMTR_DEAL): The standard role describes the responsibilities
for the individual approval steps.
For each individual approval, the agent must be found in the system. To do this, a standard role has
been built into the Workflow definition. However, this is still empty. To define the agents for an
approval level, you have to create a responsibility in the standard role and assign it to a
user/position.
(Change the responsibilities so that the "momentary approval level" is set to the corresponding value,
and the "release steps" are set to the maximum number).
You have the option of entering several users/positions which are to be notified if deadlines are
exceeded (standard role 20000035).
Since this workflow is triggered by an event, you must activate the event linkage of the workflow
used.
For more information on the release workflow, see the IMG documentation.
A reporting overview is available that enables you to see for each Treasury transaction the release
that was processed, when it was processed, and by whom.
SAP AG
AC825
4-86
Special Features of Deposit at Notice / Commercial

Topic 6
Paper
Deposit at notice
Termination
Commercial Paper
Master agreement
NPV calculator
Cash flow transaction
SAP AG 1999
SAP AG
AC825
4-87
Giving Notice (Deposit at Notice)

Termination
Investment
Term
Flow type
Start
06/07/YY
Amount
Termination
06/30/YY
Interest structure
...
Contract
...
Notice period
...
3
Days
SAP AG 1999
With deposits at notice, there are functions available for giving notice or roll over for funds already
invested. Here, rollover means an increase or decrease in the amount of the original deposit at notice
with, if necessary, changed terms under the same transaction number.
With deposits at notice, the cash flow for these transactions can only be generated for a set period
since the end of term is only fixed when notice is given. Therefore, for deposits at notice for which
no notice has been given, it is necessary to periodically update the cash flow.
SAP AG
AC825
4-88
Master Agreement
Establishment of agreement and conditions with which each transaction
has to comply
Example: Master agreement
Term of the contract
1/1/YYYY to 12/31/YYYY
Permitted company codes
1000
Permitted business partners
IDES AG; Deuba; FUXX
Permitted transaction types
Investment
Minimum and maximum

terms of the transactions
UNI
Currencies:
10m
Tranche
500m
Minimum amount
1m
Commercial Paper program from 12/31/Y-1
Total volume
SAP AG 1999
You can store master agreements in the system to define company-specific standards for the
conclusion of Money Market transactions. These contain specific information on company codes,
business partners, terms, as well as minimum and maximum volumes by currency.
Master agreements can be assigned to Commercial Papers, fixed-term deposits, deposits at notice,
and cash flow transactions.
You either specify the master agreement when you create a transaction, or you can subsequently
assign a transaction to a master agreement. The system checks several master agreement restrictions
including the following:
Is the amount a multiple of the tranche?
Has the minimum amount been reached?
Determination and evaluation of the degree of usage of the master agreement limits by the assigned
transactions.
For each specific master agreement, you can determine to what degree the transactions on the assets
and liabilities sides approach the usage limits.
You can use tab pages to switch between displays of different details concerning the master
agreements.
While processing, you can directly call up an overview of the degree of usage of the master
agreement limits.
SAP AG
AC825
4-89
Commercial Paper Program - Example

Master agreement for 500 million USD
Terms
1st series: =
2nd series: =
3rd series: =
01/01
01/31
100 m,
200 m,
200 m,
02/28
Term 01/01.
Term 02/28.
Term 05/15.
03/31
04/30
03/31.
05/31.
07/31.
05/31
06/30.
07/31
Term series no. 1.

Term series no. 2.
Term series no. 3.
Start
500
m
400 m
free for
issue
200 m
free for
issue
100m
300 m
free for
issue
free for
issue
300 m
free for
issue
500 m
free for
issue
SAP AG 1999
Besides the familiar procedure for calculating present value using yield, you can now also calculate
the present value of Commercial Paper using discounting. Here, the regular quotations for Euro-CPs
and US-CPs are supported.
SAP AG
AC825
4-90
Cash Flow Transactions

Flexible representation of a wide range of transactions
Manual entry of
Term and
Cash flow from position changes, expenses, revenues,
payments etc.
The application supports:
Entering and processing of cash flow transactions and
their subsequent processes in back office and accounting
SAP AG 1999
Note that the relevant flow types must be assigned to the product type/transaction type.
SAP AG
AC825
4-91
Information System (Topic 7)
Journal: Money Market /

Journal: Money Market, Forex, Derivatives,
Securities
Payment schedule
Position list
Transaction changes
SAP AG 1999
SAP AG
AC825
4-92
Structure of the Information System: Journal

Example
...3 Accounting
3 Treasury
3 Treasury Management
Area-specific journal
3 Money Market
3 Information system
3 Transaction
3 Info system
Transaction Overview
3 Journal - Money Market
3 Treasury Reports
3
3 Treasury: Strategic View

3 Treasury: Operative View
Cross-area journal
3 Transaction
3 Transaction Overview
3 Journal: Money Market, Forex, Derivatives, Securities
SAP AG 1999
For an overview of all Treasury reports, see Treasury Reports.

You can find the cross-Treasury reports under the menu option Treasury: Strategic View. These
include reports from Cash Management for analyzing liquidity, reports from the Limit Management
and Market Risk Management areas for controlling risk, and cross-Treasury reports for analyzing
your positions and revenue.
For detailed analyses for supporting work processes in day-to-day business, see the menu option
Treasury: Operative View.
Information on area-specific reporting is aggregated in the cross-application reporting section in the
Treasury Information System.
The reporting tree displays a complete directory of all reports that are defined in Treasury and that
can be assigned to users. Just as with transactions, you can assign reports to specific users (rolespecific).
SAP AG
AC825
4-93
Journal - Money Market
Overview list of money market transactions

Information on
Company code 1000

Product type
51A
Transaction
Activity cat.
1
Contract
Entered/changed on 09/06/YYYY
Transaction type
100 Investment
Counterparty
Portfolio
Finance project Trader
Out. Conf. Inc. Conf.
Status
Curr.
Amount
Start term
Rollover start End term
Int. rate
1000
Deutsche Bank
1 reqd
1 reqd
Active
UNI
100,000.00 09/06/YYYY
11/06/YYYY 2.5
Company code 1000

Product type
52A
Transaction
Activity cat.
3
Contract
IDES AG
IDES AG
Call money EXTERNAL
Cont. date
Valid from
09/06/YYYY
09/06/YYYY
Entered/changed on
Transaction type
Entd/chd.date
Entd/chd
09/06/YYYY
BAUERT
09/06/YYYY
100 Investment
Counterparty
Portfolio
Finance project Trader
Out. Conf. Inc. Conf.
Status
Curr.
Amount
Start term
Rollover start
Int. rate
1000
Deutsche Bank
1 reqd
1 reqd
Active
UNI
100,000.00 09/06/YYYY
2.6
Cont. date
Valid from
09/06/YYYY
09/06/YYYY
Entd/chd.date
Entd/chd
09/06/YYYY
BAUERT
SAP AG 1999
The Money Market journal enables you to call up an overview of the money market transactions
stored in the system using flexible selection criteria. For each selection criterion, you can define
selection options (single value or interval, inclusive/exclusive).
In this way, you can use the journal to select transactions that were concluded by certain traders, for
example, or with certain business partners.
SAP AG
AC825
4-94
Journal: Money Market, Forex, Derivatives,

Securities
Forex transactions
Company code 1000
Product type
60A
Transaction
Activity c at.
2
Vertrag
Counterpart y
Portfolio
Status
Due dat e
1000
Deut sche Bank
Aktiv
08.09. JJJJ USD / UNI
Company code 1000

Product type
51A
Transaction
Activity c at.
1
Contract
Trans. type
Fin. project
Ex. Rate
Trader
Buy
1,83
USD
IDES AG
IDES AG
Call money EXTERNAL
Entd/chd date 09/06/YYYY

101 Spot transaction
Out. Conf.
Inc . Conf.
Sell
1 erford.
0 not reqd
100.000,00 UNI
Cont . Date
06. 09. JJJJ
183.000,00
Ent/c hd dat.
Ent/c hd
09/06/YYYY
BAUERT

Trans. Type
Counterpart y
Portfolio
Fin. Project
Trader
Status
Curr.
Amount
Start term
St art rollover
1000
Deut sche Bank
Active
UNI
100, 000.00 09/06/YYYY
Company code 1000

Product type
52A
Transaction
Activity c at.
1
Contract
IDES AG
Forex EXTERNAL
100 Investment
Out. Conf.
End t erm
Int. Rate
1 reqd
1 reqd
11/06/YYYY 2,5
Cont . Date
valid from
09/ 06/ YYYY
09/ 06/ YYYY
Ent/c hd dat.
Ent/c hd
09/06/YYYY
BAUERT

Trans. Type
Counterpart y
Portfolio
Fin. Project
Trader
Status
Curr.
Amount
Start term
St art rollover
1000
Deut sche Bank
Active
UNI
100. 000,00 09/06/YYYY
100 Investment
Out. Conf.
End t erm
Int. Rate
1 reqd
1 reqd
11/06/YYYY 2,5
Cont . Date
valid from
09/ 06/ YYYY
09/ 06/ YYYY
Ent/c hd dat.
Ent/c hd
09/06/YYYY
BAUERT
Money market transactions
SAP AG 1999
Using Journal: Money Market, Forex, Derivatives, Securities, you can call up an overview list of
the transactions saved in the system according to flexible selection criteria.
SAP AG
AC825
4-95
Payment Schedule
Area-specific payment schedule
Cross-area payment schedule
Payment schedule: Money Market
Payment schedule: Money

Market, Forex, Derivatives, Securities
company code
payment date, payment amount, payment currency
transaction, name
product type, transaction type
posting status, posting approval
house bank key, house bank account
bank key of business partner bank, partners bank account
...
SAP AG 1999
You can use the payment schedule to call up incoming and outgoing payments within a user-defined
time period.
The functions of the payment schedule have been significantly enhanced. You can output lists
flexibly using the SAP List Viewer. You can now:
Define and save your own layouts
Sort by field
Filter according to any values
Form group totals
Payment amounts for a payment date are summed as default provided they are all in the same
currency. You can structure the payment schedule according to your own requirements - that is, you
can define new column characteristics with a maximum width list of 255 characteristics or you can
delete existing columns.
SAP AG
AC825
4-96
Money Market - Position List
CoCd Trans.
Ptyp TCat Part
Tcat Partner Tcurr. Betrag
Int. RTerm strt
Termend
1000
510 100 51A 100 Deuba UNI
100,000.00 2.5 09.06.YYYY 11.06.YYYY
1000
520 100 52A 100 Deuba UNI
100,000.00 2.5 09.06.YYYY 11.06.YYYY
1000
510 100 51A 100 Deuba UNI
100,000.00 2,7 09.07.YYYY 11.07.YYYY
Link to the SAP List Viewer
SAP AG 1999
Furthermore, you can execute results controls using the position list for traders or business partners.
The transaction types are sorted and listed according to conditions. In the position list, the positions
for Money Market transactions are displayed by key date.
You can also select Money Market transactions that have a certain term start or due date.
determine the columns or rows to be displayed, sort and sum as you wish.You can save these display
variants to use them again.
SAP AG
AC825
4-97
Money Market: Unit Summary
SAP Money Market incorporates the following

financial instruments: Fixed-term deposits, deposits at
notice and Commercial Paper.
Cash flow transactions enable you to represent a wide
range of transactions
The transaction and position management process in
the SAP Treasury system is divided into trading, back
office and accounting functions.
Transaction processing depends on the process chain
that has been defined for a product type/transaction
type (e.g. fixed-term deposit/investment).
TR Accounting is integrated into FI Accounting via the
account assignment reference and account
determination.
SAP AG 1999
SAP AG
AC825
4-98
Money Market Exercises

Unit: Money Market
Topic: Trading - Fixed-term Deposit Investment 1

Set up a forward exchange product in SAP R/3 Treasury
Management.
You take advantage of the favorable conditions at your house bank to

invest in a fixed-term deposit.
1-1
Create an external fixed-term deposit as a contract in your company code.

Choose the Deutsche Bank (DEUBA) as your business partner.
This is your house bank, that is, you have at least one current account here.
Select the following transaction data:
Amount:
Interest rate:
Term:
Interest calculation method:
(Interest) frequency:
50 million UNI,
2.6 %,
3 months starting from today
act/360
3 monthly
Then check
- the conditions,
- the cash flow,
- the payment details.
Save the financial transaction and note the transaction number for later settlement
activities and postings.
Transaction number:_______________________
1-2
SAP AG
Check your entries in the cash position (Grouping: "BANKEN").
AC825
4-99
Unit: Money Market


create a fixed-term deposit using fast entry.
Use the favorable conditions to invest in another fixed-term deposit.
2-1
Create another fixed-term deposit in your company code as a contract.

Use the fast entry and the input help relating to the amount field and the term.
Select the following transaction data:
Amount:
Interest rate:
End of term:
(Interest) frequency:
30 million UNI,
3%
12/25/YY
act/360
"monthly payment"
Check the financial transaction and date the end of term as the following workday.
2-2
SAP AG
Check your entries in the cash position (Grouping: "BANKEN").
AC825
4-100
Unit: Money Market

Topic: Back Office - Settlement and Correspondence

create confirmations
settle transactions.
After you create the fixed-term deposit, the back office processing takes
place:
confirmation letters are written here and the settlement is carried out, that
is, the transaction is checked.
3-1
Using the correspondence function (confirmation letter), confirm the fixed-term

deposit that has not yet been settled from the exercise above "Trading - Fixed-term
deposit investment 1".
3-2
Compare the printed confirmation letter with your transaction in the system, and
then check the correspondence status in the transaction under Status.
3-3
Assume that the counterconfirmation has been received. Save this in the system
and check the correspondence status again.
By choosing Goto in the financial transaction, you access information on the confirmation
and counterconfirmation letters.
3-4
Settle the transaction from the exercise above "Trading - Fixed-term deposit
investment 1".
Note the change in the activity category.
Check the payment details in particular, and, under "Administration", specify the
account assignment reference and the balance sheet account.
Do you see a change in Cash Management?
SAP AG
AC825
4-101
Unit: Money Market

Topic: Back Office - Netting

net transaction payment flows with each other in order to settle them
in one payment run.
You invest in an overnight deposit. The next day you create another
fixed-term deposit. The business partner is a bank that is not your house
bank - this means that you have to make an active payment.
To save transaction costs, you wish to net tomorrow's money inflow
(repayment) with the money outflow for the second transaction.
4-1
Create an external fixed-term deposit in your company code. The start of term is
today and the end of term is tomorrow. (FIXED-TERM DEPOSIT 51A INVESTMENT 100).
Choose Citibank as your business partner (CITI).
This is your business partner but not your house bank, that is, you do not have a
current account there. You must, therefore, instruct one of your house banks to pay
Citibank.
You can choose the transaction conditions as you wish. Check the
account assignment reference.
Then settle the transaction. Note the payment details that are proposed based on the
standing instructions for CITI.
4-2
Create another fixed-term deposit in your company code. The start of term is
tomorrow (FIXED-TERM DEPOSIT 51A - INVESTMENT 100).
Choose Citibank (CITI) as your business partner here also.
You can choose the transaction conditions as you wish. Check the
account assignment reference.
Settle the transaction.
SAP AG
AC825
4-102
4-3
Now display the proposal list for netting transactions. Assign the appropriate
transactions (Due date tomorrow) to one another. The prerequisites for such netting
transactions are:
- the same business partner
- the same value date
- the same currency
Check and save the new netting transaction.
Then display the netting transaction and look at the net amount determined by the
system.
In the subsequent payment run, this amount is settled in one record.
The transactions involved are blocked against changes to relevant fields.
SAP AG
AC825
4-103
Unit: Money Market

Topic: Accounting

process the fixed-term deposit in accounting.
In Treasury Accounting, you have to take certain steps in order to transfer

the transaction flows to FI (Financial Accounting).
5-1
Post the transaction from the exercise above called "Trading - Fixed-term deposit
investment 1".
Your first posting relates only to the creation of the fixed-term deposit.
In the second step - at the end of the term - you post the interest payment and
principal repayment amounts.
Carry out a test run prior to the update run.
Note: Prior to posting, the transaction must be settled and monitored in the back
office.
5-2
In the posting run, double-click directly on the FI document generated.
5-3
Do you see a change in Cash Management after posting?
SAP AG
AC825
4-104
Unit: Money Market

Topic: Rollover, Reversal

roll over a money market transaction
carry out a reversal.
Because of rising interest rates, you decide to extend the transaction for
another three months. The interest rate increases at the same time by 0.5
%. Subsequently, however, you have to carry out a reversal.
6-1
Settle the transaction from the exercise above called "Trading - Fixed-term deposit
investment 2", and post the flows resulting from the principal increase.
6-2
In December, you decide to extend the transaction for an additional three months
due to rising interest rates. The interest rate increases at the same time by 0.5 %.
Roll over your transaction. Use Time Deposit - Fast Processing
6-3
Take a look at the transaction history.

If it had been necessary to change the interest payment method for the above
transaction - how would you do this in the system?
6-4
SAP AG
Reverse the rollover.

Now take a look at the revised transaction history.
AC825
4-105
Unit: Money Market

Topic: Interest Accrual/Deferral

carry out an interest accrual/deferral on a key date.
You have to accrue/defer your interest at the end of the quarter/year.

Use the accrual/deferral run, after you have made the appropriate settings
in Customizing regarding the procedure and the flow types.
7-1
Create a new fixed-term deposit with a term that extends beyond the end of the next
quarter/year.
Settle this fixed-term deposit transaction. Then post only the principal increase and
not the interest that is due at the end of the period.
7-2
Carry out an interest accrual/deferral at the end of the next quarter or 12/31/YY.
Carry out the postings immediately.
7-3
Take a look at the cash flow in the transaction. Note that you can select the
classification (structure characteristics, accrual/deferral, valuation, transfer posting)
by choosing Set filter.
SAP AG
AC825
4-106
Money Market Solutions

Unit: Money Market
1-1
Solution to the step: Fixed-term deposit 1.
Accounting
Treasury
Treasury Management
Money Market
Trading
Fixed-term deposit
Create
InputData a) Create Fixed-Term Deposit: Initial screen
b) Create Fixed-Term Deposit: Structure
Button: Conditions
Tabstrip: Cash flow
Tabstrip: Payment details
Save (F11)
1-2
Solution to the step: Check in Cash Position.
Accounting
Treasury
Cash Management
Information System
Reports on Cash Management
Liquidity Analyses
Cash Position
SAP AG
AC825
4-107
Values
Company code
TRXX
Cash Position
Set the flag
Grouping
BANKEN
Display as of
Today's date
Display in
UNI
Delta display with balances
Select
(Use button: all selections)
Execute
You can see your transaction:
Banks Time deposit level Banks TB - DBGIRO- Transaction.
SAP AG
AC825
4-108
Unit: Money Market

2-1
Solution to the step: Fixed-term deposit 2.
Accounting
Treasury
Treasury Management
Money Market
Trading
Fixed-term deposit
Fast entry
Input: Data: Fixed-term deposit - fast entry
Button:
Details (go to details screen)
Save
2-2
Solution to the step: Check in Cash Position.
Accounting
Treasury
Cash Management
Information System
Liquidity Analyses
Cash Position
SAP AG
AC825
4-109
Values
Company code
TRXX
Cash Position
Set the flag
Grouping
BANKEN
Display as of
Today's date
Display in
UNI
Select
Execute
You can see your transaction:
Banks Time deposit level Banks TB - DBGIRO - Transaction.
SAP AG
AC825
4-110
Unit: Money Market

Topic: Back Office - Settlement and Correspondence
3-1
Solution to the step: Outgoing correspondence.
Accounting
Treasury
Treasury Management
Money Market
Back Office
Correspondence
Outgoing correspondence
Values
Company code
TRXX
Transaction
Your transaction number
Correspondence type
001
Select Printer and Preview

Execute
Print
3-2
Solution to the step: Comparing the confirmation letter and checking the
confirmation status.
Accounting
Treasury
Treasury Management
Money Market
Trading (or Back office)
Fixed-Term Deposit
Display
Tabstrip: Status
Correspondence: Confirmation carried out
SAP AG
AC825
4-111
3-3
Solution to the step: Saving the counterconfirmation letter and checking the
confirmation status.
Accounting
Treasury
Treasury Management
Money Market
Back Office
Correspondence
Incoming confirmations
Input: Exact data that you can take from your business partner's
counterconfirmation letter.
(Enter: The assigned transaction is displayed and the confirmation status in
the transaction is matched under Status. )
Save
Information in the financial transaction:
- Goto Correspondence
Correspondence - Overview
- Status Correspondence Counterconfirmation matched
If you are using optical archiving, the system usually displays the
correspondence letters from here. If not, the letter comes from
the spool request as long as this has not been deleted.
3-4
Solution to the step: Settling the transaction.
Accounting
Treasury
Treasury Management
Money Market
Back Office
Fixed-Term Deposit
Settle
You can see the change in the activity type in the upper right hand
part of the screen.

