ac030 treasury

AC030 TreasuryAC030

R/3 System Release 46C 04/04/2001

AC030 Treasury.............................................................................................................................................................0-1

Copyright....................................................................................................................................................................0-2

Treasury..................................................................................................................................................................0-4

Euro........................................................................................................................................................................0-5

Course Prerequisites...............................................................................................................................................0-6

Target Group..........................................................................................................................................................0-7

Course Overview........................................................................................................................................................1-1

Course Goals..........................................................................................................................................................1-2

Course Objectives...................................................................................................................................................1-3

Course Content.......................................................................................................................................................1-4

Course Overview Diagram.....................................................................................................................................1-5

Main Business Scenario.........................................................................................................................................1-6

Navigation..................................................................................................................................................................2-1

Navigation: Unit Objectives...................................................................................................................................2-2

Navigation: Business Scenario...............................................................................................................................2-3

Logging On to the System......................................................................................................................................2-4

Screen Elements.....................................................................................................................................................2-5

SAP Easy Access - Standard..................................................................................................................................2-6

Selecting Functions................................................................................................................................................2-7

Role-Based User Menu..........................................................................................................................................2-8

Field Help: F1 and F4.............................................................................................................................................2-9

SAP Library..........................................................................................................................................................2-10

Menus: System and Help......................................................................................................................................2-11

User-Specific Personalization..............................................................................................................................2-12

Table Settings - Example......................................................................................................................................2-13

Personalizing the Frontend with GuiXT...............................................................................................................2-14

Navigation: Unit Summary...................................................................................................................................2-15

Navigation - Exercises..........................................................................................................................................2-16

Navigation - Solutions..........................................................................................................................................2-21

SAP Treasury Overview.............................................................................................................................................3-1

SAP Treasury Overview: Unit Objectives.............................................................................................................3-2


SAP Treasury Overview: Business Scenario.........................................................................................................3-4

SAP Treasury Overview.........................................................................................................................................3-5

SAP Support for Business Requirements...............................................................................................................3-6

Defining the Organizational Framework................................................................................................................3-7

Investment and Risk Guidelines.............................................................................................................................3-8

Selection of Financial Instruments.........................................................................................................................3-9

Hedging................................................................................................................................................................3-10

Identifying Treasury Processes............................................................................................................................3-11

SAP Treasury Overview: Unit Summary.............................................................................................................3-12

Liquidity Management in the Short andMedium Term..............................................................................................4-1

Liquidity Management in the Short and Medium Term: Unit Objectives.............................................................4-2


Liquidity Management in the Short and Medium Term: Cash Management Scenario..........................................4-4

Analysis and Trading Process................................................................................................................................4-5

Main Targets of Treasury.......................................................................................................................................4-6

Liquidity Management...........................................................................................................................................4-7

Cash Management: Functions................................................................................................................................4-8

Electronic Banking: Functions...............................................................................................................................4-9

Electronic Banking: General Process...................................................................................................................4-10

Electronic Banking: Check Deposit.....................................................................................................................4-11

Electronic Banking...............................................................................................................................................4-12

Control Functions.................................................................................................................................................4-13

Cash Position........................................................................................................................................................4-14

Structure/Views of Liquidity Analysis.................................................................................................................4-15

Corporate Group Evaluations...............................................................................................................................4-16

Cash Concentration..............................................................................................................................................4-17

Liquidity Forecast.................................................................................................................................................4-18

Exercise: Cash Management Functions................................................................................................................4-19

Cash Position and Liquidity Forecast...................................................................................................................4-20

Integration with Other SAP Modules...................................................................................................................4-21

Liquidity Management in the Short and Medium Term: Treasury Management Scenario.................................4-22

Treasury and Market Risk Management..............................................................................................................4-23

Identifying Treasury Processes............................................................................................................................4-24

Transaction and Position Management Process...................................................................................................4-25

Treasury Management: Functions........................................................................................................................4-26

Liquidity Management in the Short and Medium Term: Money Market Scenario..............................................4-27

Money Market: Product Types.............................................................................................................................4-28

Transaction and Position Management Process: Example of a Fixed-Term Deposit..........................................4-29

Trading: Entering a Fixed-Term Deposit.............................................................................................................4-30

Creating Contract Data: Fixed-Term Deposit......................................................................................................4-31

Organizational Units.............................................................................................................................................4-32

Basic Principles of Transaction Management (1)................................................................................................4-33

Business Partner - Roles and Functions...............................................................................................................4-34

Business Partner - Data: Overview......................................................................................................................4-35

Business Partner and Trader Authorization..........................................................................................................4-36

Exercise: Creating a New Business Partner.........................................................................................................4-37

Creating a Fixed-Term Deposit: Structure...........................................................................................................4-38

Trading Support....................................................................................................................................................4-39

Financial Transactions: Cash Flow......................................................................................................................4-40

Financial Transaction Architecture......................................................................................................................4-41

Condition Types/Flow Types...............................................................................................................................4-42

Financial Transactions in Cash Management.......................................................................................................4-43

Exercise: Integrating Trading Functions toCash Management............................................................................4-44

Cash Flows in Cash Management........................................................................................................................4-45

Collective Processing: Money Market.................................................................................................................4-46

Transaction Management: Worklist and Collective Processing...........................................................................4-47

Money Market - Fast Processing..........................................................................................................................4-48

SAP Business Workflow......................................................................................................................................4-49

Transaction and Position Management Process: Example of a Fixed-Term Deposit..........................................4-50

Back Office...........................................................................................................................................................4-51

Business Partner - Standing Instructions..............................................................................................................4-52

Correspondence....................................................................................................................................................4-53

Business Partner: Standing Instructions - Correspondence..................................................................................4-54

Business Partner - Payment Details (1)................................................................................................................4-55

Business Partner - Payment Details (2)................................................................................................................4-56

Transaction Settlement / Control..........................................................................................................................4-57

Exercise: Confirmation Management and Control Functions in the Back Office Area.......................................4-58

Transaction and Position Management:Example of a Fixed-Term Deposit........................................................4-59

Accounting...........................................................................................................................................................4-60

Payment Transaction Handling............................................................................................................................4-61

Postings: Account Assignment Reference............................................................................................................4-62

Customizing: Account Determination..................................................................................................................4-63