Tabstrip: Administration
(Account assignment reference DB000001 and G/L account 113113)
SAP AG
AC825
4-112
Save.
If necessary: Check the G/L account:
Accounting
General Ledger
Master records
Individual processing
Can you see a change in Cash Management?
You do not see a change because the level that is assigned for the processing
activity is the same as that displayed for the fixed-term deposit investment.
SAP AG
AC825
4-113
Unit: Money Market

Topic: Back Office - Netting
4-1
Solution to the step: Fixed-term deposit CITI I.
Accounting
Treasury
Treasury Management
Money Market
Trading
Fixed-Term Deposit
Create
Input: Data...
a) Create fixed-term deposit: Initial screen

b) Create fixed-term deposit: Structure
Note that, due to the current standing instructions in the system,
netting transactions are only possible with CITI.
Tabstrip: Administration - Assign account assignment reference.

Save
Solution to the step: Settling the fixed-term deposit CITI I.
Accounting
Treasury
Treasury Management
Money Market
Back Office
Fixed-Term Deposit
Settle
Save
SAP AG
AC825
4-114
4-2
Solution to the step: Fixed-term deposit CITI II.
Accounting
Treasury
Treasury Management
Money Market
Trading
Fixed-Term Deposit
Create
Input: Data...
a) Create fixed-term deposit: Initial screen

b) Create fixed-term deposit: Structure
Tabstrip: Administration - Assign account assignment reference.

Tabstrip: Payment Details
Save
Solution to the step: Settling the fixed-term deposit CITI II.
Accounting
Treasury
Treasury Management
Money Market
Back Office
Fixed-Term Deposit
Settle
Save
4-3
Solution to the step: Displaying the proposal list for netting transactions, and
assigning the transactions.
The prerequisites for such netting transactions include:

- the same business partner
- the same value date
- the same currency
SAP AG
AC825
4-115
Accounting
Treasury
Treasury Management
Money Market
Back Office
Netting
Proposal list
Execute
Select transactions having tomorrow as due date.
Button: Check
Save
Solution to the step: Displaying netting transaction.
Accounting
Treasury
Treasury Management
Money Market
Back Office
Netting
Display
Values
Netting
Your company code
TRXX
One of your transactions

Note the net amount determined by the system.
In the subsequent payment run, this amount is settled in one record.
The transactions involved are blocked against changing the relevant
fields.
SAP AG
AC825
4-116
Unit: Money Market

Topic: Accounting
5-1
Solution to the step: Posting fixed-term deposit 1.
Accounting
Treasury
Treasury Management
Money Market
Accounting
Posting
Execute
Values
Your company code
TRXX
Transaction
Transaction number
Up to and including due date.
Day of creation of fixed-term

deposit
Execute (test run/update run)
5-2
SAP AG
Solution to the step: Displaying the FI document.

After the update run: In the posting log: Click to see the FI document.
AC825
4-117
5-3
Solution to the step: Change in Cash Management as a result of the posting.

YES:
Accounting
Treasury
Cash Management
Information System
Liquidity Analyses
Cash Position
Values
Company code
TRXX
Cash Position
Set the flag
Grouping
BANKEN
Display as of
Today's date
Display in
UNI
Select
Execute.
(Banks - Level change: B5 Level)
SAP AG
AC825
4-118
Unit: Money Market

Topic: Rollover, Reversal
6-1
Solution to the step: Settling fixed-term deposit 2.
Accounting
Treasury
Treasury Management
Money Market
Back Office
Fixed-Term Deposit
Settle: Checking the data
Save
Solution to the step: Posting the principal increase - fixed-term deposit 2.
Accounting
Treasury
Treasury Management
Money Market
Accounting
Posting
Execute
Input: Data ...
SAP AG
AC825
4-119
6-2
Solution to the step: Rollover using fast processing.
Accounting
Treasury
Treasury Management
Money Market
Trading
Time Deposit - Fast Processing
Input: Data ...
Execute.
Input: Rollover data ...
(using fast processing: (Total amount, if amount changes)
Save
Alternative:
...
Money Market
Trading
Fixed-Term Deposit
Roll over
Input:
6-3
Rollover data ...

(Change amount, if amount changes)
Solution to the step: Transaction history.
Accounting
Treasury
Treasury Management
Money Market
Trading or Back office
Fixed-Term Deposit
History
Alternative: In collective processing:
SAP AG
...
Money Market
AC825
4-120

Money Market
Execute
Select the transaction
Button: History
Solution to the step: Changing the interest payment method.
Simply enter in rollover or fast processing.
6-4
Solution to the step: Reversing the rollover.
Accounting
Treasury
Treasury Management
Money Market
Fixed-Term Deposit
Reverse
Enter a reason for the reversal.
Save.
Solution to the step: The new transaction history.
...
Fixed-Term Deposit
History
SAP AG
AC825
4-121
Unit: Money Market

Topic: Interest Accrual/Deferral
7-1
Solution to the step:

Creating a new fixed-term deposit, settling and posting the principal increase.
-see previous exercises-
7-2
Solution to the step: Carrying out an interest accrual/deferral.
Accounting
Treasury
Treasury Management
Money Market
Accounting
Accrual/deferral
Execute
Values
Company code
TRXX
Transaction
Transaction number
Key date
For example, 12/31/YY

(inclusive)
Test run
Do not select
Carry out posting immediately
Select
Execute.
You can carry out a test run if you wish.
SAP AG
AC825
4-122
7-3
Solution to the step: Looking at the cash flow:
Accounting
Treasury
Treasury Management
Money Market
Fixed-Term Deposit
Display
Tabstrip: Cash flow
The accrual/deferral flows are already posted!
Note that you can select the classification (structure characteristics,
accrual/deferral, valuation, transfer posting) by choosing Set filter.
SAP AG
AC825
4-123
Foreign Exchange
Contents:
Topic 1
Introduction to Foreign Exchange trading
Topic 2
Trading functions
Topic 3
Back office functions
Topic 4
Accounting and valuation functions
Topic 5
Information system
SAP AG 1999
SAP AG
AC825
5-1
Foreign Exchange: Unit Objectives

Minimize currency risks using the example of
forward exchange transactions
Process spot/forward transactions and currency
swaps
Use tools to monitor and speed up back-office
processing.
SAP AG 1999
SAP AG
AC825
5-2

Basic Principles
Money Market
Foreign Exchange
Derivatives
SAP AG 1999
SAP AG
AC825
5-3
Foreign Exchange: Business Scenario
After learning about Money Market transactions in

SAP R/3 Treasury Management, you would now like to
look at currency hedging using Foreign Exchange
transactions.
What do you have to enter in Trading inn order to
create a Foreign Exchange transaction?
How can you ensure the integration of Treasury
transactions in Financial Accounting?
What evaluations can you carry out?
SAP AG 1999
SAP AG
AC825
5-4
Introduction to Foreign Exchange Trading (Topic 1)
Foreign Exchange product types

Transaction and position management
process
SAP AG 1999
SAP AG
AC825
5-5
Forex Transaction Product Types

Product types
instruments
Money Market
Securities
Hedging tools
Loans

Forex
spot
transactions
Forward
exchange
transactions
Forex swaps
SAP AG 1999
With the integration of Cash Management, Treasury Management and Market Risk Management,
you can immediately analyze and consider both the effects of foreign exchange trading on the
liquidity situation of the company and also the resulting currency risks. Current market data can be
retrieved via realtime datafeed.
Forex trading incorporates the following product types:
Forex spot transactions and forward exchange transactions
Forex swap transactions
OTC currency options
The currency options are dealt with under derivative financial transactions.
In foreign exchange trading, you can have a key date valuation and and also show realized gains and
losses.
SAP AG
AC825
5-6
Forex Spot Transactions/Forward Exchange

Transactions
Spot Transactions
Due immediately, that is, on the second bank workday after
conclusion of the contract
Purpose: mainly for processing international payment transactions
Forward Exchange Transactions

Settlement of the transaction on the arranged date (usually 1-12
months)
Settlement rate/forward rate (also outright rate) is fixed upon
conclusion of the transaction
Purpose: Hedging exchange rate risks - stable calculation basis
especially for international trading
SAP AG 1999
With spot transactions, internationally traded currencies are bought or sold on the value date against
other currencies.
With forward transactions, however, they are traded at a certain time in the future and the relevant
markup or markdown to calculate the forward rate is given. The back-office processing of foreign
exchange transactions requires that the authorized banks are defined in the system as authorized
business partners with corresponding payment details.
SAP AG
AC825
5-7
Forward Exchange Transaction - Price Calculation
The difference between the spot and forward rate is known as the 'SWAP
RATE' (premium or discount).
The swap rate is determined by the different interest rate levels in the
participating countries. If the foreign currency interest rate is higher than
that of the domestic currency, the forward rate contains a discount.
Example:
3-monthly Euro-$ Interest rate 6.75 %

3-monthly Euro-UNI Interest rate 3.5 %
USD spot rate:
1.58 UNI
SWAP rate =
FC rate x (Dom.int rate - foreign int. rate) x Term

360 x 100
1.58 x (-3.25) x 90
= -0.0128375 UNI per USD
360 x 100
3-monthly forward rate USD = 1.5671625 UNI

SAP AG 1999
For the above calculation, we assume that in Customizing the foreign currency has been defined as
the leading currency and the local currency has been defined as the following currency.
In general, an inverse rate is also possible for a transaction.
The swap sign must be given (for example: 0.0012-) !!!
SAP AG
AC825
5-8
Transaction and Position Management Process

Example: Foreign Exchange Transaction
Release
Trading
Create offer/order/contract
Exercise/expiration
Rollovers
Reversals
Transaction history
Back office
Settlement/checking
Netting
Reversals
Transaction history
Accounting
Postings
Payment
transactions
Reversals
Accrual/deferral
Valuation
User authorization
Limit management
SAP AG 1999
The uniform structure of the trading and transaction management processes forms the basis for
integrating and further processing transactions within the SAP System. It also provides the
framework for adapting the way transactions are represented in the system to meet company-specific
requirements.
You can grant user authorizations for the various activities in the transaction and position
management process. The authorization concept is specifically designed to allow you to assign
different authorization profiles to employees in different organizational areas. This enables you to
separate trading, back office and accounting functions.
For each product/transaction type, you determine whether a special posting release is required.
As well as being able to provide activity transitions with user authorizations, limit management
allows you to set different amount limits for transactions.
SAP AG
AC825
5-9
Trading Functions (Topic 2)
Customizing settings
Foreign exchange transaction introduction
SAP AG 1999
SAP AG
AC825
5-10
Customizing Settings - Foreign Exchange

Transactions
Product types
(60A - Forex External)
Transaction types
(60a - Forex External

101 - Spot transaction)
Number ranges
for transaction
for underlying transaction
Flow types
(1000 Purchase Forex Principal increase)
Assign flow types

Assign foreign exchange attributes
SAP AG 1999
SAP AG
AC825
5-11
Customizing - Foreign Exchange Master Data 1
Product
Product category
category
600 Forex
Transaction category Activity category

100 Forward
transaction
:
Contract
Settlement
:
Processing cat.
1 Order- contract settlement
2 Contract
3 Contract settlement
:
SYSTEM LEVEL
Product type
- Forex - external
:
Transaction type
- Spot
transaction
- Forward
transaction
:
USER LEVEL
SAP AG 1999
SAP AG
AC825
5-12
Customizing - Foreign Exchange Master Data 2
Product category
600 Forex
Flow category
Transaction
category
10 Principal increase
90 Other flow

100 Forward
transaction
:
Calculation cat.
AA - Inflow
SYSTEM LEVEL
Product type
- Forex - external
:
Transaction type
- Spot transaction
- Forward transaction
:
Flow type
1000 -Purchase forex
2000 -Sale forex
USER LEVEL
SAP AG 1999
Unlike in money market, condition types are not necessary in foreign exchange trading.
SAP AG
AC825
5-13
Create Order/Contract: Forward Exchange

Transaction
...
Company code
1000
IDES AG
Product type
60A
Forex
EXTERNAL
Trans. type
102
Forward
exchange
transaction
Partner
Deuba
...
Purchase
Sales
Currency
USD
Currency
UNI
Amount
1,000,000.00
Sale amount
Rate/Value date
Rate
Invers
Spot
2.10
Swap
0.00975
Current rate !!
Liquidity
Value date ++3
Contract data
Contract data
09/29/YYYY Trader
Contract person
Extern. ref.
SAP AG 1999
On the entry screen, you enter further transaction data for contract conclusion, currencies, payment
amounts, rate, value date, etc.
For transactions with two foreign currencies, you can calculate the rate using the cross-rate
calculator. You can call this up under Extras -- Cross rates.
From here. you can branch to the entry screens of general transaction management. Tab strips help
you navigate between the screens.
Administration:
Information on the portfolio assignment, the account assignment reference for position posting.
Other flows:
You can manually add other flows (charges, commissions, etc.) to the flows created automatically.
Payment details:
Entry of payment details that are relevant for this transaction. If the payment details are maintained
as standing instructions for a business partner, they appear as default values.
Using Memos, you can store additional information for each activity.
SAP AG
AC825
5-14
Value Date Input in Forex Transaction Entry

Lead curr. Foll. curr. Spot days
USD
CHF
USD
UNI
USD
FRF
Number of working days between

conclusion of contract and spot value
date
User name
Dat.string
M T WDC REC Trader
Date string from

spot value date
SAP AG 1999
In the field Spot days (see Define Leading Currency), you can store the number of days between the
conclusion of the contract and the value date of the forex transaction.
As a rule, the number of working days is two. Depending on the particular currency pair, this number
can vary. You should only make an entry here if a rule other than two days commonly applies to a
particular currency pair in the international foreign exchange market.
If the flag "Dat. string" is checked (see Define User Data), the date strings you enter (e.g. ++1 for
one month) in the value date fields in forex and forex option entry are interpreted and calculated
from the spot day and not from the date of conclusion of the contract.
Example:
Conclusion of the contract is 03/08/YYYY.
The Date string flag is not checked.
An entry of +2 determines the date 03/10/YYYY for the currency pair EUR/USD.
If the flag is checked. the system determines the date 03/12/YYYY.
SAP AG
AC825
5-15
Foreign Exchange - Exercise

Foreign Exchange Transaction
SAP AG 1999
SAP AG
AC825
5-16
Create Order/Contract: Forex Swap Transaction
...
1st transaction
2nd transaction
Product type 60A Forex: EXTERNAL 60A Forex: EXTERNAL

Trans. type
102 Forward transaction
Transaction
Currency pair
In.
Buy
USD 1,000,000.00
Sell
UNI
Rate
Spot
1.88
Swap
0.01287Liquidity
Value date
+2
++4
Ext.refer.
Finance proj.
...
SAP AG 1999
Foreign exchange swap transactions are an important part of foreign exchange management. When a
foreign exchange swap is created, a spot transaction and a forward transaction are created
simultaneously in the SAP System. The foreign currency bought today is sold at a later date, or the
foreign currency sold today is bought back at a later date.
The entry of foreign exchange swaps enables combined entry of a foreign exchange spot transaction
and a forward exchange transaction.
The forward rate is automatically determined via a premium or discount which has been entered. The
criteria for the authorized business partners just as for the payment details correspond to those of
spot and forward transactions. To speed up entry, there are convenient copy functions available. You
can use these to copy data from the first transaction (spot and/or forward) to the corresponding field
of the second transaction (forward and/or swap).
SAP AG
AC825
5-17
Create Order/Contract: Forex Fixing Transaction

...
Company code
1000
IDES AG
Product type
60A
Forex
EXTERNAL
Trans. type
106
Fixing
transaction
Partner
Deuba
...
Purchase
Sales
Currency
USD
Currency
UNI
Amount
1,000,000.00
Sale amount
Rate/Value date
Rate
0.000000000
Spot
0.000000000
Invers
Current rate !!
Swap
Liquidity
Value date
10/27/YYYY
Fixing date
10/25/YYYY
...
Contract data
Contract date
10/15/YYYY Trader
Contact person.
Extern. ref.
SAP AG 1999
On the entry screen you enter the transaction data for contract conclusion, currencies, payment
amounts, value date, etc.- but not the rate.
You can enter the fixing date manually. If you do not make an entry here, the system fills the field
with the current date.
You fix rates later in back-office processing. You can do this manually or automatically.
SAP AG
AC825
5-18
Rate Fixing: Manual or Automatic

Automatic Processing of Forex Fixing Transactions
Automatic Processing of Forex Fixing Transactions
The following transactions were processed successfully:
CoCd Transaction Currency

1000
12
USD UNI
SAP AG 1999
You can fix rates in back-office processing. You can do this manually or automatically. If you want
to fix rates automatically, the currency table TCURR must already be filled.
You access the individual fixing transactions via double-click.
SAP AG
AC825
5-19
Architecture Datafeed
SAP R/3
Datafeed Provider
TR Applications
Market
data
buffer
Forex
Translation
table
...
Information
provider
Reply
Request
Market
Risk Securities
Mgmt.
Operative
SAP tables
External
interface
program
Selective refresh
Reply
Request
Datafeed
Internet/
RFC
Log
Datafeed
server
SAP AG 1999
Current market data (exchange rates, security prices, reference interest rates, indexes ...) can be
maintained in the R/3 System in three ways :
manual maintenance
Market data file interface
The relevant data can be maintained here, for example in Excel (manually or via a data provider),
and it can then be imported in an R/3-compatible format.
Datafeed
By using the datafeed connection, you can have realtime market data available in the system.
SAP AG
AC825
5-20
Foreign Exchange in Cash Management


1000
IDES AG
60A
Forex-EXTERNAL
DB
Forex banks
20
Contract
Banks
Lev
Description
10/02
10/03 10/03
10/04 10/05
10/05 later
later
10/02 10/03
Time deposits
xxx,xxx xxx,xxx xxx,xxx xxx,xxx xxx,xxx
TB
...
...
OB
...
...
DB
Forex
Forex options
Balance
...
...
...
...
...
...
...
...
...
...
123,456 xxx.xxx xxx.xxx xxx.xxx xxx.xxx

E.g. Forward exchange

transaction
Display accounts
DBGiro
- 1.48 m UNI
Outflow in local currency

DBUS$
+1.00m USD
Inflow in foreign currency
SAP AG 1999
In Customizing, for each product type and activity category (or status), you must maintain the
planning levels for G/L and/or subledger accounts where the information is to be displayed.
When displaying forex transactions, for example, forward exchange transactions, you should note
that an inflow takes place on one currency side and an outflow on the other currency side. If you
perform the evaluation for each level, for example, at forward exchange transaction level, only the
difference between the two currency amounts may be shown. Only when you call up the accounts,
can you display the incoming and outgoing cash flows of the single currency accounts.
SAP AG
AC825
5-21
Trading Functions: Additional Functions
Fast entry
Rollover
Premature back-office processing
Reversal
Transaction history
Utilities/Date check
SAP AG 1999
SAP AG
AC825
5-22
Rollover/Premature Back-Office Processing
Rollover/Premature Back-Office Processing

-Forward exchange transaction-
Finance
project
System generates 2 new transactions
Finance
project
Netting transaction
New forward transaction
Swap unit
Adjusting the term
Offsetting
SAP AG 1999
With the functions, Premature back-office processing and/or Rollover, the system generates two
individual transactions that are linked by a swap unit. One transaction serves to offset the original
forward exchange transaction (with identical, reversed conditions so as to avoid exchange rate
gains/losses), the other transaction (as a new transaction) enables the desired adjustment to the term
while retaining the same amounts. The relationship of the swap to the original forward transaction is
documented through the assignment of the individual transactions to a common finance project with
an identical project number. This project number is stored in the administrative data. Whenever a
part of the swap is to be changed, the system displays a warning message to refer to the relationship
with the second swap component.
With this change in transaction data, you can use premature back-office processing and/or a rollover
to split a forward exchange transaction into separate transactions. Via the liquidity effect, financial
income and expenditure from rollovers can be generated on the old rate basis and included in the
extended transaction as a premium. In this case also, the pairing of the swap components is done by
means of the finance project.
If the flag "New base" is checked for the forex attributes, you can enter a current rate for those
transactions that are using the function. If the field has the initial value, then the rate of the rolled
over/prematurely processed original transaction is used as the forward rate for the netting
transaction. You cannot change the rate for this rolled over/prematurely processed transaction that is
based on the old rate.
SAP AG
AC825
5-23
Cross-Rate Calculator
Spot/Forward Transaction Display: Structure
Entry
Reference currency UNI
CHF
/ UNI
In.
1.160000000
USD
/ UNI
In.
1.690000000
Result
USD /
CHF
1.456896552
SAP AG 1999
The Cross rate calculator can be of help for currency translation.
SAP AG
AC825
5-24
Back-Office Functions (Topic 3)
Settlement/checking
SAP AG 1999
SAP AG
AC825
5-25
Settling the Contract: Checking/Completion
Back
office
Trade
Order
with
order
Order execution/
expiration
Termination
Contract
with
settlement
Execution/
Expiration
Termination
Contract
Contract settlement
Exercise/expiration
settlement
Termination
settlement
Example: Forward Exchange Transaction

SAP AG 1999
Back-office processing contains checking and change functions - any entries made can be checked
here and changed if necessary. When a financial transaction is settled, it is completed and checked.
A contract is settled in back office. Here, the contract data can be supplemented with posting and
payment-relevant information.
By saving the settlement activity, the system changes the activity category of the transaction in order
to document that it has been checked and processed in back-office processing.
You can only post the contract after it has been settled.
SAP AG
AC825
5-26
Back-Office Processing Functions: Additional

Functions
Limit management
Reversal
Transaction history
Correspondence
Netting
Referencing
Rate fixing
Automatic fixing
Manual fixing
SAP AG 1999
SAP AG
AC825
5-27
Limit Management (1)

Limits updated on the basis of the following
characteristics:
Company code
Trader
Limit utilization
Business partner: Dt.
Business partner
Limit amount: 100m
Currency
Utilization:
30m
Surplus/deficit: 70m
Portfolio
Limit product group
Country key
Industry key
As offline report
Rating indicator
SAP AG 1999
The limit management functions allow you to set differentiated amount limits for the transactions
you conclude and monitor the amounts utilized. These are determined by volume - based on the
transactions up to a key date. The limits you define are based on limit characteristics. You can
combine these as you wish.
If a limit type does not include all transactions, you can use the characteristic limit product group
to control which product/transaction types are to be included. The limit product groups are userdefined. In money market, forward exchange transactions, forex options, and loans and bonds in the
securities area, they are assigned at the product/transaction type level. This enables you to examine
the limits in detail (risks).
By assigning the product/transaction type, "fixed-term deposits (invested and borrowed)" to a limit
product group, and then combining this limit product group with the characteristic "business
partner", you can determine that a trader may conclude fixed-term deposits up to a predetermined
total volume with a particular business partner.
Furthermore, for determining the limit utilization, you then need to define whether lending and
borrowing transactions are to be considered separately, jointly or whether they are to be offset
against each other. You can call up an overview which shows the current limit utilization as well as
the remaining amount.
Limit amounts can be allocated time-dependent and you can use the SAP List Viewer to display the
limit amounts and the extent of utilization. As before, you can go directly from the limit amounts to
the utilization figures.
SAP AG
AC825
5-28
Limit Management (2)

Char. values Limits
Limit type: L1 : Limit characteristic: Business partner:

Dt. Bank
Dres. Bank
100m
90m
Limit type: L2 : Limit characteristic: Limit product group

Total
Total
Total
FTD
(Fix.-term dep.)
Forex
(Forex)
ForexOpt (Forex options)
70m
50m
70m
Limit type: L3 : Limit characteristics: Partner/Limit product group
L2
70
FG
Dres. 40
90
FG
50
L1
Dt.
100
Dt. Bank
FTD
Forex
Forex options
Dres. Bank
FTD
Forex
Forex options
L1
L3
50m
40m
60m
40m
30m
50m
SAP AG 1999
You set limits for a combination of limit characteristics. By combining these limit characteristics in
different ways, you can define a wide range of limits.
For each of the characteristics assigned to a limit type, you specify characteristic values. You then
assign a limit amount to these values (combination of these values).
In the example above:
L1 : Limit type 1 - Business partner limit
With the business partner Deutsche Bank, you can conclude transactions of up to
100 million UNI (money market, forex spot, forward exchange, and currency options).
L2 : Limit type 2 - Limit for product/transaction type
You can conclude fixed-term deposits of up to 70 million UNI (total, for all partners).
L3 : Limit type 3 - Limit for a partner/transaction
You can conclude fixed-term deposits of up to 50 million UNI with the business partner
Deutsche Bank.
SAP AG
AC825
5-29
Accounting and Valuation Functions (Topic 4)
Posting a Transaction
Posting overview
Valuation of forward exchange
transactions
SAP AG 1999
SAP AG
AC825
5-30
Posting a Transaction
Application
Forex
Money market
Derivatives
Securities
POSTING LOG
General selections
Company code
Transaction
Product type
Transaction type
Portfolio
Currency
Flow classification
Up to and including due date
Only post flow according to currency
...
Posting control
Posting date
Document date
Test run
SAP AG 1999
Through posting, the settled financial transactions are transferred to Financial Accounting. You can
only post transactions that have achieved contract or settlement status (depending on the back-office
processing category) at internal level (system level).
Prior to posting, the transaction flows and/or positions to be posted are selected. You can have the
system carry out a test run in order to check the accuracy of the posting entries in the posting log.
When posting is carried out, the flows and corresponding documents are transferred to Financial
Accounting.
Posting in R/3 Financial Accounting occurs online.
The FI document numbers are displayed.
When you post a transaction, the system generates a posting log. By double-clicking on a posting
line, you access the respective posting document.
If the indicator "Only post flow according to currency" is checked, only the flows of the specified
transactions in the selected currencies are processed.
Example: In a foreign exchange transaction between currency A and currency B, and selection by
currency A, the system behaves as follows:
If this indicator is not checked, the flows in currency A and currency B are posted.
If this indicator is checked, only the flows in currency A are posted.
SAP AG
AC825
5-31
Posting Log
Treasury: Post Flows
TR-TM Worksh./
Walldorf
Treasury: Post Flows

Posting log
Due date FTyp D P Flow type

Company code
1000
Foreign curr. amt
Transaction
300074
Curr.
Product type
Time: 12.27.16
RFTBBB00/WALTER
Local curr. amt
Curr.
DT
60A Forex -External
PK
Debit acct
Trans. Type
101
Date: 09.06.YY
Page
1
PK Credit acct Doc. no.
Post Date
Spot transaction
09.09.YYYY 1000 + Buy forex
1,000,000.00 USD
1,500,000.00
UNI
SA
40
113155
50
194100
100000300 09.09.YYYY
09.09.YYYY 2000 - Sell forex
1,500,000.00 UNI
1,500,000.00
UNI
SA
40
194100
50
113105
100000301 09.09.YYYY
SAP AG 1999
From the posting log, you can access the posted FI documents directly.
SAP AG
AC825
5-32

Back-Office Processing and Accounting
SAP AG 1999
SAP AG
AC825
5-33
Valuation
You can carry out the following foreign currency valuations:

Key date valuation: The position is valued on a key date the realtime datafeed can provide the required valuation
rates.
Realized gains/losses: With positions that are closed, the
realized gain/loss is determined using the principle of single
valuation of transactions. This is calculated by taking the
difference between the forward rate based on the conclusion
of the contract and the posted rate on the value date.
SAP AG 1999
For valuations in the foreign exchange area, you usually use realtime datafeed which provides the
necessary valuation rates. You can carry out a valuation run for specific transactions that you select.
You determine realized gains/losses via the single valuation principle. There are two alternative
procedures to choose from: On the one hand, you can calculate the valuation rate by taking the
difference between the forward rate based on the conclusion of the contract and the posted rate at the
value date. On the other hand, you can generate split valuations for spots and swaps by using certain
settings to separate the amounts resulting from the spot and/or swaps. In this way, realized
gains/losses are calculated by taking the difference between the spot rate on the day of conclusion of
the contract and the spot rate on the valuation key date. Swap incomes and expenditures are
generated from the discounted swap component up to the the key date. Besides this, a valuation of
the other components is carried out for the discounted swap component from the key date up to the
term end, and unrealized gains/losses are generated.
For a foreign exchange swap, you carry out the foreign currency valuations on the basis of the single
transactions generated. With a forward exchange transaction, you can also carry out a split valuation
here for the spot and swap, provided that the necessary settings have been made.
SAP AG
AC825
5-34
Valuation: Valuation Units
Macro view
Selection of
valuation
objects
Valuation
Micro view
Global selection
operative basic
transactions
Treasury
transactions
Valuation
unit:
Valuation
unit:
Valuation
unit:
Hedge unit*
Portfolio
position*
Single
transaction
TR- Risk/market-based
MRM Valuation
Value-at-Risk
Mark-to-Market
Accounting
valuation:
TRTM
E.g. imparity
principle
SAP AG 1999
The requirements of the accounting valuation on the single transaction basis are met in both
Financial Accounting and Treasury Management.
* In preparation: Release not yet specified.
According to the imparity principle, unrealized losses can be anticipated. Unrealized losses are
treated as losses and, therefore, should be displayed. Unrealized gains are not gains and, therefore,
should not be displayed.
For the valuation of cross currency transactions, there is a separate valuation of flows for both
currencies and also a separate display of the currency profit. Besides this, the valuation and accrual
of swaps is carried out separately.
SAP AG
AC825
5-35
Valuation Rules I
Establish valuation rules

Dependent on company code/product type/transaction type
A. Define single-level valuation principles and classes/
for key date valuation - "Unrealized Gains and Losses"
Unrealized losses (write-downs):
- No valuation loss
or - valuation loss until key date value
Unrealized gains (write-ups):
- No valuation gain
or
- valuation gain to purchase value
or
- valuation gain to key date value
SAP AG 1999
SAP AG
AC825
5-36
Valuation Rules II
=> Define flow types for valuation and assign

to product/transaction type combination
B. Foreign currency rate determination
for key date valuation - "Unrealized Gains and Losses"
and realized gains and losses
1 = Compare transaction forward rate with current spot rate
2 = Key date valuation:
- Compare transaction forward rate with market forward rate
(incl. spot rate)
Realized gains:
- Compare transaction forward rate with current spot rate
3 = Compare transaction forward rate with current spot rate
SAP AG 1999
SAP AG
AC825
5-37
Valuation Rules III

B. Foreign currency rate determination (continuation)
4 = Split valuation spot/swap:
Transaction forward rate USD/UNI
Contract date: 02/01/YY, value date: 03.31.YY
Forward rate: 1.49 Spot rate: 1.40 Swap rate: 0.09
02.01
|
arising up to now
Contract date
02.28
|
remaining
03.31
1. Real. gains/losses
1. Compare transaction forward rate
2. Accrual/deferral
with current spot rate
past swap rate
2. Accrual/deferral swap rate: past
3. Posting to a prior
= Transaction spot rate x (past period
period
/whole period)
past swap rate
3. Accrual/deferral swap rate: remaining
= Transaction swap rate x (remaining period
/ whole period) - Market swap rate
5 = like 4 but swap accrual without

swap valution
SAP AG 1999
SAP AG
AC825
5-38
Foreign Currency Valuation (FCR Determination: 2)

Forex transaction:
USD/UNI
Contract date:
03/01/YY
Value date:
05/31/YY
USD purchase amount:

UNI sale amount:
1,000,000 USD (Forward rate)

1,700,000 UNI
Spot rate:
Forward rate:
1,65
1,70
Valuations
Closing valuation
on 03/31/YY and 04/30/YY

on 05/31/YY
Local currency = UNI

SAP AG 1999
Forward exchange transactions are usually pending transactions, that is, transactions that are based
on an exchange of payments that have not yet been made by either party.
Gain/loss realization only takes place when the contracting parties have paid.
In forex valuation, in the case of valuation at the current forward rate or with swap/swap
comparisons, the term of the swap is no longer determined as the period between the key date and
the due date of the transaction, but rather as the period between the spot date (calculated from the
key date) and the due date of the transaction.
If you select the field Perform posting immediately, the flows generated by the valuation are posted
immediately. Otherwise, the flows must be posted later using the appropriate functions.
You can set the flag Derivatives if you want to value derivative financial instruments. Currently,
however, SAP only supports the valuation of options of product category 760.
SAP AG
AC825
5-39
Foreign Currency Valuation

1. Valuation:
03/31/YY
2. Valuation:
04/30/YY
End valuation:
05/31/YY
Forward rate: 1.70
Local currency = UNI
Date
Forward rate UNI
Not realized
03/01/YY
03/31/YY
04/30/YY
05/31/YY
1.70
1.65
1.72
1.69
- 50,000
+ 20,000
1,700,000
1,650,000
1,720,000
1,690,000
Realized
- 10,000
SAP AG 1999
This is an example for the following scenario:

Creating and reversing provisions
Showing realized loss.
In the valuation of 04/30/YY there is an unrealized gain. This, however, does not have to be
disclosed according to German trade and tax law.
SAP AG
AC825
5-40
Foreign Currency Valuation - G/L Accounting

1. Valuation:
03/31/YY
Balance sheet
Forward rate
on conclusion: 1.70
Provision Assets
Forward rate
on market:
Clearing account
1.65
Creation of passive provision and

display of unrealized loss
Provision Liabilities
50t 1
USD bank account

UNI bank account
P&L
Unrealized loss
1 50t
Unrealized profit
Realized loss
Realized profit
SAP AG 1999
SAP AG
AC825
5-41

2. Valuation:
Forward rate
on conclusion: 1.70
Forward rate
on market:
1.72
04/30/YY
Writing-off of passive provisions,

creation of active provisions, display
Balance sheet of unrealized profit
Provision Assets
2 20t
50t 1
2 50t
Clearing account
USD bank account
UNI bank account
P&L
Unrealized loss
50t
2
1 50t
Realized loss
Unrealized profit
20t 2
Realized profit
SAP AG 1999
Unrealized profits and active provisions are not disclosed in Germany.
SAP AG
AC825
5-42

End valuation: 05/31/YY
Forward rate
on conclusion: 1.70
Spot rate
on market:
1.69
(after posting the transaction)

Balance sheet
Provision Assets
20t 3
2 20t
50t
1
2 50t
Clearing account
1.70m UNI
1m USD
10t
USD bank account

1m USD
UNI bank account

1.70m UNI
P&L
Unrealized loss
50t
2
1 50t
Realized loss
3 10t
Unrealized profit
3 20t
20t 2
Realized profit
SAP AG 1999
The closing valuation of the forward exchange transaction is carried out using a currency clearing
account. The update is carried out based on the forward rate that is fixed in the transaction. The
foreign currency amount is translated at the current rate of exchange.
The difference (realized gain/loss) is determined by the closing valuation, it is held in Treasury as a
valuation flow, and is transferred to Financial Accounting during the posting run.
In order to determine the (profits and/or ) losses made, you must first post the transactions.
SAP AG
AC825
5-43
MRM: Saving OTC Net Present Values

TRMRM
TR-TM
Mark-to-market
EUR
USD
Saving
FI
Valuation
GBP
10
NPVs
8
6
4
2
1 2 4
M Y Y
6 8 10
Y Y Y
Money Market
Forex
Derivatives
Financial
accounting
SAP AG 1999
In the Market Risk Tools area, you can store net present value (NPV) figures (determined with the
Mark-to-Market valuation) in the OTC NPV table.
These NPVs can then be accessed for the (accounting) key date valuation of derivative financial
instruments in Treasury Management. Currently, however, SAP only supports the valuation of
options of product category 760.
With the key date valuation, the NPVs in the display currency are translated into the premium
currency and the write-ups/write-downs or provisions are formed based on the corresponding local
currency amount.
SAP AG
AC825
5-44

Valuation
SAP AG 1999
SAP AG
AC825
5-45
Report selection/Link to drilldown reporting

Journal
Journal Forex
Journal Money Market Forex Derivatives
Securities
Payment schedule
Payment schedule Forex

Payment schedule Money Market
Forex Derivatives Securities
Maturity schedule - spot and forward transactions

Transaction changes
SAP AG 1999
There are specific reports available in the Information system for particular business requirements.
You can use these reports to analyze and evaluate foreign exchange trading transactions.
The financial transactions journal gives you an overview of the financial transactions according to
variable selection criteria. From the journal, you can branch to the basic data of each transaction at
any time.
The payment schedule provides an overview of the payments already made or outstanding and
contains information about business partners and bank details.
With the maturity schedule for spot/forward transactions, a list of due dates for spot and forward
transactions within a predefined period of time is generated. To get detailed information, you can
branch from the list to the display of the selected transaction.
By linking to the SAP drilldown tool, you can use flexible reporting and interactive processing
functionality for cumulative and non-cumulative values in foreign exchange trading. These include
drilldown techniques, data export, and graphical presentation forms. You can use flexible report trees
to configure individual reports.
SAP AG
AC825
5-46
Foreign exchange: Unit Summary

Transaction back-office processing in foreign
exchange trading depends on the process chain
defined for a product/transaction type (for example,
a forex/forward transaction).
Foreign exchange transactions are represented in
Cash Management.
In rollover/premature back-office processing, two
new transactions arise which are linked to the
original transaction.
Posting is executed via a Currency clearing account.
Valuation is based on this.
Treasury Management also provides accrual/deferral
and valuation functions.
SAP AG 1999
SAP AG
AC825
5-47
Foreign Exchange Exercises

Unit: Foreign Exchange
Topic: Trading - Forward Exchange Transaction
Set up a forward exchange transaction in SAP R/3 Treasury
Management.
You must pay an invoice in 3 months to the value of approximately USD

12 million and wish to take advantage of the current USD exchange rate.
You, therefore, conclude a forward exchange transaction.
1-1
In the standing instructions for your business partner (DEUBA), ensure that both
UNI and USD are maintained in the payment details for forex transactions.
1-2
Create an order via a forward exchange transaction (USD-UNI).