Posting a Transaction: Summary.........................................................................................................................4-64

Treasury Management and Cash Management....................................................................................................4-65

Transfer to Financial Accounting -Logical Process.............................................................................................4-66

Exercise: Posting Due Flows to FI and Evaluating them in Cash Management..................................................4-67

Payment Transaction Handling............................................................................................................................4-68

Posting using the Payment Program.....................................................................................................................4-69

Accrual/Deferral Procedures and Methods..........................................................................................................4-70

Interest Accruals/Deferrals: Customizing............................................................................................................4-71

Exercise: Interest Amount Accruals/Deferrals at Year End.................................................................................4-72

Transaction History..............................................................................................................................................4-73

Liquidity Management in the Short and Medium Term: Foreign Exchange Scenario (1)...................................4-74

Liquidity Management in the Short and Medium Term: Foreign Exchange Scenario (2)...................................4-75

Foreign Exchange: Product Types........................................................................................................................4-76

Creating an Order: Forward Exchange Transaction.............................................................................................4-77

Currency Master Data..........................................................................................................................................4-78

Market Data: Exchange Rates..............................................................................................................................4-79

Datafeed Architecture...........................................................................................................................................4-80

Exercise: Managing Currency Risks in CashManagement using Forex Transactions.........................................4-81

Foreign Exchange in Cash Management..............................................................................................................4-82

Netting and Payment Requests.............................................................................................................................4-83

Exercise: Active Liquidity Management using Netted Money Market and Forex Transactions.........................4-84

Valuation: Valuation Units...................................................................................................................................4-85

Foreign Currency Valuation (FCV Determination: 2).........................................................................................4-86

Foreign Currency Valuation.................................................................................................................................4-87

Foreign Currency Valuation (1) - G/L Accounting.............................................................................................4-88



Liquidity Management in the Short and Medium Term: Limit Management.....................................................4-91

Limit Management (1)..........................................................................................................................................4-92



Liquidity Management in the Short and Medium Term: Unit Summary (1).......................................................4-95

Liquidity Management in the Short and Medium Term: Unit Summary (2).......................................................4-96

Data for the...........................................................................................................................................................4-97

Liquidity Management in the Short and Medium Term Exercises...............................................................................................................................................4-99

Liquidity Management in the Short and Medium Term: Solutions...................................................................4-109

Financial Transactions in the Medium andLong Term..............................................................................................5-1

Financial Transactions in the Medium and Long Term: Unit Objectives..............................................................5-2


Financial Transactions in the Medium and Long Term: Securities Management Scenario...................................5-4

Treasury and Market Risk Management................................................................................................................5-5

Treasury Management: Functions..........................................................................................................................5-6

Product Categories - Product Types.......................................................................................................................5-7

Class Master Data: Product Types - General Data.................................................................................................5-8

Product Type - Conditions - Flows........................................................................................................................5-9

Financial Transactions in the Medium and Long Term: Scenario - Evaluating the Securities Position..............5-10

Standard Reports: Examples (Securities).............................................................................................................5-11

Reports..................................................................................................................................................................5-12

Sample Evaluation using Position Information....................................................................................................5-13

Securities: Position Overview Object List...........................................................................................................5-14

Financial Transactions in the Medium and Long Term: Concluding Securities Transactions............................5-15

Sample Evaluation................................................................................................................................................5-16

Part Sale of Stocks................................................................................................................................................5-17

Transaction and Position Management Process...................................................................................................5-18

Transaction Management: Prerequisites...............................................................................................................5-19

Process View: Trading - Back Office - Accounting............................................................................................5-20

Basic Principles of Transaction Management......................................................................................................5-21

Create Order: Initial Screen..................................................................................................................................5-22

Create Order.........................................................................................................................................................5-23

Execute Order.......................................................................................................................................................5-24

Back Office: Overview.........................................................................................................................................5-25

Collective Processing: List...................................................................................................................................5-26

Securities Account Cash Flow.............................................................................................................................5-27

Post Transaction...................................................................................................................................................5-28

Position Management Posting Journal: View.......................................................................................................5-29

Exercise: Concluding Securities Transactions Integration to Cash Management................................................5-30

Period-End Closing: Securities.............................................................................................................................5-31

Financial Transactions in the Medium and Long Term: Create Class Master Data............................................5-32

Class Data Notation..............................................................................................................................................5-33

Class.....................................................................................................................................................................5-34

Classes: Product Categories - Overview..............................................................................................................5-35

Create Class: Bond...............................................................................................................................................5-36

Create Class: Bonds - Basic Data........................................................................................................................5-37

Create Class: Conditions......................................................................................................................................5-38

Exercise: Creating Class Master Data..................................................................................................................5-39

Automatic Posting I..............................................................................................................................................5-40

Automatic Posting II with Incoming Payments....................................................................................................5-41

Defining Organizational Elements: Portfolios and Securities Accounts..............................................................5-42

Securities Account and Portfolio..........................................................................................................................5-43

Define Portfolios..................................................................................................................................................5-44

Securities Account Master Data...........................................................................................................................5-45

Master Data: Position Indicator - Initial Screen...................................................................................................5-47

Master Data: Position Indicator - Data.................................................................................................................5-48

Exercise: Defining Organizational Elements:Securities Accounts and Position Indicators................................5-49

Financial Transactions in the Medium and Long Term: Accounting Functions: Valuation................................5-50

Position Management Alternatives.......................................................................................................................5-51

Position Management and Valuation Categories.................................................................................................5-52

Valuation Principles (One-Step): Scenarios.........................................................................................................5-53

Valuation Principles (One-Step)...........................................................................................................................5-54

General Concept: Securities Position Management and Valuation......................................................................5-55

Securities Management: Overview.......................................................................................................................5-56

Financial Transactions in the Medium and Long Term: Scenario: Loans Taken................................................5-57

Loans Given - Loans Taken.................................................................................................................................5-58

New Loan Transactions: Process Overview.........................................................................................................5-59

Possible Procedures for Loan Processing.............................................................................................................5-60

Loans Given/Taken and Posting...........................................................................................................................5-61

General Posting Options I....................................................................................................................................5-62

General Posting Options II...................................................................................................................................5-63

Transaction Process: Example..............................................................................................................................5-64

Contract - 4 Ways of Entering Contracts in the SAP System..............................................................................5-65