Choose the Deutsche Bank (DEUBA) as your business partner. Select the
following transaction data
Amount:
12 million USD
Rate:
1.82 UNI
Value date:
In 3 months.
Use the input help relating to the amount field and value date.
Then check the
- account assignment reference and G/L account,
- cash flow,
- payment details.
Look at the other flows.
Consider which value date (with date string ++3) would result if you had checked
the flag "Date string" (see Define User Data).
1-3
SAP AG
Execute the order and observe the change in the activity category.
AC825
5-48

Topic: Back Office and Accounting

settle and post transactions.
Having created the forex transaction, you proceed in the Back Office.
Here, you settle or check the transaction. Then you post the transaction
flows.
2-1
Settle the forex transaction.

Check that your entries are complete.
Note the change in the activity category.
2-2
Carry out the posting for the forex transaction. Note the due date.
Carry out a test run prior to the update run.
In the posting run, double-click directly on the FI document generated.
SAP AG
AC825
5-49

Topic: Valuation - Forward Exchange Transaction

Perform a valuation for a forward exchange transaction in SAP R/3
Treasury Management.
You must pay an invoice in 2 months to the value of approximately USD

10 million and you wish to take advantage of the current USD exchange
rate. You, therefore, conclude another forward exchange transaction. At
the end of the month, you wish to value your transactions (Key date
valuation). You then have to determine your realized gains and losses.
3-1
You must first determine your valuation rules.

You do this in Customizing under Basic Functions. You define a one-step valuation
principle (BXX - VALUATION PRINCIPLE GR XX).
Select: -Valuation loss up to key date value (2)
Select: -Valuation gain up to key date value (4)
You then determine your own valuation class (CLASSXX). Assign valuation
category 10 (single - manual assignment) and your valuation principle (BXX).
3-2
Then check that the predefined flow types for forex transactions are complete.
Take a look at
- 3010 Realized loss (Forex)
- 3011 Realized gain (Forex)
- 3020 Create provision
- 3021 Reverse provision
- 3030 Show unrealized gain
- 3031 Reverse unrealized gain
3-3
SAP AG
Assign these valuation flow types to the product type/transaction type combination
(DXX/GXX) that you defined in the unit "Basic Settings".
AC825
5-50
3-4
Then you assign your valuation class to your product/transaction type (DXX/GXX)
combination in your company code (TRXX) .
You should use procedure "2" for exchange rate determination. Here, the current
forward rate (current spot rate plus swap rate) is compared with the transaction
forward rate. The standard translation should be at the middle rate (M) in each case.
We do not wish to carry out a cross valuation at this point.
3-5
Now create a contract via a forward exchange transaction (USD-UNI) for your
product type/transaction type combination (DXX/GXX) in your company code
(TRXX).
Select the following transaction data
Amount:
: Purchase USD 10 million,
Rate
: Choose a realistic value.
Value date : In 2 months.
Use the input help relating to the amount field and value date.
3-6
Carry out a key date valuation at the end of each of the next two months. Post the
generated valuation flows immediately.
On the due date, the forex transaction is realized and posted. You must then carry
out a valuation to determine the gains/losses realized and to post.
3-7
SAP AG
Finally, take a look at the cash flow. Now call up the local currency display using
choose layout.
AC825
5-51
Foreign Exchange Solutions

Topic: Trading - Forward Exchange Transaction
1-1
Solution to the step: Checking the standing instructions.
Accounting
Treasury
Treasury Management
Foreign Exchange
Master data
Payment Details
Values
Partner
Deuba
Company code
TRXX
Display
1-2
Solution to the step: Creating an order via a forward exchange transaction.
Accounting
Treasury
Treasury Management
Foreign Exchange
Trading
Spot transactions/forward transactions
Create
SAP AG
AC825
5-52
Values
Company code
TRXX
Product type
60A
Transaction type
102
Partner
Deuba
order
Select
Purchase currency
USD
Amount
12m
Sales currency
UNI
Rate
1,82
Value date
++3
Confirm the entries by pressing 'Enter', the system then
automatically determines the offset amount (here: sales); only
then should you save.
Tabstrip: Cash flow
Tabstrip: Other flows
Save
If the flag "Dat. string" is checked (see Define User Data), the date
strings you enter (e.g. ++3 for three months) in the value date fields
in forex and forex option entry are interpreted and calculated from
the spot day and not from the date of conclusion of the contract.
1-3
Solution to the step: Executing the order.

...
Foreign Exchange
Trading
Order
Execute
Save
The transaction now has "Contract" status.
SAP AG
AC825
5-53

Topic: Back Office and Accounting
2-1
Solution to the step: Settling the foreign exchange transaction.
Accounting
Treasury
Treasury Management
Foreign Exchange
Back office
Spot/forward
Settle
Check that the data is complete.
Save
2-2
Solution to the step: Posting the foreign exchange transaction.
Accounting
Treasury
Treasury Management
Foreign Exchange
Accounting
Posting
Execute
Values
Company code
TRXX
Transaction
Transaction number
Adjust date

After the update run:
In the posting log, you can branch directly to the FI document.
SAP AG
AC825
5-54

Topic: Valuation - Forward Exchange Transaction
3-1
Solution to the step: Determining the valuation rules.

Customizing:
Treasury
Treasury Management
Basic Functions
Accounting
Valuation
Define One-Step Valuation Principles
New entries
Values
Valuation principle
BXX
Name of the valuation principle
Valuation principle GR XX
Valuation loss
Valuation loss up to key date

value
Valuation gain
Valuation gain up to key date

value
Save
Solution to the step: Creating a valuation class.
Customizing:
Treasury
Treasury Management
Basic Functions
Accounting
Valuation
Define Valuation Classes
New entries
SAP AG
AC825
5-55
Values
Valuation class
ClassXX
Valuation class
10
Valuation principle
BXX
Save
3-2
Solution to the step: Checking the predefined flow types.

Take a look at
- 3010 Realized loss (Forex)
- 3011 Realized gain (Forex)
- 3020 Create provision
- 3021 Reverse provision
- 3030 Show unrealized gain
- 3031 Reverse unrealized gain
Customizing:
Treasury
Treasury Management
Foreign Exchange
Flow Types
Define Flow Types double click on the flow type
3-3
Solution to the step: Assigning the valuation flow types.

Customizing:
Treasury
Treasury Management
Foreign Exchange
Functions
Accounting
Valuation
Assign Valuation Flows to Transaction Type
3-4
Solution to the step: Assigning the valuation class.

Customizing:
Treasury
Treasury Management
Foreign Exchange
Functions
Accounting
Valuation
Assign Valuation Class to Company Code/Transaction Type
SAP AG
AC825
5-56
Values
Company code
TRXX
Product type
DXX
Transaction type
GXX
Valuation class
ClassXX
Foreign Currency Rate(FCR)

Determination
Rate cat. SwpPu
Rate cat. SwaSA
Rate type SpoPu
Rate type SpoSa
Cross valuation
No flag
If the cross valuation flag is checked, whenever cross-currency

foreign exchange transactions are valued, a separate valuation flow is
generated for each foreign currency flow. This enables you to assign
currency gains more accurately.
3-5
Solution to the step: Creating a foreign exchange transaction for your product
type/transaction type combination.
Application:
...
Foreign Exchange
Trading
Create
Button: Contract
Input:
- Purchase currency
- Amount
- Sales currency
- Rate; Value date
Save
Transaction number: _______________________
SAP AG
AC825
5-57
3-6
Solution to the step: Carrying out a key date valuation and posting.
Application:
Accounting
Treasury
Treasury Management
Foreign Exchange
Accounting
Valuation
Key date valuation (Key date 1: End of the current month
Key date 2: End of the next month)
Values
Company code
TRXX
Transaction
Transaction number
Key date
Key date 1: End of the current

month
Key date 2: End of the next
month
Test run
Do not select
Perform posting immediately
Select
Execute
If you select the field Perform posting immediately, the flows
generated by the valuation are posted immediately. Otherwise, the
flows must be posted later using the appropriate functions.
Solution to the step: Posting the forward exchange transaction.

Application:
Accounting
Treasury
Treasury Management
Foreign Exchange
Accounting
Posting
Execute (Transaction - purchase, sale - on value date)
SAP AG
AC825
5-58
Solution to the step: Determining realized gains/losses.

Application:
Accounting
Treasury
Treasury Management
Foreign Exchange
Accounting
Valuation
Realized gains/losses
Values
Company code
TRXX
Transaction number
Transaction number
Test run
Do not select
Perform posting immediately
Select
Execute
3-7
Solution to the step: Looking at the cash flow.

Application:
Accounting
Treasury
Treasury Management
Foreign Exchange
Trading
Display
Tabstrip: Cash flow
Select layout Local currency view Set filter
Note that you can select the classification (structure

characteristics, accrual/deferral, valuation, transfer posting) by
choosing Set filter.
SAP AG
AC825
5-59
Derivatives
Contents:
Topic 1
Introduction to derivative
financial instruments
Topic 2
Control of exchange rate risks via

Topic 3
- OTC Currency options

- Currency barrier options
- Compound options
Control of interest rate risks via derivatives
- Forward rate agreement (FRA), interest rate
swap, Cap/Floor
Topic 4
Topic 5
Futures
Back Office
Topic 6
Topic 7
Accounting
Information System
SAP AG 1999
SAP AG
AC825
6-1
Derivatives: Unit Objectives

Create various instruments for hedging against
interest rate and exchange rate risks and
Represent them in the SAP R/3 Treasury System.
SAP AG 1999
SAP AG
AC825
6-2

Basic Principles
Money Market
Foreign Exchange
Derivatives
SAP AG 1999
SAP AG
AC825
6-3
Derivatives: Business Scenario
You now wish to create various instruments for

hedging against interest rate and exchange rate
risks.
What must you do in the Trading area in order to
create a derivatives transaction and process it?
SAP AG 1999
SAP AG
AC825
6-4
Introduction to Derivative Financial Instruments
(Topic 1)
Product types in derivatives trading
SAP AG 1999
SAP AG
AC825
6-5
Selection of Relevant Product Types

Product types
instruments
Money Market
Securities
Hedging instruments
Loans

CAP/Floor
FRA
Swaps
- Interest rate
- Cross currency
OTC Options
- Currency
- Interest rate
- Stocks
- Swaption
Futures
SAP AG 1999
SAP AG
AC825
6-6
Product Matrix - Derivative Financial Instruments

Important Hedging Instruments
Exchange rate risk
Interest rate risk
Forward exchange trans.

Currency futures
FRA
Forward rate agreements
Interest futures
Interest rate swap
Currency swap
OTC interest rate options

CAP/Floor
Swaption
IRG
SAP AG 1999
What exactly you want to hedge against (elimination of the currency risk, interest rate risk, or price
risk) will determine which of the hedging instruments you choose.
Derivative financial instruments can roughly be divided into exchange transactions (upper half) and
optional transactions (lower half) on the currency and interest side. The latter can also be further
divided into listed and OTC (Over The Counter) options.
The building block concept applies here - this means that an instrument can be formed from another
one or combined with others to form a new instrument.
SAP AG
AC825
6-7
Control of Exchange Rate Risks via Currency

Options (Topic 2)
Typical transaction and position management

processes:
Transaction entry and back-office processing
- OTC currency options
- Currency barrier options
- Compound options
SAP AG 1999
Using an option provides the flexibility to both reduce the risk of loss and at the same time to profit
from favorable market trends. Options represent a type of insurance, therefore, and a premium is
paid or collected for this.
The use of currency options is recommended when there are strong exchange rate fluctuations or
when future expectations are very uncertain.
OTC currency options can be assigned to both foreign exchange trading and to the area of derivative
financial instruments, and can be created in both areas. The input logic for derivatives follows that of
other option types so that you can branch from the option data to the separate input screen of the
underlying transaction (in the case of currency options, the spot transaction).
OTC currency options are assymetric hedging instruments since rights and obligations are split
unevenly between purchaser and seller. In contrast to listed instruments, the OTC options with userdefined structures are traded directly between business partners.
SAP AG
AC825
6-8
Currency Options
The purchaser acquires the right (the seller accepts the obligation)
to buy (deliver) or sell (purchase)
- a certain foreign currency amount (underlier)
- at a certain rate (strike price)
- at a certain time (European option) or
within a certain time period (American option).
The purchaser must pay the option premium to the seller for this right.
The seller of the option has the obligation to deliver the foreign exchange
amount or to purchase it.
Calls: Purchaser acquires the right to buy (seller must deliver).
Puts: Purchaser acquires the right to sell (seller must buy).
Cash settlement or physical settlement (delivery/purchase)
SAP AG 1999
Example - Call: with a USD/UNI call at the strike price of 1.80, the purchaser has the right to obtain
a particular USD amount at the strike price from the seller. The purchaser will only exercise this
right if the market price is higher than the strike price at the time of exercise or within the exercise
period. This way, the purchaser can acquire the foreign currency amount cheaper using the option
than on the market.
Example - Put: with a USD/UNI put at the strike price of 1.80, the purchaser acquires the right to
sell a particular USD amount to the seller at the strike price. The purchaser will only exercise this
right if the market price at the time of exercise or within the exercise period is less than the strike
price. In this case the purchaser can obtain a higher price for the foreign currency amount using the
option than the price on the market.
Trading idea: the purchaser of a call wishes to hedge against rising prices and the purchaser of a put
hedges against falling prices. The seller expects the inverse price trend and wishes to improve his
position by collecting the option premium.
With barrier options, you differentiate between knock-in and knock-out options. With knock-in
options, the option right only arises when the trigger price is touched (Down & In, or Up & In). With
knock-out options, the existing option right expires when the trigger price is touched (Down & Out,
or Up & Out).
SAP AG
AC825
6-9
OTC Currency Options
t0 t0+2
t1 t1+2
At t0 the transaction is concluded

(Input and settlement)
At t0+2(Value date) the premium is paid
(posting of the premium flow)
At t1: - Physical exercise and exercise settlement
(transfer of the premium flow)
- The spot transaction (underlying transaction) is generated at the
same time. This must be settled according to the back-office
processing category.
At t1+2 (value date), the posting of the spot transaction flows occurs.
SAP AG 1999
SAP AG
AC825
6-10
Input of OTC Currency Options

Company code
Product type
Trans. type
...
Option
Cross rate calculator

Option price calculator
Transaction
1000 IDES AG
OTC currency option Activity
76A
1
Purchase
100
Exercise period
Currency pair
Underlying curr.
Strike
Value date
Premium
Pnt quot.
Points
Payment date
++2
USD
USD
1.82
Exercise type European

Settlmnt.
UNI
* Put
5,000,000.00 : Call
Invers
Contract
Physical exercise
* Perc. quoted
Curr.
UNI
Amnt
300,000.00
Contract
Contract date
...
09.29.YYYY
...
SAP AG 1999
When creating a currency option, you document the purchase/sale intention for a currency option.
On the initial screen, you enter the transaction type (purchase/sale) and the business partner for the
product type, currency option.
On the following screen, in addition to the transaction data for the underlying spot exchange
transaction or forward transaction, you enter data relating to the option such as the due date, exercise,
and purchase premium.
From here, you can branch to the entry screens of general transaction management. Tab strips help
you navigate between the screens (Structure, Administration, Other flows, Payment details, Cash
flow, Memos, Status).
You can branch to the option price calculator to calculate the option premium.
SAP AG
AC825
6-11
Derivatives Trading - Exercise

OTC Currency Options 1
SAP AG 1999
SAP AG
AC825
6-12
Underlying
OTC currency option
Underlying
Product type 60A Forex - external
Strike
Trans. type
Pmnt amnt 3,640,000 UNI
1.82
Transaction 1800002 USD - Call 2,000,000 USD
SAP AG 1999
In Treasury, when you define the product types, you can include the related underlying transactions.
In this way, for example, a spot exchange transaction is entered as an underlying transaction in
currency options. In general, in the case of physical exercise, the underlying transactions are
generated automatically. You can specify different payment methods for the underlying transaction
and the option because of this separation into two transactions.
Option type: PUT/CALL
Case A) Local currency involved:
If the local currency is involved on one side of the transaction, the foreign currency determines
whether the option is a call or a put.
Example: USD/UNI: USD-Call
Case B) Cross transaction
B1) If the local currency is a European Monetary Union (EMU) participant, and one of the
transaction currencies is also an EMU participant, then the currency that is not an EMU participant
determines whether the option is a call or a put.
Example: EUR/GBP : GBP Put
(Note: In these examples, the local currency is assumed to be UNI.)
B2) If the local currency is not an EMU participant, or if it is a genuine Cross transaction, then the
lead currency determines whether the option is a call or put.
Example: USD/JPY: USD-Call
SAP AG
AC825
6-13
Currency Option: Option Price Calculator
Market data
Premium Calculation for Standard Options

Swap/forward Premiums Sensitivities Implied volatility List
Curr. pair
Market data
Spot
1.70900
Swap
0.11212Forward 1.59688
Premiums
Basis
Put 1
Put 2
1.700000
Put 3
Call 1
Call 2
Call 3
/
/
/
1.71100
0.106441.60456
Int. 1st curr.