Financial Transactions in the Medium and Long Term: Scenario: Create Contract............................................5-66

Contract - Function Overview..............................................................................................................................5-67

Loan - Initial Screen.............................................................................................................................................5-68

Contract - Basic Data............................................................................................................................................5-69

Condition Header / Condition Items.....................................................................................................................5-70

Contract - Condition Header................................................................................................................................5-71

Contract - Condition Items...................................................................................................................................5-72

Condition Items - Fields.......................................................................................................................................5-73

Condition Structure..............................................................................................................................................5-74

Loans - Cash Flow................................................................................................................................................5-75

Effective Interest Calculation...............................................................................................................................5-76

Payment Schedule................................................................................................................................................5-77

Exercise: Create Contract.....................................................................................................................................5-78

Financial Transactions in the Medium and Long Term: Scenario: Disbursement...............................................5-79

Contract: Disbursement........................................................................................................................................5-80

Disburse Contract: Incidental Costs.....................................................................................................................5-81

Save / Post Disbursement.....................................................................................................................................5-82

Integration with FI................................................................................................................................................5-83

Disburse Contract: Posting...................................................................................................................................5-84

Planned -> Actual Record....................................................................................................................................5-85

Integration with R/3 Financial Accounting / TR Cash Management...................................................................5-86

Exercise: Disburse Contract.................................................................................................................................5-87

Payment Options..................................................................................................................................................5-88

Incoming Bank Transfer: Example of Manual Bank Statement..........................................................................5-89

Disbursement Payment (Bank Transfer): Posting................................................................................................5-90

Financial Transactions in the Medium and Long Term: Scenario: Payments Due..............................................5-91

Automatic Posting: Post Planned Records...........................................................................................................5-92

Post Planned Records Due...................................................................................................................................5-93

Exercise: Post Amounts as...................................................................................................................................5-94

Payment Options..................................................................................................................................................5-95

Outgoing Payments..............................................................................................................................................5-96

Financial Transactions in the Medium and Long Term: Closing Operations / Special Cases.............................5-97

Closing Operations / Special Cases......................................................................................................................5-98

Accrual/Deferral: Overview.................................................................................................................................5-99

Valuation: Position Valuation............................................................................................................................5-100

Loans - Cash Flow..............................................................................................................................................5-101

Cash Flow: Making Changes.............................................................................................................................5-102

Loans - Cash Flow: Display Variants.................................................................................................................5-103

Business Operations for a Contract....................................................................................................................5-104

Types of Business Operation..............................................................................................................................5-105

Enter Charges as Business Operation: Example................................................................................................5-106

Transfer Postings: Overview..............................................................................................................................5-107

Loans: Release....................................................................................................................................................5-108

Financial Transactions in the Medium and Long Term: Unit Summary (1)......................................................5-109

Financial Transactions in the Medium and Long Term: Unit Summary (2)......................................................5-110

Data used in the Unit: Financial Transactions in the Medium and Long Term.................................................5-111

Financial Transactions in the medium and long term Exercises.............................................................................................................................................5-113

Financial Transactions in the Medium and Long Term Solutions.....................................................................5-122

Market Risk Management and Managing Risk Positions..........................................................................................6-1

Market Risk Management and Managing Risk Positions: Unit Objectives...........................................................6-2


Market Risk Management and Managing Risk Positions: Business Scenario.......................................................6-4

Market Risk Management and Managing Risk Positions: Analysis and Simulation.............................................6-5

Risk Categories.......................................................................................................................................................6-6

Risk Controlling in Treasury..................................................................................................................................6-7

Defining the Organizational Framework................................................................................................................6-8

Investment and Risk Guidelines.............................................................................................................................6-9

Selection of Financial Instruments.......................................................................................................................6-10

Hedging................................................................................................................................................................6-11

Risk Process in Treasury......................................................................................................................................6-12

Market Risk Management: Functions..................................................................................................................6-13

Integration of Scenarios and Fictitious Transactions...........................................................................................6-14

Instruments in Currency and Interest Management..............................................................................................6-15

Financial Instruments and Influencing Factors....................................................................................................6-16

Market Risk Management and Managing Risk Positions: Mark-to-Market Valuation.......................................6-17

Mark-to-Market Valuation...................................................................................................................................6-18

Mark-To-Market Valuation: Procedure................................................................................................................6-19

Example: Valuation of Swaps..............................................................................................................................6-20

Mark-to-Market Valuation - Calculation Base.....................................................................................................6-21

Mark-to-Market Valuation - Details Log.............................................................................................................6-22

Exercise: Mark-to-Market....................................................................................................................................6-23

Storing OTC NPVs...............................................................................................................................................6-24

Market Risk Management and Managing Risk Positions: Currency Risks.........................................................6-25

Exposure Analysis................................................................................................................................................6-26

Integration of a Company’s Cash Flows..............................................................................................................6-27

Currency Exposure...............................................................................................................................................6-28

Option Exposure...................................................................................................................................................6-29

Currency Option...................................................................................................................................................6-30

Create OTC Currency Option...............................................................................................................................6-31

Currency Option: Option Price Calculator...........................................................................................................6-32

Exercise: Currency Exposure...............................................................................................................................6-33

Market Risk Management and Managing Risk Positions: Interest Rate Risks....................................................6-34

Interest Rate Exposure..........................................................................................................................................6-35

Interest Rate Exposure - Determine Basis Point Value.......................................................................................6-36

Forward Rate Agreement.....................................................................................................................................6-37

Create FRA...........................................................................................................................................................6-38

Swaps....................................................................................................................................................................6-39

Enter: Interest Rate Swap.....................................................................................................................................6-40

Manual / Automatic Interest Rate Adjustment.....................................................................................................6-41

Exercise: Interest Rate Exposure..........................................................................................................................6-42

Analysis / Simulation - Key Figures..................................................................................................................6-43

Analysis / Simulation - Evaluations.....................................................................................................................6-44

Analysis / Simulation - Structure.........................................................................................................................6-45

Exercise: Analysis and Simulation.......................................................................................................................6-46

Integrated Market Risk Management...................................................................................................................6-47

Market Risk Management and Managing Risk Positions: Unit Summary...........................................................6-48

SAP Treasury Overview.......................................................................................................................................6-49

Market Risk Management and Managing Risk Positions Exercises...............................................................................................................................................6-50

Market Risk Management and Managing Risk Positions Solutions................................................................................................................................................6-56

0

SAP AG 1999

AC030 Treasury

SAP AG

AC030AC030

TreasuryTreasury

SAP System R/3 Release 4.6B Status: April 2000 Material number: 5003 6818

0.2

SAP AG 1999

Copyright 2000 SAP AG. All rights reserved.

Neither this training manual nor any part thereof maybe copied or reproduced in any form or by any means,or translated into another language, without the priorconsent of SAP AG. The information contained in thisdocument is subject to change and supplement without prior notice.

All rights reserved.

Copyright

Trademarks: Some software products marketed by SAP AG and its distributors contain proprietary software

components of other software vendors. Microsoft®, WINDOWS®, NT®, EXCEL®, Word® and SQL Server® are registered trademarks of

Microsoft Corporation. IBM®, DB2®, OS/2®, DB2/6000®, Parallel Sysplex®, MVS/ESA®, RS/6000®, AIX®, S/390®,

AS/400®, OS/390®, and OS/400® are registered trademarks of IBM Corporation. ORACLE® is a registered trademark of ORACLE Corporation, California, USA. INFORMIX®-OnLine for SAP and Informix® Dynamic ServerTM are registered trademarks of

Informix Software Incorporated. UNIX®, X/Open®, OSF/1®, and Motif® are registered trademarks of The Open Group. HTML, DHTML, XML, XHTML are trademarks or registered trademarks of W3C®, World Wide Web

Consortium, Laboratory for Computer Science NE43-358, Massachusetts Institute of Technology, 545 Technology Square, Cambridge, MA 02139.

JAVA® is a registered trademark of Sun Microsystems, Inc. , 901 San Antonio Road, Palo Alto, CA 94303 USA.

JAVASCRIPT® is a registered trademark of Sun Microsystems, Inc., used under license for technology invented and implemented by Netscape.

SAP, SAP Logo, mySAP.com, mySAP.com Marketplace, mySAP.com Workplace, mySAP.com Business Scenarios, mySAP.com Application Hosting, WebFlow, R/2, R/3, RIVA, ABAP™, SAP Business Workflow, SAP EarlyWatch, SAP ArchiveLink, BAPI, SAPPHIRE, Management Cockpit,

SEM, are trademarks or registered trademarks of SAP AG in Germany and in several other countries all over the world. All other products mentioned are trademarks or registered trademarks of their respective companies.

Design: SAP Communications Media

0.3

SAP AG 1999

Treasury

Treasury Overview

AC030 3 days

Level 2 Level 3

Financial Accounting and Reporting

AC010 5 days

Cash Budget Management

AC215 1 day

Basic Functions inTreasury Management

AC810 3 days

Cash Management

AC805 3 days

Money Market, Foreign Exchange and Derivatives

AC825 3 days

Loans Management for Financial Services

AC815 5 days

Loans Management forCorporates

AC816 3 days

Securities Management

AC820 4 days

Market Risk Management

AC830 3 days

0.4

SAP AG 1999

Euro

I.Conversion of local currency

Treasury ManagementR/3R/3

II.Conversion of

position currency(for securities)

III.Conversion of transaction or

contract currency(usual module)

• The company itself triggers conversion

• Convert all flows on a key date after closed fiscal year

• Reconcile rounding differences, generate adjustment flows, and post to specific accounts

• No postings in closed fiscal year

• Notification from issuer triggers conversion• Convert nominal values, book values, and historical acquisition values

selectively• Reconcile rounding differences with the depository bank, generate

adjustment flows, and post to specific account• Adjust class data• Adjust nominal values using alternative means

• Business partners agree on conversion date - depends on term/due date of transactions/contracts

• Convert transactions/contracts selectively

• Reconcile rounding differences, generate adjustment flows, and post to specific accounts

0.5

SAP AG 1999

Course Prerequisites

Required: You must already be familiar with the SAP R/3

System

Recommended:

We recommend that you attend the SAP20 - SAP R/3 Overview course

0.6

SAP AG 1999

Target Group

Participants:

Project team

DP administrators

Duration: 3 days

Note These training materials are not designed as a self-study program. They are only complete when used in

conjunction with the instructor's explanations. Space is provided for your notes on these explanations.

1

SAP AG 1999

Course Overview

Course Goals

Course Objectives

Course Content

Course Overview Diagram

Main Business Scenario

Contents:

(C) SAP AG AC030 1

1.2

SAP AG 1999

Course Goals

This course will prepare you to:

Use all the options provided by the SAP R/3 Treasury module in order to ensure that your short-, medium-, and long-term cash flows and their related risks are managed efficiently.

(C) SAP AG AC030 2

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SAP AG 1999

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

Describe the relationships between the SAP Cash Management, Treasury Management, Loans Management, and Market Risk Management applications

Set up the structures required for managing short-, medium-, and long-term liquidity in your company

Explain the different ways of monitoring and controlling market risk

Define the system settings needed to control internal processing

Course Objectives

(C) SAP AG AC030 3

1.4

SAP AG 1999

Unit 5 Financial Transactions in the Medium and Long Term

Unit 6 Market Risk Managementand Managing Risk Positions

Unit 1 Course Overview

Unit 2 Introduction

Unit 3 SAP Treasury Overview

Unit 4 Liquidity Management in theShort and Medium Term

Preface

Appendix

Course Content

(C) SAP AG AC030 4

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SAP Treasury Overview

Liquidity Management in the Short and Medium Term

Introduction

Financial Transactions in the Medium and Long Term

Market Risk Management and Managing Risk Positions

(C) SAP AG AC030 5

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SAP AG 1999

You are using (or have successfully installed) the SAP FI module. You now want to activate short-, medium-, and long-term liquidity management and use the Market Risk Management options.