Int. 2nd curr.
Volatility
European
6.4152
3.8005
10.0000
/
/
/
0.06347
0.4502
6.4574
3.8997
10.0000
American
0.06527
0.06366
/
/
/
0.06545
0.04878
/
/
/
0.05020
/
1.700000
/
/
/
0.04650
/
SAP AG 1999
In order to calculate the arithmetical value of the option premium, the trader can use the option price
calculator directly during input. Besides supplying the premium, this also provides you with the
critical sensitivities of the options. You can enter the option premium on the entry screen as a
percentage of the basis transaction (in percentage points) or as a fixed amount. Calculation of the
premium is based on the: spot price, strike price, term, the risk-free interest rate in both currencies,
the option category and the volatility of the exchange rate.
You can choose Market data to obtain the current market data: spot rates, swap rates, interest rates
for currency 1 and 2 as well as exchange rate volatility.
You can enter different strike prices for the underlying currency transaction for 3 put and call
options.
You can determine premiums for European and American standard options and also for European
currency barrier options (exotic options).
If you position the cursor on a premium and choose sensitivities, the option sensitivities (delta,
gamma, etc.) are calculated. You can have a list displayed with all key figures for all the calculated
options.
By specifying an option premium, you can determine the underlying volatility (implied volatility) by
calculating backwards using the option price model.
SAP AG
AC825
6-14
Configuration of the Master Data
Maintain product types

Assign cash management levels
Transaction type
Number ranges
Maintain number ranges for underlying transactions
Maintain flow types

Assign flow type
Transfer of option premium at exercise
Account assignment reference
SAP AG 1999
SAP AG
AC825
6-15
Product Types - Currency Option
Product type
76A
Text
OTC Currency option

760 OTC Options
Product cat.
Option/Future
Number range
Underlying
Quot. type
...
60A
Product type
Settlement
...
Option type
SAP AG 1999
Number range: Identifies the number range for transaction number allocation for the underlying
transaction.
Settlement: Settlement indicator that controls whether the underlying transaction is to be exercised
physically or if there is to be a cash settlement.
Quotation type: Price quotation, percentage quotation, etc.
Settlement method
Exercise type: 1 = European 2 = American
Option category: 1 = Standard OTC option.
Underlying:
Underlying product type
Underlying transaction type
SAP AG
AC825
6-16

OTC Currency Options 2
SAP AG 1999
SAP AG
AC825
6-17
Transfer of Option Premium at Exercise
Transfer of Flows - Activity Transitions

New entries
Activity transition
Product type
76A
Settlement
1
New activity cat. 41
OTC Currency option

Purchase
Physical exercise
Exercise
Original flow
Flow type
Direction
1301
Option premium (OTC)

-
Generated flow
TransferTrans
ProdTypeUnderly
TransTypeUnderl
1321
60A
101
Premium transfer on exercise

Forex: External
Spot transaction
SAP AG 1999
Posting of the premium flow at t0+2(value date):

Other receivables to bank clearing account
Transfer posting of the premium flow:
Rate gains/losses to other receivables
SAP AG
AC825
6-18
Exercise
OTC currency option
Exercise
Exercise
Cash settlement
Physical exercise
SAP AG 1999
At the time of conclusion of the transaction, the cash flow consists only of the premium. Both
European and American option forms can be represented in the SAP System. As settlement, you can
have either physical exercise or cash settlement.
When the option is exercised, in the case of a cash settlement, the settlement amount is based on the
difference between the strike price and the market price. In the case of physical exercise, the spot
transaction is generated automatically from the underlying transaction (option).
If the option is worthless, it is deleted. As with the exercise, it may be necessary- according to backoffice processing category - for this expiration to be settled by the back-office processing area again.
SAP AG
AC825
6-19
Currency Barrier Options
Barrier options are represented as product types with a

specific option category.
The transactions are processed using special
processing categories that take into account activities
such as knock-in/knock-out.
As with options, the underlying transaction is assigned.
The barrier must also be specified.
SAP AG 1999
Currency barrier options are different from regular OTC options as they have a defined upper and
lower limit (instrike or outstrike). If these limits are exceeded or fallen short of by the market, the
option - depending on it's type - either becomes effective or expires. This barrier is specified in the
financial transaction data.
In Treasury Management, you can see the basic categories traded on the market: These are:
Calls:
Puts:
Down&Out
Option expires at or below the outstrike
Up&Out
Option expires at or above the outstrike
Down&In
Option comes into existence at or below the instrike
Up&In
Option comes into existence at or above the instrike
Down&Out
Option expires at or below the outstrike
Up&Out
Option expires at or above the outstrike
Down&In
Option comes into existence at or below the instrike
Up&In
Option comes into existence at or above the instrike
You can also enter double barrier options. These either come into existence or expire if two barriers
are exceeded or fallen below.
SAP AG
AC825
6-20
Currency Barrier Option

Barrier
Company code
Product type
Trans. type
Structure
1000
76F
100
Underlying
Partner
Exercise
Underlying
Option price calculator

IDES AG
Transaction
Currency barrier option Up. Activity
1
Kauf
Deuba
...
...
...
...
Contract
...
...
Currency barrier option Up&In
Currency barrier 1.750000 USD/UNI
Continue
Cancel
Premium
Contract
SAP AG 1999
SAP AG
AC825
6-21
Customizing: Currency Barrier Option
Product type
76F
Text
Currency barrier option Up&In

760 OTC Options
Product cat.
Options/Futures
Number range
Quotation type
...
Settlement
...
Underlying
Product type 60A
Trans. type 101
Opt./fut. cat. 13
SAP AG 1999
1. Defining product types:

Option categories:
011: Down&In
012: Down&Out
013: Up&In
014: Up&Out
2. Defining transaction types:
==> Selection of the "Processing category" with
knock-in or knock-out
Example:
Prod.type
76F
SAP AG
Trans. type
100
Back-office cat.
00106
AC825
Definition
Order - Contract - Knock-in/Expiration Exercise/Expiration
6-22
Knock-In/Knock-Out Activities
Currency barrier option
Barrier
Barrier exceeded/fallen
exceeded/fallen short
short of
of
Knock-in
Knock-out
Exercise
Expiration
SAP AG 1999
The options are activated either for exercise or expiration by means of the knock-in/knock-out
activities. Using the function Expiration/Barrier check, you can have the instrikes and outstrikes
checked by currency barrier options. After comparing the transaction data with the relevant rates, the
SAP System proposes a transaction (knock-in, knock-out, or expiration) to process the transaction
further.
To determine market-driven option prices, you can use the option price calculator. This takes the
agreed barriers into account and also any rebates that are to be paid upon expiration of the option.
SAP AG
AC825
6-23
Compound Options
With the purchase of a Compound Option, the buyer acquires the

right to buy or sell a specified option (the underlying option) at a
certain premium, at a certain time or within a certain time period.
Compound forex option = Option on a currency option

Underlying: Currency option
Advantages compared to a currency option:
Reduction in the cost of the option premium
Exercise decision is postponed
SAP AG 1999
Example:
Alternative 1:
Purchase of a 6-month currency option
Alternative 2:
Purchase of a 3-month compound forex option with a 3-month currency

option as the underlying transaction.
Note here, however, that if the compound option is exercised, a second premium must be paid, that
is, for the underlying option. If the option is not required, the hedging partner has paid a lower
premium for the hedge, than the underlying option would have cost.
SAP AG
AC825
6-24
Compound Options - Entry Screen

Company code
Product type
Trans. type
Structure
1000
76O
100
IDES AG
CompFXOpt.Long Call
Purchase
Underlying
...
...
Transaction
Activity
...
...
Contract
...
...
Exercise
...
Underlying
Underlying
Product type76A
TransTyp 100
Currency option (OTC) Activity 1

Purchase
ActCat Underlying
Option
Premium
...
...
Contract data
...
SAP AG 1999
SAP AG
AC825
6-25
Maturity Schedule OTC Options
Type Term start
Maturity
Exer.
Put
MM.DD.YY
12.30.YY
Eur.
Call
MM.DD.YY
06.30.YY
Eur.
Settl.
Underl.
Ctrpy
Strike
Trans.
Phys. GBP 10m
2.20
4711
ABC
Phys. GBP 20m
1.48
1712
XY
SAP AG 1999
The option maturity schedule incorporates all OTC options that can be exercised in a predefined
period of time. To get more detailed information, you can branch from the list to the display of the
selected OTC transaction. From here, you can access the exercise or expiration transactions.
You can use flexible selection criteria (product type, transaction type, put, call, due date, etc.) to call
up the option maturity schedule for transactions in a particular company code.
You can exercise individual option transactions or allow them to expire by positioning your cursor
on the option.
SAP AG
AC825
6-26
Control of Interest Rate Risks via Derivatives (Topic 3)
FRA, Interest rate swap, Cap/Floor

Typical transaction and position
management processes:
Transaction entry and back-office
processing
SAP AG 1999
In the case of the interest rate derivatives FRA, SWAP, and CAP/FLOOR, the variable side is
updated in Cash Management before the fixing date. The system uses the most recently stored
reference interest rate. An update occurs after every transaction change.
SAP AG
AC825
6-27
Forward Rate Agreement

Agreement between two contract parties (buyer and seller)
- on a certain interest rate (FRA rate)
- for an investment or loan
- for a period of time in the future
Goal: Fixing of an interest rate today to apply to a period in the future
Term: 3-24 months
Quotation: 3:9; 6:12; 12:24; (Future period: Total term)
Reference interest rate, for example, LIBOR 3 months, LIBOR 6 months
Interest rate comparison (Fixed rate to reference interest rate)
after future period and determination of the settlement payments
to be made.
Interest netting in the form of a cash settlement, not an exchange
of nominal amounts.
SAP AG 1999
Trading idea: The purchaser of an FRA hopes for higher interest rates
for the reference period and the seller hopes for lower interest rates.
Example:
FRA 3x9; Nominal amount 10m UNI

FRA rate 5% (=> in 3 months for 6 months)
Reference interest rate LIBOR 6 months
Interest rate comparison in 3 months, Hedging period 6 months
6m LIBOR in 3 months = 6%
=>Settlement payment to the purchaser=
Interest rate payment x Nom. amount x Hedging period in days
360 x Discount factor
If the LIBOR rate was lower than the FRA rate, the purchaser would have to make the settlement
payment.
SAP AG
AC825
6-28
FRA - Forward Rate Agreement
23
t0
t8 - 2 t8
t11
At t0 the transaction is concluded

(Entry and settlement)
On fixing day = Start of hedging period -2 days (from the definition of
the reference interest rate)
(Carry out the interest rate adjustment)
Start of hedging period and payment of the discounted settlement
amount (Posting of the flows generated under 3)
End of hedging period
SAP AG 1999
A company will receive UNI 10m in 8 months and it wishes to invest this as 3-month money. The
company expects falling interest rates. Therefore, at time t0 the company agrees an FRA with the
bank for DEM 10m. The FRA will start in 8 months (t8) for a term of 3 months until (t11). The
agreed interest rate is 5%:
8 months later (Fixing day = t8 minus 2 days):
The reference interest rate (3 months LIBOR) is 4.5%. Therefore, the bank is obliged to pay the
company a settlement of
UNI 10m x 0.5% x 90/360 = UNI 12,500 (this amount is still to be discounted).
If the interest rate on the fixing day had been higher than the agreed interest rate of 5%, the
company would have had to pay a corresponding settlement. This is because the FRA is a
symmetrical financial instrument.
SAP AG
AC825
6-29
Creating a FRA
Company Code 1000

63A
Product type
200
Trans. type
Structure
...
IDES AG
FRA
Sale
Transaction
Activity
...
...
...
Term
Start of lead time
Start of hedge period
End of hedge period
10.07.YYYY
++8
++11
Interest structure
Base amount
Interest rate
Reference int. rate
Interest calc. method
Fixing
10,000,000.00
5.0
LIB_3_UNI
act/360
2-
Business calendar ...

Contract data
Contract date
10.05.YYYY
...
Inclusive
...
Contract
...
No. int. days
UNI
...
SAP AG 1999
Forward rate agreements are financial instruments with which purchasers and sellers agree today on
a fixed interest rate for a future time period. Amounts, currencies and terms can be determined by the
parties to the contract; the interest rate reflects the forward interest rate curve.
A notional money market transaction underlies the FRA. The capital amount of this transaction is
used purely for calculation purposes. A '8 x 11' FRA has a contract period of 3 months and the term
starts in 8 months. The contract is settled and paid at the start of the term. Purchasers of FRAs
protect themselves against rising interest rates whereas the sellers protect themselves against falling
interest rates. The entry in the SAP System is user-defined and is based on the trading conventions
shown.
SAP AG
AC825
6-30
Interest Rate Adjustment - Automatic/Manual

Treasury: Due Date Processing
Treasury: Due Date Processing
Transaction
400000
Status
0002
ProdTyp
63A
TranTyp
200
Text
Int. rate adjustment on ...
Determine reference interest rate

Planned fixing date
automatic
interest rate adjustment
Reference
MM.DD.YY
Int. rate
Act.fx. dte RteFixTime
LIB_3_UNI
Copy
Cancel
manual
interest rate adjustment
SAP AG 1999
The amount of the interest payments that can result from derivative interest rate transactions is
usually determined by a variable Index (reference interest rate). Two examples are the reference
interest rates LIBOR_6_months and LIBOR_12_months. Today, these might have the values 4.75
percent and 5.23 percent. Future values are not known, however. An example of a derivative
financial instrument is a plain vanilla swap with variable and fixed interest rates: LIBOR_6 in return
for 5.5%, term 20 years with semiannual interest payments.
In the derivative financial instruments application, when you create a swap, you can create flows for
the fixed interest side and the variable side of the contract. These flows correspond to the term. You
can determine the payment amounts on the fixed interest side when you create the swap by using
finance-mathematical rules. The future amounts on the variable side are, by definition, unknown
since the future reference interest rate percentage is unknown when the swap is created. For this
reason, the activity "interest rate adjustment" is necessary. This changes a plan interest rate (that is, a
rate where the payment amount is unknown) into an actual interest rate (payment amount is known).
This activity occurs at "interest rate fixing".
The interest rate adjustment activity is usually run daily in a batch process. The function determines
the plan interest rates that are to be converted to actual interest rates on a specific day (using the
fixing date that is stored at the rate level). The function then determines the interest values per
interest rate reference, calculates the amounts and writes the actual interest rates to the database.
Following the interest rate adjustment, the plan interest rate is no longer available in the transaction.
The result of the interest rate adjustment function is an interest rate fixing of the plan rate and
generation of the actual interest rate.
SAP AG
AC825
6-31

Forward Rate Agreement (FRA)
SAP AG 1999
SAP AG
AC825
6-32
Swaps
A swap is an exchange of payment flows over a fixed time period.
The payment flows are defined on conclusion of the swaps.
However, their magnitude may depend on future events
(e.g. variable interest payments where the amounts depend
on the level of the reference interest rate in the future).
Based on the type of payment flows to be swapped, we distinguish
between
- Interest rate swaps and
- Cross-currency swaps.
Possible variants when swapping the interest payments:
PAYER: outgoing interest payments fixed, incoming variable
RECEIVER: incoming interest payments fixed, outgoing variable
BASIC: variable and variable interest payments
FIXED TO FIXED: fixed and fixed interest payments
SAP AG 1999
With an interest rate swap, two parties agree to exchange payment flows in one currency during a
certain term. The payment flows are related to a defined capital amount which is not itself
exchanged.
Possible situation:
Payer
Receiver
Basic
A cross-currency swap can be characterized as follows:
? A mutual exchange of funds in different currencies at an agreed exchange rate.
? An exchange of interest payments based on an agreed principal and an agreed interest rate.
? Exchanging the original amount back on the due date at the original exchange rate.
Possible situation:
Payer
Receiver
Basic
Fixed to fixed
The trading idea is based on the comparative cost advantages which can be achieved together due to
different positions (credit standings) in different financial market segments and cannot be taken
advantage of individually.
SAP AG
AC825
6-33
Interest Rate Swap (Coupon Swap)
2 3
4 5
6 7
1)
Conclusion of the SWAPs and 1st interest rate fixing

(Entry and settlement of the transaction as well as the first interest
rate adjustment)
2)
Interest rate fixing for the 2nd period of the variable interest rate (6
months)
(Adjust interest rate -> Generate interest flow)
3)
Interest payment for variable side/start of the 2nd period

(Posting of interest flow from 1 )
4)
Interest rate fixing for the 3rd period
5)
Interest payment for variable and fixed side/start of the 3rd period
6)
Interest rate fixing for the 4th period
7)
Interest payment for variable side/start of the 4th period
SAP AG 1999
A company finances an existing investment with a fixed rate loan of 6.5%. The treasurer of the
company expects falling interest rates and, therefore, agrees an interest rate swap with a bank. The
company receives an annual fixed rate of 7.25% and pays a variable rate of 6 M LIBOR.
The company incurs the following interest costs:
Interest expense of 6.5% and 6 M LIBOR
Interest revenue from SWAP of 7.25%
Equals an interest expense of 6 M LIBOR - 0.75%
Integration in Cash Management:
The function Update planned record refers only to the derivative financial instruments Cap, Floor,
Swap and FRA. Usually the future interest payments are passed to Cash Management (CM) in order
to reflect the liquidity status correctly.
Flows that originate from a fixed interest rate are transferred to the CM as soon as the transaction is
created. Since the percentages of reference interest rates can change daily, the flows that originate
from reference interest rates must be estimated. The planned record update is used for this purpose.
Interest rate adjustments occur during the term of a transaction. Each of these adjustments reduces
the number of remaining plan interest rates. After the final interest rate adjustment takes place, there
will be no plan interest rates remaining. The planned record update thus becomes redundant.
SAP AG
AC825
6-34
Creating Interest Rate Swap

Company Code 1000
Product type
62A
Trans. type
300
IDES AG
Int. Rate swap (IRS)
Swap
Transaction
Activity
Contract
...
Term
Start
End
10.15.YYYY
10.15.YY+5
Inclusive
Business calendar
Calendar 1
Calendar 2
Outgoing interest
Incoming interest
Nominal amount 10m
Nominal amount
UNI
Effective from 10.15.YYYY
Effective from
1st due date
Freq.month 12 1st due date
++12
Fix. rate
Fix. rate
4.6
Var. interest
Var. interest
Int.calc.method 360/360
Int.calc.method
Int.
Contract data
Contract date
Int. rate adjustment.
Int.
...
10m
10.15.YYYY
Freq.month 6
++6
Lib_6_UNI
act/360
Int. rate adjustment.
10.13.YYYY
SAP AG 1999
You input the transaction data for the partner, transaction conclusion, term and the actual trading
object (amount, currency, interest structure, etc.).
You can also branch to other entry screens to enter detailed information:
There are conditions overviews available for the incoming and outgoing sides and also the detailed
information in each case. You can change the nominal amounts and also specify the interest rate
adjustment conditions.
In the detail view: Interest rate adjustment, you can set the frequency with which the variable interest
is to be calculated and on what day the value of the underlying reference interest rate is to be taken.
An interest rate adjustment can be carried out at the start of the period, at regular intervals, or at
specific times.
You start an automatic interest rate adjustment by choosing Back office - Interest rate adjustment Automatic.
You can access the NPV calculator for Swaps by choosing Extras - NPV calculation.
There is a notice function for premature settlement of a swap or a Cap/Floor.
SAP AG
AC825
6-35
Conditions in Detail: Interest
Example: Interest conditions Interest

Update
Rule
: Standard
Unadjusted
Increment
12
Days +/-
1-
Special
Months
Due date
Due date
MM.DD.YY
Month-end
Working day
Next working day
Calendar
Calendar
01
Calendar
GB
SAP AG 1999
You can choose between standard update methods (rhythmic, unadjusted, adjusted) and
special update methods.
Example:
Update method
Calculation date
Unadjusted
relative to due date before shifting
Adjusted
relative to due date after shifting
Regular
regular
Unadjusted (interest period) regular
Adjusted (interest period)
Due date
regular
regular
regular
relative to due date
before shifting
regular relative to due date
after shifting
As the table shows, for the "Adjusted" and "Unadjusted" methods, the calculation date is determined
relative to the due date. As the table shows, for the "Adjusted" and "Unadjusted" methods, the
calculation date is determined relative to the due date. Contrast this with the "Unadjusted (interest
period)" and "Adjusted (interest period)" above.
For more details, see the F1 Help or the SAP Library.
SAP AG
AC825
6-36
Master Data: Cross-Currency Interest Rate Swap
Product type
62B
Text
Crosscurr. int.rate swap (CCS)

620 SWAP
Product category
Interest rate instruments
Cap/Floor
E Currency swap
SAP AG 1999
By flagging the relevant field, you ensure that the right currency field can be filled when you create a
swap in the details screen of the application.
SAP AG
AC825
6-37

Interest Rate Swap
SAP AG 1999
SAP AG
AC825
6-38
CAP/Floor
CAPs/Floors are a series of interest options that you can

fit to the periods/term of the transaction that you wish to hedge.
CAP:
Agreement between the seller and buyer of the Cap.