Main Business Scenario

(C) SAP AG AC030 6

2

SAP AG 1999

Navigation in the system

User-specific settings

Navigation in the mySAP.com Workplace

Contents:

Navigation

(C) SAP AG AC030 1

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Identify the elements of a typical window

Navigate in the system

Personalize your user settings

Describe and use the mySAP.com Workplace

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

Navigation: Unit Objectives

(C) SAP AG AC030 2

2.3

SAP AG 1999

New users need to familiarize themselves with the screens in the system and define their personal default settings

Navigation: Business Scenario

(C) SAP AG AC030 3

2.4

SAP AG 1999

Logging On to the System

Client

User

Password

Language

New Password

SAP R/3SAP R/3

T70 (1) (000) iwdf5070 INS

User System Help

You can place your own text onthe initial screen: See SAP Note 205487

If you have problems logging on, contact Donna Moore, x486

SAP R/3 Systems are client systems. The client concept enables the parallel operation, in one system, of several enterprises that are independent of each other in business terms. The components SAP Business Information Warehouse (BW) and SAP Knowledge Warehouse (KW) are exceptions to this: in these cases only one client is used. During each user session you can only access the data of the client selected during logon.

A client is, in organizational terms, an independent unit in the system. Each client has its own data environment and therefore its own master data and transaction data, assigned user master records and charts of accounts, and specific Customizing parameters.

For a user to log on to the system, a master record must exist in the system for that user. To protect access, a password is required for logon. The password is hidden as you type (you only see asterisks).

SAP R/3 Systems are available in several languages. Use the Language input field to select the logon language for each session.

Multiple logons are always logged in the system beginning with SAP R/3 4.6. This is for security as well as licensing reasons. A warning message appears if the same user attempts to log on twice or more. This message offers three options: Continue with current logon and end any other logons of the same user in the system Continue with current logon without ending any other logons in the system (logged in system) Terminate current logon attempt

You can place your own text on the initial screen in a number of ways. For more information, see the SAP Note mentioned above. The GuiXT (covered at the end of this chapter) offers a further option.

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SAP AG 1999

Screen Elements

System System Function Function Name: Name: ActivityActivity

Menu Edit Favorites Extras System Help

Choose Save

Input field

Tick

Selection 1

Selection 4

Selection 2

Selection 3

Options

Option 1

Option 2

Option 3

Option 4

Option 5

Display Edit

Overview

Neutral

Positive

System Message T70 (1) (400) iwdf5070 INS Status Bar

Application Toolbar

Command Field Standard Toolbar

CheckboxesRadio ButtonsPushbuttons

Tab Page

This screen is made up of various screen elements. It does not match an actual

screen in the system.

Command field: You can use the command field to go to applications directly by entering the transaction code. You can find the transaction code either in the SAP Easy Access menu tree (see the page User-Specific Personalization) or in the appropriate application by choosing SystemStatus.

Standard toolbar: The icons in the standard toolbar are available on all SAP R/3 screens. Any icons that you cannot use on a particular screen are dimmed. If you leave the cursor on an icon for a moment, a QuickInfo appears with the name (or function) of that icon. You will also see the corresponding function key. The application toolbar shows you which functions are available in the current application.

Checkboxes: Checkboxes allow you to select several options simultaneously within a group. Radio buttons: Radio buttons allow you to select one option only. Tabs: Tabs provide a clearer overview of several information screens. Status bar: The status bar displays information on the current system status, for example, warnings or

error messages.Other elements are: Menu bar: The menus shown here depend on which application you are working in. These menus contain

cascading menu options. Title bar: The title bar displays your current position and activity in the system.

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SAP AG 1999

SAP Easy Access - Standard

SAPSAP EasyEasy AccessAccessOther Menu


Create Role Assign User Documentation

FavoritesSAP Menu

OfficeLogisticsAccountingHuman ResourcesInformation SystemsTools

T70 (1) (400) iwdf5070 INS

You are greeted by your logo in the right-hand part of the window.

SAP Easy Access is the standard entry screen displayed after logon. You navigate through the system using a compact tree structure.

You can include an image on the right-hand side of the screen such as your company logo. This image can only be entered systemwide, and is a cross-client setting. Assuming you have the appropriate authorization, you can find a detailed description of the necessary settings by choosing Extras Administration Information. Note that this image is stored in the system and transported to the SAP Frontend every time it is called by SAP Easy Access. Although this transfer is compressed, the image for the initial screen should not be bigger than around 20 kB. You can prevent this image being called either by using the setting Low Speed Connection in the SAPLogon program (see SAP Note 161053), or by switching off the calling of the image under ExtrasSettings. See also User-Specific Personalization.

(C) SAP AG AC030 6

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SAP AG 1999

Selecting Functions


SAPSAP EasyEasy Access Access -- Enjoy User MenuEnjoy User Menu

Create session

End session

User profile

Services

Utilities

List

Services for object

Object history

Own spool requests

Own Jobs

Short Message

Status...

Log off

FavoritesEnjoy User Menu

URL - SAP Notes (User / PW req.)Accounts Receivable

FD02 -Change Customer (Account

Materials ManagementSales and DistributionTools

... using the transaction code in the command field

... using SAP Easy Access and Favorites

... using the menu path

You can select system functions in the following ways: Use the mouse to choose: Menu options, Favorites, and SAP Easy Access options Use the keyboard (ALT + the underlined letter of the relevant menu option) Enter a transaction code in the command field:

A transaction code is assigned to each function in SAP R/3 Systems. You can access the assigned transaction code from any screen in the system. For example, to display customer master data, enter /n and the appropriate transaction code (in this case /nfd03). You can find the transaction code for the function you are working in under the Status option of the System menu. Other possible entries:/n ends the current transaction. /i ends the current session./osm04 creates a new session and goes to the transaction specified (SM04).

You can also use the keyboard to go to the command field. Use the CTRL + TAB key combination to move the cursor from one (input) field group to the next. Use TAB to move between fields within a group.

By entering search-sap-menu in the command field, you can search for and display the menu path for an SAP transaction. You can also search for text strings.

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2.8

SAP AG 1999

Role-Based User Menu

SAPSAP EasyEasy Access Access -- Enjoy User MenuEnjoy User MenuOther Menu


Create Role Assign User Documentation

T70 (1) (400) iwdf5070 INS

FavoritesGreat Transactions

SM50 - Prcoess OverviewVA01 - Create Sales Order

Interesting WWW PagesURL - The Herald TribuneURL - Time Magazine

Important FilesURL - Vacation Planning

Enjoy User MenuURL - SAP Notes (User / PW req.)Accounts Receivable

FD02 - Change Customer (Accountin

Favorites chosen by the userreduce navigation time

A role-based menu contains the activities that the user can execute based on the role assigned to the user in the system.

Sales and DsitributionTools

Materials Management

A Role describes a set of logically linked transactions in the system. These represent the range of functions users typically need for their work.

User roles (previously “activity groups”) have to be set up using the Profile Generator so that SAP R/3 System users can work with user-specific or position-related menus.

The authorizations for the activities listed in the menus are also assigned to the users using user roles. With Release 4.6, predefined user roles from all application areas are included in the standard system.

Users who have been assigned a user role can choose between the user menu and the SAP standard menu.

The above screen shows the role-based user menu for a user with the name "Enjoy". You can find roles that are supplied in the standard SAP R/3 System by choosing Other menu on the SAP Easy Access initial screen.

Every enduser can personalize the initial screen using Favorites. You can create your own Favorites list containing the transactions, reports, files, and Web addresses that you use most often.

You can add favorites either by choosing Favorites or by using the mouse to “drag & drop” items into the Favorites directory.

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2.9

SAP AG 1999

Field Help: F1 and F4

Display Display CustomerCustomer: Initial : Initial ScreenScreen

Customer Edit Goto Extras Environment System Help

Customer

Company Code

Restrictions

Company Code

Company Name

City

Currency

Restrict Number to

1000Customer

SAP A.G. Walldorf EUR

Co... Company Name City Cur...

Restrictions

IDES AG 1000 Frankfurt UNI

IDES Canada Toronto CAD

IDES AG Frankfurt UNI

Customer account number

A unique key is used to clearly identify the customer within the SAP

System.

Procedure

When creating a customer master record, the user either enters the

account number of the customer or has the system determine the

number when the record is saved, depending on the type of number

assignment used. The account group determines how numbers are

assigned.

F4 Help: Displays Possible Entries

F1 Help: Displays the Meaning ofFields and Technical Information

Entries Found

For help on fields, menus, functions, and messages, use F1. F1 help also provides technical information on the relevant field. This includes, for example, the

parameter ID, which you can use to assign values for your user to input fields , which have to refer to these parameter IDs.

For information on what values you can enter, use F4. You can also access F4 help for a selected field using the button immediately to the right of that field.

If input fields are marked with a small icon with a checkmark, then you can only continue in that application by entering a permitted value. You can mark many fields in an application as either required entry fields or optional entry fields. You can also hide fields and preassign values using transaction or screen variants or Customizing.

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2.10

SAP AG 1999

SAP Library

SAP Library - SAP Library

SAPLibrary

Contents Index Search SAP LibraryRelease 4.6C, March 2000

IDES

Getting Started

Release Notes

Implementation Guide

Glossary

Copyright 2000 SAP AGAll rights reserved.

You can access the complete online

documentation for the system using the SAP

Library

SAP R/3 Systems provide comprehensive online help. You can display the help from any screen in the system. You can always request help using the Help menu or using the relevant icon (the yellow question mark).

You can access the SAP Library quickly and comfortably by using the SAP Service Marketplace. There you can find the SAP Help Portal under Knowledge and Training, where you can not only access Help in HTML format, but can also perform efficient full-text searches in the SAP Library. If you have the SAP Library installed, you also have, of course, these opportunities within your company.

You can access the Help Portal directly at http://help.sap.com

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SAP AG 1999

Menus: System and Help



Rolle anlegen Benutzer zuordnen Documentation

FavoritesSAP Menu

OfficeLogisticsAccountingPersonnelInformation SystemsTools

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Create Session

End Session

User profile

Services

Utilities

List

Services for object

Object history

Own spool requests

Own jobs

Short message

Status...

Log off

Application help

SAP Library

Glossary

Release Notes

SAPNet

Feedback

Settings...

Both of these menus are available on every screenand always offer exactly the same options.

The System menu contains, among others, the following options: Create/End Session: Allows you to create and end sessions. The maximum number of sessions can be

set to a number between 2 and 6 by the system administrator using the parameter rdisp/max_alt_modes.

User profile: This is where you can enter user-specific settings. For example, you can use Parameter IDs in Own Data, in order to set default values for specific user-dependent fields in the system (for example the company code field).

List: Contains important list functions, such as searching for character strings, saving in PC files, printing, and so on.

Status: Enables you to display important user and system data. Log off: Ends the R/3 session with a confirmation prompt.

The Help menu contains, among others, the following options: Context-sensitive Application Help Access to the SAP Library (see previous page) a Glossary ...

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2.12

SAP AG 1999

User-Specific Personalization


Menu Edit Favorites Exrtas System Help

Rolle anlegen Benutzer zuordnen Dokumentation

FavoritesSAP Menu

OfficeLogisticsAccountingHuman ResourcesInformation SystemsTools

T70 (1) (400) iwdf5070 INS

Administration Information

Assign user

Display Documentation

Technical Details

Settings

Set Start Transaction

Ctrl+Shift+ F8

Shift+ F6

Shift+ F7

Shift+ F9

Ctrl+Shift+ F10

Display favorites at end of list

Settings

This is used to specify settings

Do not display menu, only display favoritesDo not display pictureDisplay technical names

Options ...

Generate Graphic

Create Shortcut ...

Activate GuiXT

Default Size

Hardcopy

Quick Cut and Paste

About...

Different Settings options make working with the system easier

The end user has many possibilities for personalizing the system. Some are described below: You can alter the layout of your initial screen under Extras Settings, for example by switching off

the image in the right-hand part of the window or by turning on the option to display the technical names (transaction codes) in the SAP Easy Access Menu.

Among other things, you can activate a quick cut and paste in the Options menu. Using Options you can change the reaction speed of the QuickInfo that is displayed when you hold your mouse cursor over an icon or a push button.

By following the path System User profile Own data, you can set personal standard values. You can choose the tabs Address, Defaults, and Parameters. As an example, the setting of Parameters is explained here:

Parameters: Here you can set defaults for frequently used input fields. In order to be able set a default value for a field, it must have been assigned a Parameter ID. Procedure for finding the Parameter ID: Go to the field for which you wish to set a default value. Select the F1 help, and then choose Technical Info. The system displays an information window that contains the relevant parameter ID under the heading Field Data (as long as the field has been assigned a Parameter ID).