The seller agrees, in the case of a rise in the reference
interest rate above the agreed fixed rate (Strike), to pay
the difference in the interest rates to the Cap holder. If
the reference interest rate falls below the agreed
interest rate, no compensation payment is made.
FLOOR: The buyer receives a settlement payment if the

reference interest rate falls below the agreed
interest rate.
SAP AG 1999
Trading idea: both cases involve a type of interest insurance. The purchaser of the CAP wants to
hedge against rising interest rates. He agrees an interest rate upper limit for which he pays an
"insurance premium". The purchaser of a Floor wants to have a minimum interest rate and agrees an
interest rate lower limit for protection against falling interest rates.
CAPS/Floors are a series of interest rate options that are exercised when a particular interest rate
level is exceeded/fallen short of. The exercise of the option right is regulated in such a way that the
purchaser's declaration of intent is understood to be given automatically as soon as the favorable
conditions apply.
SAP AG
AC825
6-39
CAP
12
3 4
5 6
78
1) Conclusion of the transaction (Entry and settlement)

2) Payment of the premium
(Posting of the premium flow)
3) Fixing day for the first hedging period (Carry out interest rate adjustment)
4) Start of first hedging period
5) Fixing day for second hedging period
6) End of first/start of second hedging period - possibly first settlement payment
7) Fixing day for third hedging period
8) End of second/start of third hedging period; possibly second settlement payment
9) End of the final hedging period; possibly settlement payment
SAP AG 1999
A company has a variable loan liability of UNI 10m and has to pay interest at the LIBOR 6 month
rate. The company expects that interest rates will stay roughly the same but does not rule out a rise.
Therefore, it purchases a CAP.
Term:
07/01/YY until 06/30/YY+2
Interest rate upper limit: 6,125 %

Nominal amount:
UNI 10m
Premium:
0.85 % = 85,000 UNI
SAP AG
AC825
6-40
Entering a CAP/Floor
1000
61A
100
Company code
Product type
Trans. type
IDES AG
CAP
Purchase
Transaction
Activity
Contract
...
Term
Start
End
10.15.YYYY
++62
Strike
Upper limit
Interest
Base amount
Effective from
1st due date
Ref. int. rate
Int.calc.method
15m
++2
++6
LIB_6_UNI
act/360
Int.
Contract data
Contract date
Business calendar ...

Inclusive
Premium
200,000.00
Amount
Percentage rate
UNI
Freq.month 6
Payment date
Effective from
Int. Rate adjustment.
UNI
10.15.YYYY
10.15.YYYY
Option premium
10.13.YYYY
SAP AG 1999
You input a contract for purchasing or selling a CAP or Floor in the usual way. The important point
here is the interest-related data such as interest rate upper limit/lower limit, reference interest rate,
interest calculation method, frequency of interest rate adjustment, etc.
A detail view is available: Interest, interest rate adjustment, and option premium.
In the Detail view: Interest rate adjustment, you can set the frequency with which the variable
interest is to be calculated and on what day the value of the underlying reference interest rate is to be
taken. An interest rate adjustment can be carried out at the start of the period, at regular intervals, or
at specific times.
When you create the CAP/Floor, the system will propose a single premium as default. In the Detail
view: Option premium, you can generate several premium payments by setting a frequency.
By choosing the menu option Reverse, you can reverse activities.
There is a notice function for premature settlement of a swap or a CAP/Floor.
SAP AG
AC825
6-41
Interest Rate Scenario - LIBOR with CAP
Int. rate
7,0
Interest rate upper limit
6,5
6,0
5,5
5,0
4,5
SAP AG 1999
By purchasing a CAP, the purchaser is not relieved of having to pay the complete variable interest
for the loan. However, the seller of the CAP is obliged to pay to the purchaser an amount equal to the
excess of the variable interest rate over the agreed upper limit.
SAP AG
AC825
6-42
Master Data: CAP/FLOOR
Product type
61A
Text
CAP
610
Product category
CAP/FLOOR
Int. rate instruments

CAP/FLOOR
1
CAP/FLOOR
1 Upper limit
2 Lower limit
SAP AG 1999
SAP AG
AC825
6-43
Futures (Topic 4)
Create master data

OPEN transactions
Margin management
CLOSE transactions
Determine price gains
SAP AG 1999
A future is a forward exchange transaction, of standard structure, with obligations for both sides,
that is traded on a forward exchange.
A listed option is a forward exchange transaction, of standard structure, with obligations for one
side, that is traded on a forward exchange. You can currently only maintain master data for tradeable
options. The system does not currently support trading of listed options.
SAP AG
AC825
6-44
Futures
Master data
TR-TM
Maintain class data

Assign exchanges
Maintain securities prices

Transaction entry
OPEN transaction
Close transaction
Margin Management
Determination of exchange rate gains with Close
transactions
SAP AG 1999
In principle, the application does not refer to any specific exchange or any specific financial product.
You make the system aware of the exchanges and products by means of Customizing.
The exchange, as the institution that enables the free trade of contracts between partners, collects
insurance payments from the trading parties in the form of additional (initial), premium, spread/nonspread, and marginal payments. These payments put the exchange in a position to offset all the
contracts of all participants in the market. They payment amounts are the result of different
calculation algorithms depending on the product type. With futures and future-styled options, the
gains and losses are calculated daily as a Variation margin and cleared immediately.
SAP AG
AC825
6-45
Master Data
Bond
Futures
Interest rate
Index
Listed
options
Stocks
Index
Bond
Futures
Index
SAP AG 1999
Futures are forward exchange transactions with standardized structures. The standardized contract
elements are stored in the class data. As with all forward exchange transactions, the price is
determined from the daily rate plus the financing costs.
Note that, for listed options, you can currently only maintain the master data.
SAP AG
AC825
6-46
Assign Exchange
Futures
Assign Exchanges
Extras
ID number
1111
Exchanges
Listed
FFM
Extras
options
...
SAP AG 1999
After you have created the master data, you specify the exchange to be used.
SAP AG
AC825
6-47
Maintain Securities Prices

Yearly high
Yearly low
Hist. high
Hist. low
ID number
1111
FaWp
Exchange
Frankfurt
Quotation
0
Quot.curr. UNI Universal Currency
130,000,000
70,000,000
130,000,000
70,000,000
Price information
09.16.YYYY05
End
101.000000 UNI
MANUAL
08.13.YYYY 05
End
107.000000 UNI
MANUAL
08.12.YYYY 05
End
130.000000 UNI
MANUAL
08.11.YYYY 05
End
120.000000 UNI
MANUAL
07.10.YYYY 05
End
101.000000 UNI
MANUAL
07.06.YYYY 05
End
125.000000 UNI
MANUAL
06.10.YYYY03
BID
110.000000 UNI
MANUAL
06.09.YYYY05
End
119.280000 UNI
MANUAL
06.08.YYYY05
End
119.340000 UNI
MANUAL
06.05.YYYY05
End
119.000000 UNI
MANUAL
06.04.YYYY05
End
120.000000 UNI
MANUAL
SAP AG 1999
SAP AG
AC825
6-48
Transaction Entry: Open and Close
FUTURE
Open purchase
Close sale
Offset by:
Open sale
Close purchase
Single Position Management
SAP AG 1999
In the context of these transactions, the terms purchase and sale do not describe the increase or
decrease in positions; rather, they define the direction of a forward transaction. Positions are,
therefore, built up whether you purchase or sell.
Open transactions refer to the build-up of positions whereas Close transactions refer to the reduction
of positions.
The decrease in the position is brought about by a counter-transaction with the same class, and the
counter-transaction is identified as an offsetting transaction (Closing). This facility to leave the
market again at any time without obtaining the consent of the counterparty is one of the two
important characteristics that distinguish listed options and futures from the options and forwards
traded in the OTC area. The second characteristic is the strict standardization of contract contents.
Futures are managed in Single Position Management. Each Open generates a new single position.
This can be closed by one or more (part) Close transactions.
If you want to conclude a Close transaction, you must assign this to a position (Open transaction).
You assign the Closing positions to the Open positions by manual matching.
SAP AG
AC825
6-49
Margin Management
Variation Margin
OPEN
transaction
- Accounting
- Daily
- Purchase
- Sale
CLOSE
transaction
- Purchase
- Sale
Rate
101
+VM
100
-VM
98,5
t1
t2
t3
t4
Days
SAP AG 1999
Futures are subject to the future-style settlement method. This means that by comparing the current
settlement price with the previous day's price (on the first day with the cost price), the price change
of each position is determined. The difference is converted to the number of ticks. This number
multiplied by the tick value results in an amount that is immediately debited from or credited to the
margin account.
The variation margin represents the daily gains and losses in the mark-to-market valuation
method. In this sense, it is not a margin. The variation margin is, therefore, not a valuation but a
settlement method using the daily valuation at market prices.
The variation margin method should prevent unmanageable payables/receivables amounts building
up between the counterparties over a long period of time. The payables/receivables are, therefore,
reconciled immediately on the day they arise. The maximum loss is thus only one day's fluctuation.
In the variation margin process, although the amounts are credited to/debited from the margin
account daily, and even discounted, they are unrealized gains/losses. The position itself is pending.
Consequently, in accounting you must differentiate these amounts clearly from those amounts that
have arisen as realized gains/losses from the closing of positions.
The variation margin calculated daily, the exchange rates/losses from Close transactions, and the
variation margin of the Close transactions are shown in the Variation Margin Journal. The "Position
list and flow list - traded derivatives" is still available.
SAP AG
AC825
6-50
Back-Office Processing (Topic 5)
Settle transaction: add/change detailed information

on payment details and posting
Exercise/expiration settlement
SAP AG 1999
SAP AG
AC825
6-51
Accounting (Topic 6)
Post/transfer option premium

Payment program
SAP AG 1999
SAP AG
AC825
6-52
Journal
Payment schedule
Interest rate adjustment schedule
Maturity schedule OTC Options
SAP AG 1999
SAP AG
AC825
6-53
Derivatives: Interest Rate Adjustment Schedule
Interest Rate Adjustment Schedule
Company code:
code: 1000
Reference Pl.fx.date Trans.

Ptyp Partner Base amountCurrBas
FIB_6 12.30.YY
4711 61A XY
5m
UNI
LIB_6 06.30.Y+1
4712 62C ABC
30 m
USD
SAP AG 1999
The interest rate adjustment schedule serves to monitor the interest rate adjustment dates for
derivative interest rate transactions.
You can call up the interest rate adjustment schedule for all transactions in a company code or
restrict it to the transactions of specific time periods, currencies, or reference interest rates.
SAP AG
AC825
6-54
Derivatives: Maturity Schedule OTC Options
Maturity Schedule OTC Options
Typ
Term strt Due date Exer. Settl. Underl.
Put
MM.DD.YY 12. 30. YY Eur. Phys. GBP 10 m 2.20
Call MM.DD.YY 06. 30. YY Am.
Strike
Phys. USD 20 m 1.48
Trans.
Cntrpy
4711
ABC
1712
XY
SAP AG 1999
You can use flexible selection criteria (product type, transaction type, put, call, due date, etc.) to call
up the option maturity schedule for transactions in a particular company code.
You can exercise individual option transactions or allow them to expire by positioning your cursor
on the option.
SAP AG
AC825
6-55
Derivatives: Unit Summary
In this unit you have learned how to create and

control the different derivative financial instruments
in SAP R/3 Treasury Management in order to hedge
against interest rate and exchange rate risks.
SAP AG 1999
SAP AG
AC825
6-56
Exercises
Unit: Derivatives
Topic: OTC Currency Option 1
Set up an OTC currency option in SAP R/3 Treasury Management using the foreign exchange module.
You wish to purchase a currency option.
1-1
Create an OTC currency option (in the menu via Foreign exchange) as a contract.
Choose the following transaction data:
Purchase of a currency put option
Option:
Exercise:
Conclusion date:
Currency: USD
Strike:
Value date:
Offsetting currency:
Exercise date:
European
TODAY
Amount
: 3,000,000
Choose a realistic value.
in 5 months
UNI
in 5 months minus 2 days
Premium:
Value date:
in 2 days
Currency:
UNI
Choose a realistic premium.
"If this option gets to the exercise stage, you have the right but not the obligation to
sell USD to DEUBA."
SAP AG
AC825
6-57
Take a look at the cash flow. Which flows are shown?

Check the payment details and the account assignment reference.
1-2
Settle the contract via fast processing.
1-3
Post the option premium. Note the posting due date.

Carry out a test run prior to the update run. Take a look at the document.
SAP AG
AC825
6-58
Unit: Derivatives
At the conclusion of this exercise, you will be able to:

Set up an OTC currency option in SAP R/3 Treasury Management using the derivative module.
You wish to sell a currency option.
2-1
Create the offsetting transaction for the OTC currency option (in the menu via
Derivatives) as a contract.
Sale of a currency call option
Option
Exercise :
Conclusion date:
Currency:
Amount:
Rate:
Value date:
Offsetting currency:
Exercise date:
SAP AG
European
TODAY
USD
3,000,000
Choose a realistic value.
in 6 months
UNI
in 6 months minus 2 days
AC825
6-59
Premium
Value date:
in 2 days
Currency:
UNI
Choose a realistic premium.
"If this option gets to the exercise stage, the bank has the right but not the obligation
to purchase USD from you."
Settle the contract using collective processing.
Post the option premium.
SAP AG
AC825
6-60
Unit: Derivatives
Topic: Forward Rate Agreement (FRA)

Set up a Forward Rate Agreement (FRA) in SAP R/3 Treasury
Management - using the derivative module.
You wish to sell an FRA because you expect interest rates to fall.
3-1
Create an FRA as a contract. You are the seller of the FRA.

Take the Deutsche Bank (DEUBA) as your business partner (FRA purchaser).
Conclusion date:
TODAY
Start of lead time:
in 2 days
Start of hedging period:
1 year after start of lead time
End of hedging period:
2 years after start of lead time
Base amount:
10,000,000 UNI
Exchange: Frankfurt, but London for determination of the basic interest rate
Interest rate:
4.56 % p.a.
Reference interest rate:
LIBOR_12 months_UNI
act/360
Interest rate fixing is to occur 2 days before the start of the hedging period.
Settle the contract using collective processing.
SAP AG
AC825
6-61
3-2
Take a look at the interest rate adjustment schedule. What is the planned date for
setting the rate (planned fixing date)?
Carry out a manual interest rate adjustment. The actual fixing date is 2 days prior
to the start of the hedging period (planned fixing date!).
Post the interest generated as a result of the interest rate adjustment.
SAP AG
AC825
6-62
Unit: Derivatives
Topic: Interest rate swap
At the conclusion of this exercise, you will be able to:

Set up an interest rate swap in SAP R/3 Treasury Management - using
the derivative module.
You wish to conclude an interest rate swap.
4-1
Create an interest rate swap (receiver swap) as a contract.

Conclusion date:
Start of term:
End of term:
Exchange:
Nominal amoun:
11/09/1999
11/11/99
11.11.03
Frankfurt, but London for determination of the basic rate
5,000,000 UNI
Regulations concerning fixed amounts:

DEUBA pays the fixed amounts.
Fixed interest rate: 6.53% p.a.
Interest calculation method: 30/360
Frequency: every 12 months
SAP AG
AC825
6-63
Regulations concerning variable amounts:

You pay the variable amounts.
Variable rate:
LIBOR_6M_UNI Interest calculation method: actual/360
Spread:
0% p.a.
Frequency:
every 6 months
Remember to maintain the condition details.
As the update rule, choose "Unadjusted".
- Shift the due date relative to the end of the interest period (days +/-). Choose the
value 1-.
Choose the shift rule: Next working day modified
Then settle the interest rate swap.
Carry out the manual interest rate adjustments - only for your company
code!!!- Compare the fixing data with the details in the exercise.
Take a look at the interest rate adjustment schedule. Has the "Manual entry" field
been checked?
Then post the interest generated as a result of the interest rate adjustment. Note the
due date.
SAP AG
AC825
6-64
Derivatives Solutions
Unit: Derivatives
1-1
Solution to the step: Creating an OTC currency option using the foreign exchange
module.
Accounting
Treasury
Treasury Management
Foreign Exchange
Trading
OTC option
Create
Input: Data... a) Create an OTC option: Initial screen
b) Create an OTC option: Structure
Note: For orientation concerning the option price:
Button: Option price calculator
Evaluation type: 0001 (Standard report)
Input: Data (directly, or using the Market data button)
Button: Premiums
Tabstrip: Cash flow (You see the option premium)
Save
SAP AG
AC825
6-65
1-2
Solution to the step: Settlement using collective processing.
Accounting
Treasury
Treasury Management
Foreign Exchange
Back office
OTC options
Execute
Select the transaction that you wish to settle.
Button: Settle
Save
1-3
Solution to the step: Posting the option premium.
...
Foreign Exchange
Accounting
Posting
Execute
SAP AG
Values
Company code
TRXX
Transaction
Your transaction number
Due date of the premium
Test run
Do not select this. Choose

execute.
From here, you can view the
document.
AC825
6-66
Unit: Derivatives
2-1
Solution to the step: Creating a currency option using the derivatives module.
Accounting
Treasury
Treasury Management
Derivatives
Trading
OTC options
Create
Input: Data
a) Create an OTC option: Initial screen

b) Create an OTC option: Structure
Tab strip: Underlying

Tab strip: Payment details
Tab strip: Administration
Save
SAP AG
AC825
6-67
Accounting
Treasury
Treasury Management
Derivatives
Back office
OTC options
Execute
Button: Settle
Save
Solution to the step: Posting the option premium.
...
Derivatives
Accounting
Posting
Execute
SAP AG
AC825
6-68
Unit: Derivatives
Topic: Forward Rate Agreement (FRA)
3-1
Solution to the step: Creating a FRA.
Accounting
Treasury
Treasury Management
Derivatives
Trading
OTC interest rate instrument
Create
Input: Data... a) Create OTC Interest Rate Instrument: Initial Screen
b) Create FRA: Structure
-
Pay attention to the CONTRACT DATE ! -
Use the input help "+..." for days and months !
As calendar 1, use GB (factory calendar Great Britain standard) to

determine the reference interest rate.

Tab strip: Administration
Save
SAP AG
AC825
6-69
Accounting
Treasury
Treasury Management
Derivatives
Trading
OTC interest rate instruments
Execute
Button: Settle
Save
3-2
Solution to the step: Looking at the interest rate adjustment schedule.
Accounting
Treasury
Treasury Management
Derivatives
Information system
Transaction
Deadline Monitoring
Derivatives: Interest Adjustment Schedule
Execute
Solution to the step: Carrying out an interest rate adjustment manually.
Accounting
Treasury
Treasury Management
Derivatives
Back office
Create
Pay attention to the planned fixing date. (Note: Assume that today is the planned
fixing date. For the purposes of this exercise, change the Act.fx.dte. Otherwise you
SAP AG
AC825
6-70
will get an error message saying that the planned fixing date differs from the actual
fixing date.)
Enter an interest rate. (Note: Choose a lower interest rate so that you receive a
settlement payment.)
Copy
Button: Newly generated flows
Save
Solution to the step:
Posting the interest that was generated as a result of

the interest rate adjustment.
Accounting
Treasury
Treasury Management
Derivatives
Accounting
Posting
Execute
SAP AG
AC825
6-71
Unit: Derivatives
Topic: Interest rate swap
4-1
Solution to the step: Creating an interest rate swap.
Accounting
Treasury
Treasury Management
Derivatives
Trading
OTC interest rate instrument
Create
Input: Data... a) Create OTC Interest Rate Instrument: Initial Screen
Since the incoming interest is fixed, select "Receiver swap"

(transaction type - 301).
b) Create a swap: Structure
- Use the input help "+..." for days and months ! -
SAP AG
AC825
6-72
Values
Contract date
11/09/1999
Start of term
11/11/1999
End of term
11/11/2003
Outgoing interest
Nominal amount
5,000,000.00 UNI
Effective from
11/11/1999
1. Due date
++6
Freq.month
Variable interest
LIBOR_6_UNI
Interest calculation method
act/360
Incoming interest
Nominal amount
5,000,000.00
Effective from
11/11/1999
1. Due date
++12
Freq.month
12
Fixed interest rate
6.53
Interest calculation method
360/360
Solution to the step: Maintaining the condition details.