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2.13

SAP AG 1999

Table Settings - Example

Parameters Value Text

Company code

Processing group

Bank key

Sales order type

Choose Variants

Maintain Variants

Use as standard setting

Variant

Save

Standard setting

Current setting

Create

Delete

Administrator

My variant

Basic setting

Table Settings

Use the Table Settings function to change, in the table control, the individual basic table settings that are supplied with the system. This is particularly useful for tables where you do not need all the columns. You can use the mouse to drag & drop column positions and widths, or even make the column disappear.

Save the changed table settings as a variant. The number of different variants you can create per table is not restricted.

The first variant is called the basic setting; the SAP System defines this setting. You cannot delete the basic setting (you can delete the variants you define yourself).

The table settings are stored with your user name. The system uses the variant currently valid until you exit the relevant application. If you then select the application again, the system will use the standard settings valid for this table.

Note: you can change table settings wherever you see the table control icon in the top right-hand corner of a table.

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2.14

SAP AG 1999

Personalizing the Frontend with GuiXT

FD03 with GuiXTFD03 without GuiXT

Example from http://www.guixt.com

SAP R/3 Systems offer numerous options for settings and adjustments: Define default values for input fields Hide screen elements Deactivate screen elements (dimmed)

You can do this by, for example, defining transaction variants. SAP offers GuiXT, as of SAP R/3 Release 4.6. In addition to all of the above functions, you can now:

Include graphics Convert fields and add pushbuttons and text Change input fields (or their F4 help results) into radio buttons

GuiXT scripts are stored on the Frontend. In accordance with local scripts (which can also be stored centrally), the GUIXT scripts determine how data sent from the application server is displayed. These scripts can be standard throughout a company, or they can be different for each Frontend.

NOTE: The GuiXT will support the mySAP.com Workplace only as of the end of the year 2000. This means that until then you should use either the SAP GUI for the Windows Environment and the GuiXT or the mySAP.com Workplace with the SAP GUI for HTML (or the SAP GUI for Java or the SAP GUI for Windows).

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2.15

SAP AG 1999

You are now able to:

Navigation: Unit Summary

Identify the elements of a typical window

Navigate in the system

Make personal system settings

Describe and use the mySAP.com Workplace

(C) SAP AG AC030 15

2.16Navigation - Exercises

Unit: Navigation

Topic: Basic Functions

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

Log on to an SAP R/3 System

Find transaction codes

Access the SAP Library

Use F1 help to find field information

Use F4 help to search for possible field entries

As a new user of an SAP R/3 System, you begin to navigate the system using the menu paths and transaction codes. You also begin to access the various types of online help.

All menu paths in the exercises refer to the SAP standard menu.

1-1 Logging on to the system

Select the appropriate system for this course. Use the client, user name, initial password and logon language specified by the instructor. The first time you log on, you will get a prompt in which you must enter your new password, which you choose yourself, twice. Make a note of the following:

Client: _ _ _ User: _ _ _ _ _ _ Password: ____________ Language: _ _.

1-2 What is the maximum number of sessions (windows in the SAP R/3 System) you can have open simultaneously? __

(C) SAP AG AC030 16

1-3 Identify the functions and find the transaction codes that correspond to the following menu paths in the SAP standard menu.

1-3-1 Tools Administration Monitor System Monitoring User Overview

Name of function: ___________________________________________

Transaction: _________________________________________________

1-3-2 Accounting Financial Accounting Accounts Receivable

Master Records Display

Enter Customer 1000 and Company Code 1000 to go to the next screen.

Name of function: _____________________________________

Transaction: ___________________________________________

1-4 Help

1-4-1 If you choose Application help in the SAP Easy Access initial screen (System menu), which area of the SAP Library does it take you to?

_________________________________________________________

To answer the questions below, you will need to go to the Display Customer: Initial Screen.

1-4-2 Use F1 help on the Customer field. What is this field used for?Write a brief summary of the business-related information.

______________________________________________________

(C) SAP AG AC030 17

1-4-3 Use the F1 help on the Company code field. If you choose the Application help icon from the F1 help screen, which area of the SAP Library does it take you to?

______________________________________________________

1-4-4 Which icon do you need to use on the F1 help screen to find the parameter ID for the Company code field?Hint: See the notes on the slide User-Specific Personalization

______________________________________________________

1-4-5 Use F4 help on the Customer field to find the customer number for Becker ##. To do this, use the Search term "Becker*" after calling the F4 help.

Note: ## corresponds to your assigned group number.

___________________________________________________

(C) SAP AG AC030 18

Unit: Navigation

Topic: User-Specific Settings

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

Set a user parameter for a field

Set user defaults

Maintain your favorites

Select a start transaction of your choice

You begin to set various user-specific settings.

Exercises marked * are optional.

2-1 Setting user parameters.

2-1-1 Assign a parameter value for the Company code field to your user profile.

Note: The instructor will tell you what parameter value to enter (for example 1000). For information about defaults, see the notes on the slide User-Specific Personalization.

Parameter ID: ___ ___ ___

Parameter value: ___ ___ ___ ___

2-2 Defining User-Specific Settings using System User profile Own Data

2-2-1 In your user profile, set your logon language to the value used for the course.

2-2-2 In your user profile, set the decimal notation and date format of your choice.

(C) SAP AG AC030 19

2-3 Defining your favorites

2-3-1 Insert at least one new folder under the Favorites folder.

2-3-2 Add any two of your favorite transactions to the corresponding folders.

2-3-3 Add the Internet address http://www.sap.com with the text SAP Homepage.

2-4* Setting a start transaction using the Extras menu.

2-4-1 Enter a transaction of your choice as the initial transaction. You will then need to log off and on again for the change to take effect.

Note: If desired, you can change the initial transaction back to the default value simply by deleting the transaction code that you entered.

(C) SAP AG AC030 20

2.17Navigation - Solutions

Unit: Navigation

Topic: Basic Functions

1-1 Log on to the system specified by the instructor and change your initial password.

1-2 To open and close sessions, choose System Create session (or use the appropriate icon) or System End session. The maximum number of sessions you can have open simultaneously is six (6), depending on your system settings.

1-3 To find the transaction code, choose System Status. These function names and transaction codes correspond to the menu paths:

1-3-1 Transaction: SM04 for Function Name: User list

1-3-2 Transaction: FD03 for Function Name: Display Customer: General Data

1-4 Help

1-4-1 The section of the unit Getting Started that deals with using SAP Easy Access is displayed.