Button: Details: Interest
Update
- Regular
: Unadjusted
- Days +/: 1Due date
- Working day : "Next working day modified"
Calendar
Maintain the calendar.
The end of the interest period is determined relative to the due date.
It is determined before the due date is shifted (unadjusted) by the
working day check.
SAP AG
AC825
6-73
Solution to the step: Checking the payment details and the account
assignment reference.
Tab strip: Administration (Maintain the account assignment reference.)
Save
Solution to the step: Settling the interest rate swap, manual interest rate
adjustment and posting the interest.
- See the FRA exercise -
SAP AG
AC825
6-74
Contents:
General
Preparation Activities
Conversion Phase
Money Market
Foreign Exchange
Derivatives
Cleanup Activities
SAP AG 1999
SAP AG
AC825
7-1
Transaction Currency Changeover:

Unit Objectives

Carry out the transaction currency changeover for
your Money Market, Foreign Exchange and
Derivatives transactions.
SAP AG 1999
SAP AG
AC825
7-2

Basic Principles
Money Market
Foreign Exchange
Derivatives
SAP AG 1999
SAP AG
AC825
7-3

Business Scenario
You would like to use the Money Market, Foreign

Exchange and Derivatives modules.
If some of these transactions are carried out in
the dual currency phase or extend beyond this,
you can/must convert these transactions to the
euro after agreement with the business partner.
SAP AG 1999
SAP AG
AC825
7-4
Transaction Currency Changeover: General
SAP AG 1999
SAP AG
AC825
7-5
General
After agreement with the business partner, a selected

transaction position is processed on a transaction-bytransaction basis as part of an automatic transaction.
Transactions with due dates within the dual currency phase
(01/01/1999-06/30/2002) can be converted to the common
euro currency
Transactions with due dates after the dual currency phase
must be converted to the common euro currency
The transaction currency changeover can take place before
or after the local currency changeover
SAP AG 1999
SAP AG
AC825
7-6
Changeover Program
The transaction currency changeover report also allows you

to value financial transactions at the fixed euro rate without
converting the transaction currency. This is necessary when
the transaction currency changeover only occurs after the
key date at which gains and losses resulting from the fixed
euro translation have to be realized.
SAP AG 1999
SAP AG
AC825
7-7
Changeover - Process Flow

Start of
changeover
Preparation activities
Changeover of transaction currency
Convert
Money Market
Convert
Forex
Convert
Derivatives
Cleanup activities
End of
changeover
SAP AG 1999
SAP AG
AC825
7-8

after Local Currency Changeover (I)
Example 1:
LC = TC = UNI
LC changeover as of 01/01/1999
TC changeover as of 01/01/2001
Dual currency phase
1/1/2000
1/1/1999
1/1/2001
1/1/2002
06/30/2002
Local currency:
UNI
Euro
Transaction currency:
UNI
UNI
LC=TC
Euro
LC # TC, TC = FC
LC = TC
SAP AG 1999
Before the local currency changeover (1/1/99) from UNI to Euro, all money market transactions are
managed as local currency transactions.
In the period between the local currency changeover and the transaction currency changeover, all
money market transactions are managed as foreign currency transactions.
Following the transaction currency changeover (1/1/2001), all money market transactions will be
managed as local currency transactions again.
After the local currency changeover (1/1/1999), the money market transaction must be valued at the
fixed euro rate using the valuation function incorporated in the changeover program (key date
valuation).
The system does not create any additional valuation flows during the transaction currency
changeover.
Note:
If the valuation principle does not allow for write-ups in the key date valuation, a euro valuation flow
is generated in the case of a gain from transaction currency changeover. This is taken into account
when realized gains and losses are determined.
SAP AG
AC825
7-9

after Local Currency Changeover (II)
Example 2:
LC # TC
LC = UNI
TC = FRF
Dual currency phase
1/1/1999
1/1/2000
1/1/2001
1/1/2002
06/30/2002
Local currency:
UNI
Euro
FRF
Euro
LC # TC, TC = FC
LC = TC
SAP AG 1999
Before the local currency changeover (1/1/1999) from UNI to Euro, all money market transactions
are managed as foreign currency transactions.
In the period between the local currency changeover and the transaction currency changeover, all
money market transactions are still managed as foreign currency transactions.
Following the transaction currency changeover (1/1/2001), all money market transactions will be
managed as local currency transactions.
After the local currency changeover (1/1/1999), money market transactions must be valued at the
fixed euro rate using the valuation function incorporated in the changeover program (key date
valuation).
The system does not create any additional valuation flows during the transaction currency
changeover.
The gains or losses resulting from the euro changeover are taken into account when the realized
gains and losses are determined.
Note:
If the valuation principle does not allow for write-ups in the key date valuation, a euro valuation flow
is generated in the case of a (euro changeover) gain from transaction currency changeover. This is
taken into account when realized gains and losses are determined.
SAP AG
AC825
7-10

before Local Currency Changeover (I)
Example 3:
LC = TC = UNI
Dual currency phase

1/1/2000
1/1/1999
1/1/2001
1/1/2002
06/30/2002
Local currency:
UNI
UNI
Euro
Euro
UNI
LC = TC
Euro
LC # TC, TC = FC
LC = TC
SAP AG 1999
Before the transaction currency changeover (1/1/1999) from UNI to Euro, all money market
transactions are managed as local currency transactions.
In the period between the transaction currency changeover and the local currency changeover, all
Following the local currency changeover (1/1/2001), all money market transactions are managed as
local currency transactions again.
At the time of the transaction currency changeover (01.01.99), the system carries out a valuation of
money market transactions at the fixed euro rate.
SAP AG
AC825
7-11

before Local Currency Changeover (II)
Example 4:
LC # TC
LC = UNI
TC = FRF
Dual currency phase

1/1/1999
1/1/2000
1/1/2001
1/1/2002
06/30/2002
Local currency:
UNI
UNI
Euro
Euro
FRF
Euro
LC # TC, TC = FC
LC = TC
SAP AG 1999
Before the transaction currency changeover (1/1/2000) from UNI to Euro, all money market
transactions are managed as foreign currency transactions.
In the period between the transaction currency changeover and the local currency changeover, all
After the local currency changeover (1/1/2001), all money market transactions are managed as local
currency transactions.
During the transaction currency changeover (1/1/2001), the system values the money market
transaction at the fixed euro rate.
Gains and losses resulting from the transaction currency changeover are disclosed separately,
regardless of the valuation principle for the corresponding transaction type.
Valuations after this time do not generate any further gains or losses.
The gain/loss that has already been disclosed is taken into account when the realized gains/losses are
determined.
SAP AG
AC825
7-12
Posting Details for Example 4
Money Market transactions in T-accounts:

Transaction
: 1000 FRF
TC changeover : FRF
LC = UNI
Euro
Balance sheet account MM (FRF)

1000 FRF
0 FRF
(300 UNI)
(10 UNI)
1000 FRF
(290 UNI)
P&L account (EUR changeover)

0 FRF
(10 UNI)
Clearing account
1000 FRF
145 Euro
(290 UNI)
(290 UNI)
Balance sheet account MM (Euro)

145 Euro
(290 UNI)
SAP AG 1999
The money market transaction was originally posted at an FRF/UNI rate of 0.30. The following
postings result from the euro changeover of the transaction currency prior to the local currency
changeover:
Valuation of the FRF position at fixed conversion rate
(Assuming:
1 FRF = 0.145 EUR

1 EUR = 2 UNI)
Post the FRF position to the clearing account at the fixed exchange rate
Post the euro position
SAP AG
AC825
7-13
Transaction Currency Changeover: Preparation

Activities
SAP AG 1999
SAP AG
AC825
7-14
Preparation Activities: Overview I
You
You need
need to
to make
make various
various changes
changes in
in the
the R/3
R/3
Customizing
Customizing Implementation
Implementation Guide:
Guide:
Maintain the euro currency table
Create one or several number ranges with internal
number assignment
Create number range 01 for the reference category
EUR
Creating clearing accounts
Create different flow types if you intend to generate
postings
SAP AG 1999
SAP AG
AC825
7-15
Preparation Activities: Overview II
Maintain account determination for these flow types

Maintain the leading currency table
Maintain the exchange rate tables
Maintain standing instructions for payment details if
applicable
SAP AG 1999
SAP AG
AC825
7-16
Maintaining the Euro Currency Table
R/3
R/3Customizing
CustomizingImplementation
ImplementationGuide:
Guide:
Treasury
Treasury Management
Basic Functions
EURO Currencies
Define Participating Currencies for EURO Changeover
SAP AG 1999
SAP AG
AC825
7-17
Creating Number Ranges
R/3
R/3Customizing
Guide:
Treasury
Treasury Management
Money Market, Foreign Exchange or Derivatives
Transaction Types
Define Number Ranges
SAP AG 1999
You need to create one or several number ranges with internal number assignment for storing the
original transactions.
SAP AG
AC825
7-18
Defining Number Ranges for Linking Transactions
R/3
R/3Customizing
Guide:
Treasury
Treasury Management
Basic Functions
Define Number Ranges for Linking Transactions
SAP AG 1999
Create a number range 01 for the reference category EUR.

The reference is used to link the original transaction to the converted euro transaction after the
transaction currency changeover.
SAP AG
AC825
7-19
Creating Clearing Accounts
R/3
R/3application
applicationmenu:
menu:
Accounting
General Ledger
Master records
Individual processing
...
SAP AG 1999
Create clearing accounts via which you take the amounts in the original currency off the books and
post the amounts in euro (account currency = local currency).
These amounts are also referred to as currency swap clearing accounts.
There is no open item management for these clearing accounts.
SAP AG
AC825
7-20
Creating Different Flow Types (I)
R/3
R/3Customizing
Guide:
Treasury
Treasury Management
Flow Types
Define Flow Types
You have to create various flow types using this path if you
intend to generate postings.
SAP AG 1999
If you want the system to generate flows, you need to create the various flow types for the Money
Market, Foreign Exchange and Derivatives applications.
Postings need to be generated if you want to carry out balance sheet transfers. To do this, you need
to create two posting flows (a debit and a credit flow) and two valuation flows. If you only want to
perform euro valuations, it is sufficient to create the two valuation flows.
SAP AG
AC825
7-21
Creating New Flow Types (II)
Create flow type (outflow)

Flow classification transfer, flow category 40
For taking the original currency off the books
Create a flow type (inflow)
Flow classification transfer, flow category 40
For posting the amounts in euro
Create a P&L flow type for a possible loss
Flow classification valuation, flow category 90
Possible loss resulting from translation at fixed rate
Create a P&L flow type for a possible gain
Flow classification valuation, flow category 91
Possible gain resulting from translation at fixed rate
SAP AG 1999
The flow types are to be flagged as relevant to posting (inflows and outflows).
- Flow types for currency swap postings.
You need to flag the P&L flow types as relevant to posting and relevant to valuation.
SAP AG
AC825
7-22
Maintaining Account Determination
Account determination for the new flow types:

R/3
R/3Customizing
Guide:
Treasury
Treasury Management
Functions
Accounting
Account Determination
Define Settings
SAP AG 1999
To ensure that account determination is correct, you may need to define several debit and credit flow
types per product category. This will depend on the flow types and account assignment references.
You need to make the settings for account determination for the Money Market, Foreign Exchange
and Derivatives applications.
SAP AG
AC825
7-23
Maintaining the Leading Currency Table
You must define the euro exchange rates in the case of

two changeover currencies (even with EUR/EUR entries).
R/3
R/3Customizing
Guide:
Treasury
Treasury Management
Basic Functions
Currencies
Define Leading Currency
SAP AG 1999
Note
The table of participating currencies for converting Treasury transactions is independent of the table
of participating currencies used for the local currency changeover!
For the local currency changeover, you must maintain the table in R/3 Customizing via:
Cross-Application Components
European Monetary Union: Euro
Local Currency Changeover
Central Changeover
Central Changeover: Preprocessing
Specify Participating Currencies for Changeover Package.
SAP AG
AC825
7-24
Maintaining the Exchange Rate Table
R/3
R/3Customizing
Guide:
General Settings
Currencies
Enter exchange rates
SAP AG 1999
For a transaction currency changeover prior to the local currency changeover, you must also make
the following settings (normally in FI):
R/3 Customizing Implementation Guide:
General Settings
Currencies
Check currency codes
Check exchange rate types
You create the euro rate type here with the following settings:
Basis currency: Euro
EMU currency is fixed
Define translation ratios for currency translation
SAP AG
AC825
7-25
Maintaining Standing Instructions
You may need to redefine the payment details

for the euro currency.
Treasury
TreasuryApplication
Applicationmenu:
menu:
Master data
Payment details
SAP AG 1999
The standing instructions must be created per business partner.
SAP AG
AC825
7-26

Conversion Phase
Prerequisites
Function description
Procedure
3.1. Money Market
3.2. Forex
3.3. Derivatives
SAP AG 1999
SAP AG
AC825
7-27
What You Have To Do:
Execute report RFTBEUR00

Release transfer posting manually, if necessary
Execute the posting after release
Perform any cleanup activities
New confirmation run
SAP AG 1999
SAP AG
AC825
7-28
1. Prerequisites
All flows relevant to posting with a due date prior to

the changeover key date must be posted
All open payment requests with a due date prior to the
changeover key date must be settled
If open payment requests exist, they cannot be settled
after the changeover date
SAP AG 1999
This should ensure that all flows relevant to posting are correctly posted in the original currency.
SAP AG
AC825
7-29
Flows Relevant to Transfer Postings
Money Market:
Principal increases
Principal reductions
Foreign Exchange:
Purchase and sale flows
OTC options, CAPs/Floors
Premiums (if relevant to positions)
Swaps
Nominal amounts(if relevant to positions)
SAP AG 1999
Interest and other flows are generally not transferred. To post any pre-posted interest flows to a euro
account, you need to delete such flows before the changeover.
SAP AG
AC825
7-30
2. Function Description (I)
Conversion of all relevant flows

The original data is saved under a new transaction
number in inactive status.
A special number range exists for these transaction
numbers
The transaction converted to euro retains the original
transaction data.
The system generates a reciprocal reference category
(category EUR) for both transactions.
SAP AG 1999
During the transaction currency changeover, the system converts all the relevant flows (including
historic flows which have already been posted) into euros, as long as the currency is defined as a
participating currency in the European Monetary Union.
By doubling the original transaction, it is possible to map the financial transaction both in the
original currency and in euros.
To avoid inconsistencies in the data, you created a special number range for the original
transactions in which the transactions are stored as inactive with a new transaction number.
The transaction that was converted to euros retains the original transaction data and also the old
transaction number.
Via the reciprocal reference category, EUR, both the original and new transactions can be matched
at any time.
SAP AG
AC825
7-31
Function Description (II)
The confirmation status of the active transaction

activity is reset
for incoming and outgoing confirmations
During the transaction currency changeover, the

system reads the new standing instructions for
payment details
Update of Cash Management if the activities are
relevant for planning
SAP AG 1999
By resetting the confirmation status, the system allows you to print out a new confirmation with a
different currency and possibly different conditions. The confirmation contains a note stating that it
has been changed.
If you have not configured the system to generate correspondence automatically, you must start the
confirmation run again.
SAP AG
AC825
7-32
3. Procedure (I)
To change over the transaction currency, start report

RFTBEUR00
Using the application menu:
System
Services
Reporting
You must enter the following data in the report

selection screen:
The key date for conversion
The number range for storing the old transactions
SAP AG 1999
The report program gives you a range of individual selection options. It does not have to be started at
the same time for all three applications (Money Market, Foreign Exchange and Derivatives).
SAP AG
AC825
7-33
Procedure (II)
You can run the conversion for
individual transactions, for
certain partners, or according
to other criteria.
Transaction
It is not possible to carry out a

simulation run. Neither can you
reverse a transaction currency
changeover that has already
been carried out.
Partners
Key date for conversion
If you want the system to

generate postings, you must
enter the defined transfer
posting and valuation flow
types for the respective
applications.
Transfer flow types

:
Flow types for currency valuation
:
Do not generate postings
Only execute valuation
SAP AG 1999
If only one area or one transaction in a particular area is to be converted, you must be careful to set
only the corresponding flag in the report (Money market, Foreign exchange or Derivatives).
SAP AG
AC825
7-34
Procedure (III)
If no transfer posting flows and valuation flows are to

be generated, the following indicator must be flagged:
Do not generate postings
(Example: for unposted forward exchange transactions)
If only an evaluation is to be carried out, the following

indicator must be flagged:
Only execute valuation
With this procedure, you only specify the respective

valuation flow types
SAP AG 1999
SAP AG
AC825
7-35
Transaction Currency Changeover: Money Market
SAP AG 1999
SAP AG
AC825
7-36
3.1. Money Market (I)

The system carries out the following steps
when you run the report:
Step 1:
Valuation at the fixed rate
The current money market position is valued at the fixed rate. This can
result in a valuation difference.
This is represented by a P&L flow for gains and losses resulting from
the conversion to the euro
Step 2:
Taking the position off the books
using the local currency amount (translated at the fixed rate - against
the euro)
to a clearing account for the transfer posting (you need to define the
clearing account specially)
using the flow type defined for taking the position off the books (in
original currency)
SAP AG 1999
For these steps, you use the relevant flow types created in the preparation phase:
Outflow flow type
P&L flow type for possible losses
P&L flow type for possible gains
SAP AG
AC825
7-37
3.1. Money Market (II)
Step 3:
Conversion of the transaction currency amount
The transaction currency amount is copied from the outgoing flow to
the ingoing flow
This amount is now converted into euros
All currency fields and any calculation bases are automatically
converted
The local currency amount of the posting corresponds to the

amount taken off the books. The sign of the flow is inverted.
SAP AG 1999
This flow is generated with the inflow flow type for making the posting in euros. This flow type was
created in the preparation stage of the transaction currency changeover.
This procedure ensures that the original transaction currency position calculated on the basis of the
fixed rate is transferred to euros correctly.
SAP AG
AC825
7-38
3.1. Money Market (III)
Valuation
Valuationwithout
withoutconversion:
conversion:
Valuation without conversion (general)
If you do not carry out the transaction currency changeover at the beginning
of the dual currency phase, you may need to perform a valuation based on
the fixed euro exchange rate. The valuation is carried out independently of
the valuation principles used for key date valuation, since both losses and
gains resulting from the translation to the euro are to be disclosed.
Valuation without conversion (for Money Market and

Derivatives)
The valuation is based on the book value of the transaction position and it
determines the difference between the book value and the fixed euro rate.
The system generates a valuation flow using the flow types for euro
gains/losses.
SAP AG 1999
Procedure
Start report RFTBEUR00.
Select the required application and enter the flow types required for euro gains and losses.
Enter a number range. This is necessary, even though no transaction number is assigned.
Select the Only execute valuation field.
Execute the report.
SAP AG
AC825
7-39
3.1. Money Market - Example 1 (I)
Fixed-term deposit - Investment 07/01/1998

100 million FRF
Book rate 07/01/1998
: 0.29832
29,832,000 UNI
Valuation rate
: 0.29475
29,475,000 UNI
Unrealized loss
Valuation 12/31/1998
100 million FRF
-357,000 UNI
Transaction currency changeover 01/01/1999

100 million FRF
Fixed rate
: 0.29974... 29,974,000 UNI
Realized gain from euro changeover:
approx. 499,000 UNI
Take old transaction currency off the books
100 million FRF
Post new transaction currency
29.974 million EUR
SAP AG 1999
Transaction currency changeover at the start of the dual currency phase, but prior to the local
currency changeover for a money market transaction in a participating currency.
For more than one balance sheet date:
Assuming:
SAP AG
1 Euro = 1.97293 UNI

1 Euro = 6.672448 FRF
AC825
7-40
3.1. Money Market - Example 1 (II)
Representation of example 1 in T accounts (in 000s):

Balance sheet account FRF
P&L Account
100.000 FRF
0 FRF
0 FRF
0 FRF
(29,832 UNI)
(357 UNI)
(357 UNI)
(499 UNI)
0 Euro
100,000 FRF
(499 UNI)
(29,974 UNI)
Clearing account
Balance sheet account Euro
100,000 FRF
15,192 Euro
15,192 Euro
(29,974 UNI)
(29,974 UNI)
(29,974 UNI)
SAP AG 1999
Postings:
1) Post fixed-term deposit investment at rate of 0.29832 (ignoring the offsetting account)
2) Value the FRF position as of 12/31/1998 (key date valuation)
3) Post FRF position to the clearing account created for the transaction currency changeover (value
date 01/01/1999)
4) Post converted euro position to euro balance sheet account (Value date 01/01/1999)
5) Value FRF position at fixed conversion rate (Value date 01/01/1999)
SAP AG
AC825
7-41
3.1. Money Market - Example 2 (I)
Fixed-term deposit - Investment 10/14/1998, Term 01/04/2000

100 million FRF
Book rate 10/14/1998 : 0.29832
29,832,000 UNI
100 million FRF
Valuation rate
: 0.29475
29,475,000 UNI
Unrealized loss :
-357,000 UNI
Euro valuation at fixed rate 01/01/1999

100 million FRF
Fixed rate
: 0.29974...
Realized gain from euro changeover:
29,974,000 UNI
approx. 499,000 UNI

Take old transaction currency off the books
100 million FRF
Post new transaction currency
15.192 million EUR
SAP AG 1999
Transaction currency changeover prior to local currency changeover for a money market
transaction in the participating currency.
For more than one balance sheet key date.
Transaction currency changeover not at the start of the dual currency phase.
If the valuation at the fixed conversion rate took place as of 01/01/1999, then only the original data
of the transaction is converted in a transaction currency changeover on 07/01/1999.
This is always the case if the transaction currency changeover takes place after the first balance sheet
key date in the dual currency phase.
SAP AG
AC825
7-42
3.1. Money Market - Example 2 (II)
Representation of example 2 in T accounts (rounded):

Balance sheet account FRF
P&L account
100,000,000 FRF
0 FRF
0 FRF
0 FRF
(29,832,000 UNI)
(357,000 UNI)
(357,000 UNI)
(499,000 UNI)
0 Euro
100,000,000 FRF
0 Euro
(499,000 UNI)
(29,974,000 UNI)
(0.01 UNI)
Clearing account
Balance sheet account Euro
100,000,000 FRF
5,192,000 Euro
15.192,000 Euro
15,192,000 Euro
(29,974,000 UNI)
(29,974,000 UNI)
(29,974,000 UNI)
(29,973,999.99 UNI)
0 Euro

15,192,000 Euro
100,000,000 FRF
(29,973,999.99 UNI)
(29,832,000 UNI)
(0.01 UNI)
SAP AG 1999
Postings:
Post the fixed-term deposit investment at the rate of 0.29832
Value the FRF position as of 12/31/1998 (key date valuation)
Value the FRF position at the fixed-conversion rate (01/01/1999)
Post the FRF position to the clearing account created for the transaction currency changeover
(07/01/1999)
Post the converted euro position to the euro balance sheet account (07/01/1999)
Post the final repayment (01/04/2000)
Realized loss for clearing a possible conversion difference (01/04/2000)
SAP AG
AC825
7-43
3.1. Money Market - Example 2 (III)
Cash flow at the end of the term:

Pmnt date
Pmnt amnt
Curr.
Local curr. amnt
Curr.
LC rate
10/14/1998
15,192,765.81
Euro
29,832,000.00-
UNI
1.96357
12/31/1998
0.00
Euro
357,000.00-
UNI
01/01/1999
0.00
FRF
499,263.46
UNI
07/01/1999
15,192,765.81
Euro
29,974,263.46-
UNI
1.97293
07/01/1999 100,000,000.00
FRF
29,974,263.46
UNI
0.29974
01/04/2000
15,192,765.81
Euro
29,974,263.45
UNI
1.97293
01/04/2000
0.00
Euro
0.01
UNI
01/04/2000
990,378.42
Euro
1,953,947.30
UNI
1.97293
(Nominal interest)
SAP AG 1999
SAP AG
AC825
7-44
3.1. Money Market (IV)
Release
Releaseand
andPosting:
Posting:
Automatic posting release of the generated valuation flow types
In some circumstances you may need to manually release the
generated transfer flows
Money Market - application menu:
Accounting
Posting
Release
Execute the posting after release
SAP AG 1999
You may need to release the generated transfer flows. This will depend on the Customizing settings
you have made for automatic posting release for the corresponding transaction type.
SAP AG
AC825
7-45
3.1. Money Market (V)
Note:
Any interest and other flows which have already been
posted are displayed in euro when you display the
transaction. However, the posting document shows the
original currency.
The position itself is not transferred.
SAP AG 1999
SAP AG
AC825
7-46

Exercise - Money Market
SAP AG 1999
SAP AG
AC825
7-47
Transaction Currency Changeover: Forex
SAP AG 1999
SAP AG
AC825
7-48
3.2. Foreign Exchange (I)
Foreign exchange transactions are pending transactions

which are usually only posted when they become due.
This means that there is no related balance sheet
position that needs to be transferred.
For transactions with two currencies to be changed
over, the key date valuation ensures that the swap
accrual/deferral is carried out correctly up to the
transaction due date.
SAP AG 1999
Note: Transactions involving two participating currencies:

These transactions are still to be settled after conversion to fulfil the original purpose, even if they
are no longer, strictly speaking, foreign exchange transactions.
SAP AG
AC825
7-49
3.2. Foreign Exchange (II)
Valuation
Valuationwithout
withoutconversion
conversion
Valuation without conversion (general)
If you do not carry out the dual currency changeover at the start of the dual
currency phase, you may need to perform a valuation based on the fixed euro
exchange rate. The valuation is carried out independently of the valuation
principles used for key date valuation, since both losses and gains resulting
from the translation to the euro are to be disclosed.
Valuation without conversion (foreign exchange)

Foreign exchange transactions with two participating currencies which have not
yet been posted are valued on the basis of the acquisition value. Any existing
key date valuations are reset automatically.
The system generates a valuation flow using the flow types for euro
gains/losses.
Where transactions have already been posted, the procedure is the same as for
Money Market transactions.
SAP AG 1999
Procedure
Start report RFTBEUR00.
Select the required application and enter the flow types required for euro gains and losses.
Enter a number range. This is necessary, even though no transaction number is assigned.
Select the Only execute valuation field.
Execute the report.
SAP AG
AC825
7-50
3.2. Foreign Exchange - Example 1
Forward exchange transaction 07/01/1998 due on 01/04/2001

Amount 01/04/2001: 10,000,035.09 UNI / 35,087,842.42 FRF
Transaction rate : 0.28500
Key date value: 10,342,141.55 UNI
Unrealized loss (Provision)
:
Accrual/deferral swap expenses :
Valuation rate : 0.29475

-342,106.46 UNI
-11.18 UNI

Key date value: 10,517,322.332 UNI
Realized loss
:
Accrual/deferral swap expenses :
(No previous valuation at fixed rate)
Fixed rate
: 0.29974...
-517,287.23 UNI
-23.72 UNI
SAP AG 1999
Note:
A forward exchange transaction that has not been posted is being used here.
Problem:
This changeover may produce a different result to the manual changeover as the euro changeover is
more exact (to more than 5 decimal places).
SAP AG
AC825
7-51
3.2. Foreign Exchange - Example 2 (I)
Forward exchange transaction 07/01/1998 due on 11/02/1999

Amount 11/02/1999: 50,000,000 UNI / 175,438,596.49 FRF
Transaction rate
: 0.28500
Key date value : 51,710,526.32 UNI
Valuation rate
: 0.29475
Unrealized loss (Provision)
-1,710,526.32 UNI
Euro valuation at fixed rate 01/01/1999

Key date value : 52,586,427.11 UNI
Fixed rate
: 0.29974...
Realized loss
-2,586,427.11 UNI

No flows of any kind are generated
SAP AG 1999
SAP AG
AC825
7-52
3.1. Foreign Exchange - Example 2 (II)
Representation of example 2 in T accounts:

Provision
1,710,526 UNI
P&L account
1,710,526 UNI
1,710,526 UNI
1,710,526 UNI
2,586,427 UNI
Forex clearing account
26,653,975 Euro
2,586,427 UNI
25,343,017 Euro
26,653,975 Euro
(52,586,427 UNI)
25,343,017 Euro
(50,000,000 UNI)
(52,586,427 UNI)
(50,000,000 UNI)
SAP AG 1999
Postings:
1) Create provision on key date 12/31/1998 (key date valuation)
2) Write back provisions on 01/01/1999
3) Realized loss from euro fixed rate valuation on 01/01/1999
4) Sell original FRF after conversion (posting on due date of 11/02/1999)
5) Purchase UNI after conversion (posting on due date of 11/02/1999)
Note:
No more realized gains or losses can occur at the due date of the transaction (minimal amounts
resulting from rounding differences are the exception).
SAP AG
AC825
7-53
Transaction with One Currency to be Changed Over
Function:
Function:
The entries from the leading/following currency table (TCURL)
are used to display the rates
The spot rate and the swap rate are determined as follows:
The spot amount is calculated using the spot rate in the old transaction
currency
The new spot rate is calculated using the ratio of this amount to the
leading currency amount of the converted transaction
The swap rate is the difference between the transaction rate and the
spot rate
SAP AG 1999
Example:
If you want to change over a USD/UNI transaction, you enter EUR/USD in the leading currency
table. The EUR/USD rate is used for the new rate notation. The system determines the transaction
rate.
SAP AG
AC825
7-54
Transaction with Two Currencies to be Changed Over
Determining the EUR/EUR rate

The original transaction amounts are converted to euros
Leading currency amount
Following currency amount
Spot amount
The system uses the ratios between these amounts to
determine an artificial euro rate
Determining the transaction rate

The converted following currency amount of the original
transaction is divided by the converted leading currency
amount.
Where the original transaction notation is inverse, the
system uses the rate notation of the leading currency table
SAP AG 1999
The calculation of the transaction rate described above ensures that transactions with the same
trading amounts are identical and have the same rate, even if the rate notation is not EUR/EUR.
The system calculates the spot and swap rates in the same way.
SAP AG
AC825
7-55
Transaction with Two Currencies to be Changed Over
Example:
You wish to convert a UNI/FRF transaction (inverse rate display). The
entry in the leading currency table is FRF/UNI.
Purchase:
1 million UNI at forward rate of 3.0000 (UNI/FRF)
Sale:
Spot rate:
3 million FRF
3.1000 (UNI/FRF)
Swap rate:
0.1000- (UNI/FRF)
The system translates both amounts into euros

(Assumption: rate EUR/UNI = 2,
EUR/FRF = 5)
1 million UNI = 500,000 Euro
3 million FRF = 600,000 Euro
The system determines the EUR/EUR rate by dividing the converted

UNI amount by the converted FRF amount. The calculation is based
on the FRF/UNI entry in the leading currency table TCURL.
The EUR/EUR rate is thus 0.833333333.
SAP AG 1999
SAP AG
AC825
7-56
Transaction Currency Changeover: Derivatives
SAP AG 1999
SAP AG
AC825
7-57
3.3. Derivatives I
The changeover program can deal with the following

product categories:
OTC options
Caps/Floors
Swaps
FRAs
The system only creates outgoing/ingoing flows and P&L
flows for derivatives which affect balance sheet positions, for
example:
purchased OTC options
purchased CAPs and Floors
Swaps
SAP AG 1999
OTC options, CAPs and floors affect balance sheet positions if the flow type for the premium is
flagged as relevant to position and relevant to posting.
Swaps affect balance sheet positions if the flow types for the nominal amounts are flagged as
relevant to position and relevant to posting.
SAP AG
AC825
7-58
3.3. Derivatives II
Flows from derivatives which do not affect balance sheet

positions are converted using the fixed rate. (No posting
flows are generated)
For OTC options, the system also converts the following
underlyings into euros
Forex transactions
CAPs and floors (simple conversion of flows)
Swaps
(simple conversion of flows)
FRAs
This system does not change either interest rates,

calculation methods or conditions.
SAP AG 1999
The system does not convert listed underlyings such as stocks and bonds. You must convert these
manually if necessary.
SAP AG
AC825
7-59
Transaction Currency Changeover: Cleanup

Activities
SAP AG 1999
SAP AG
AC825
7-60
Cleanup Activities (I)
In the case of more complex financial transactions (derivatives),

you may need to perform cleanup activities manually, for
example:
Assignment of new reference interest rates
You may need to make manual adjustments to:

interest rates
calculation methods
transaction conditions
that are not affected by the changeover program

You must manually edit any listed underlying transactions
(stocks and bonds) when they are exercised. You can do this
when you create the exercise transaction.
SAP AG 1999
To change the conditions of interest rate transactions, for which you carried out an interest-rate
adjustment before the changeover, you create new conditions effective from the next interest rate
fixing date.
SAP AG
AC825
7-61
Cleanup Activities (II)
Any rounding differences that may arise are cleared by

the key date valuation or by the determination of realized
gains or losses.
Reversibility
If you convert a transaction by mistake, you must reverse the
transaction and enter it again under a new transaction number
You must also manually reverse any flows that have been posted
When you enter the new transaction, you can copy the data from the
original (inactive) transaction
SAP is not planning to to provide a function to

reset the transaction currency changeover
SAP AG 1999
SAP AG
AC825
7-62
Cleanup Activities (III)
Special items resulting from fixed rates

The system posts the gains and losses resulting from the changeover
to the euro to the accounts for realized gains and losses.
If you opt to create special items for these gains and losses, you must
do this manually in FI.
These special items are also to be cleared manually.
SAP AG 1999
SAP AG
AC825
7-63
Cleanup Activities (IV)
Checking if the changeover is complete

The system creates a log (error list) automatically. You should print this.
The log cannot be displayed again once you have exited the program.
You can check if the changeover is complete by comparing the log with
the journal for financial transactions.
There is also a collective processing function for references for control
purposes. The reference category used in the changeover is EUR.
SAP AG 1999
Note
At the end of the dual currency phase, you need to ensure that all the transactions have been changed
over to the euro. You can check this using the journal for financial transactions and the maturity lists
in the forex area.
SAP AG
AC825
7-64
Transaction Currency Changeover: Unit Summary
Prior to the transaction currency changeover, you must

make certain preparations.
To change over the transaction currency, start Report
RFTBEUR00.
The transaction currency changeover report also allows
you to value financial transactions at the fixed euro rate
without changing over the transaction currency.
More complex financial transactions (derivatives) may
require a manual cleanup.
SAP AG 1999
SAP AG
AC825
7-65
Transaction Currency Changeover Exercises

Unit: Transaction Currency Changeover
Topic: Money Market

Create a Money Market transaction
Value and accrue/defer transactions
Convert transactions (Transaction currency changeover)
Analyze and interpret the results
If transactions end within, or extend beyond the dual currency phase, they
can/must be converted to Euros after agreement with the business partner.
1-1
Create a fixed-term deposit with the following data:

Currency: FRF, Nominal volume: 10,000,000, Term: 12/01/98 to 03/01/99.
1-2
Settle the transaction.
1-3
Post the flows up to 12/01/98.
1-4
Carry out a key date valuation on 12/31/98 and post the valuation flows up to
12/31/98.
1-5
Convert the transaction on the key date 01/01/99.
1-6
Take a look at the converted transaction. Take a look at the cash flow and analyze
all new flows.
1-7
Display the old transaction - via Back office / References / Collective

processing.
1-8
1-9
1-10
Take a look at the posting journal. Are the totals correct?
1-11
Calculate the realized gains and losses.
1-12
Post the valuation flows up to 03/01/99.
1-13
Take a look at the converted transaction. Look at the cash flow and analyze the new
flow.
SAP AG
AC825
7-66
Transaction Currency Changeover Solutions

Unit: Transaction Currency Changeover
Topic: Money Market
1-1 1-4 Solutions to steps 1-4:

- Compare with solutions in previous units:
1-5
Solution to the step: Converting the transaction.
System
Services
Reporting
Program: RFTBEUR00, Variant: Money market
1-6
Solution to the step: Looking at the cash flow

- Compare with solutions in previous units -
1-7
Solution to the step: Displaying the old transaction.
Accounting
Treasury
Treasury Management
Money Market
Back office
Reference
1-8 1-13 Solutions to steps 1-8 to 1-13:
- Compare with solutions in previous units:
SAP AG
AC825
7-67

AC825 - 46C - Money Market - Foreign Exchage and Derivatives

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AC825 - 46C - Money Market - Foreign Exchage and Derivatives

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AC825 Money Market, Foreign Exchange and

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Market Risk Management

This course will enable you to:

At the conclusion of this course, you will be able to:

Chapter 5 Foreign Exchange

Chapter 2 Treasury Management

Chapter 7 Transaction Currency

Chapter 4 Money Market

Course Overview Diagram

Treasury Management Overview

Main Business Scenario

You have successfully installed or are already using

Treasury Management Overview

Treasury Management Overview:

At the conclusion of this unit, you will be able to:

Course Overview Diagram

Treasury Management Overview

Treasury Management Overview: Business

Before beginning your work in the project team, you

SAP Treasury Overview

Market Risk Management:

Financial Instruments Available

Foreign Exchange Derivatives

Identifying Treasury Processes

Documentation and control functions

Transaction and Position Management Process

Treasury Management: Functions

Complete management of financial transactions and positions

Flexible settings to accommodate companyspecific transactions and position management

Treasury Management Overview: Unit Summary

As far as short-term financial instruments are concerned,

Basic Principles: Unit Objectives

At the conclusion of this unit, you will be able to:

Course Overview Diagram

Treasury Management Overview

Basic Principles: Business Scenario

Before you can create your financial transactions, you

Basic Settings - Financial Transactions

Customizing Structure: Money Market, Foreign

Product Categories - Product Types

- Fully paid stock

Product Categories - Product Types - Examples

Stock option - No release

Fixed-term dep. (overnight)

Product Type Customizing: Fixed-Term Deposit

Default value for transactions

Effective interest calculation

Financial Transaction Types

Customizing: Financial Transaction Types

Fixed-term dep. EXTERNAL

Number Ranges for Transaction Types

Number range obj.

510 Fixed-term deposit

600 Foreign exchange

101 Spot exchange transaction

Transaction - Activity Categories: History

Replaced New contract

Customizing Transaction Types - Processing

Fixed-term dep. EXTERNAL

Processing cat. 00002

00001 = without settlement activities

00001 Without settlement rules