1-4-2 Suggestion: The customer is a unique key (account number) used to clearly identify the customer within the system.

1-4-3 FI – Accounts Receivable and Accounts Payable

1-4-4 To find the Parameter ID: BUK, choose Technical Info

1-4-5 Customer ## (## corresponds to your assigned group number)

When you select F4 in the Customer field, the Restrict Value Range window appears. You can explore the various tabs to see the different search criteria available. Find a tab that includes the Search term field and enter the following:

Field Name Value

Search term Becker*

Choose Enter. A window appears listing the customer account numbers that match your search criteria. Select the line that corresponds to Becker ##, then choose Copy. This automatically copies the customer account number into the Customer field.

(C) SAP AG AC030 21

Unit: Navigation

Topic: User-Specific Settings

2-1 Setting user parameters.

2-1-1 To assign a parameter value to a field you will need the parameter ID of the field. First you need to select a transaction that contains this field. For example, Company code can be found in transaction FD03. Next, place the cursor on that field (click it with the mouse). To display the required info, choose:

F1 Technical Info Parameter ID

gives you the required information. For the Company code field, the parameter ID is BUK.

Finally, enter the parameter ID and desired value in your user profile:

System User profile Own data

On the Parameter tab page you enter the parameter ID and value that you want to be entered into the field. Save your entries.

2-2 Setting user defaults.

2-2-1 To set the logon language, go to your user profile:

System User profile Own data

On the Defaults tab page, enter the language of your choice in the Logon language field.

2-2-2 To set the decimal notation and date format, remain on the Defaults tab in your user profile. Select the indicator adjacent to the notation and format you desire. Save your selections.

2-3 Defining favorites of your choice.

2-3-1 Favorites Insert folder

Type any name for the folder then select Enter. You can add as many folders as you desire. Once created, folders can be dragged and dropped to position them where you want.

2-3-2 To create favorites, select specific applications (transactions) that you need as favorites for your daily work from the menu tree of the SAP standard menu. Add them to your Favorites list by selecting them and choosing Favorites Add from the menu bar. Alternatively, use the mouse to drag & drop favorites to a folder. You can also use the menu path Favorites Insert transaction to

(C) SAP AG AC030 22

add using a transaction code.. Finally, you can move existing favorites to different folders later by choosing Favorites Move or using drag & drop.

2-3-3 Create Internet addresses by choosing Favorites Add Web address or file. When you select SAP Homepage from your favorites, an Internet browser will open and you will be connected to SAP’s homepage.

2-4 Setting a start transaction.

2-4-1 Extras Set start transaction

Enter a transaction of your choice then choose Enter. Notice the system message on the status bar indicates that your selected transaction has been set as the start transaction. The next time you log on, the system will go directly to your start transaction.

Note: To change back to SAP Easy Access as the initial screen, follow the menu path again, delete the transaction code and select Enter. The next time you log on, SAP Easy Access will be the initial screen.

(C) SAP AG AC030 23

3

SAP AG 1999


Contents:


Defining the Organizational Framework

Selection of Financial Instruments

Identifying Treasury Processes

Treasury Management Functions

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3.2

SAP AG 1999

SAP Treasury Overview: Unit Objectives


Provide an overview of SAP R/3 Treasury

Identify the relevant product types

Explain the various processes and standard functions of SAP Treasury

(C) SAP AG AC030 2

3.3

SAP AG 1999


SAP Treasury OverviewSAP Treasury Overview

Liquidity Management in the Short and Medium Term

Introduction



(C) SAP AG AC030 3

3.4

SAP AG 1999

SAP Treasury Overview: Business Scenario

Before you begin your work in the project team, you want to gain an overview of SAP R/3 Treasury.

Which products and processes can be mapped using the new Treasury system? What functions are available?

(C) SAP AG AC030 4

3.5

SAP AG 1999


Financial Accounting

Bank data

Businesspartner

Market data

DownloadMarket Risk Management:• Interest/currency

exposure• Sensitivities• Mark-to-market • Risk analysis/Simulation• Value at Risk

Cash Management:• Electronic banking• Liquidity status• Integrated operationalsystems

• Control functions

Transaction Management:• Management of financial transactions and positions

• Transfer to Financial Accounting

• Flexible reporting andportfolio analysis

• Datafeed interface

DD CC DD CC

100 100 100 100

TM TM

SecuritiesSecuritiesDerivativesDerivatives

Money market Money market ForexForexLoansLoans

Logistics

The objective of the SAP Treasury module is to ensure efficient liquidity, portfolio, and risk management.

SAP Treasury is subdivided into the following three areas:

Cash Management (CM) offers tools for efficient liquidity analysis.

Transaction Management (TM) supports the management of financial transactions and positions.

Market Risk Management (MRM) provides methods and procedures for assessing risk positions.

(C) SAP AG AC030 5

3.6

SAP AG 1999

Treasury inconjunction withother SAP modules(FI, MM, SD)

Electronic bankingCash Management

Money market Securities

Loans

Foreign exchangeDerivatives

SAP Support for Business Requirements

Data integration

Centraldecision-making

Several currencies

Automatic processes

Analysis of financial resources

Investment / borrowing

Data entry

Monitoring

Processing

Reporting

Risk management

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3.7

SAP AG 1999

1. Definition of a means/end hierarchy

Define earnings and risk targets Establish investment and risk guidelines Implement in the form of operating targets

2. Definition of procedure

Identify the processes Company-specific modeling of work processes Break down into single activities and assign to groups Incorporate in an authorization and release concept


Management is responsible for defining the framework within which treasury transactions are executed. This is divided into three main areas:

Specifying the basic business principles, including: Trading strategies for the respective instruments The markets on which trading is allowed Transaction volume, organization (contract components), and documentation

Risk limitation, including: Procedures for measuring and controlling risk Value of the permitted risk positions according to instruments or organizational units Reaction to extreme market trends or exceeded limits Internal reporting

Organization, including: The areas of responsibility and functions of individual employees Division into function areas Human resources and technical equipment

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3.8

SAP AG 1999

Investment and Risk Guidelines

Internal External

Revenuetargets

Risktargets

Investmentregulations

Riskregulations

LimitsRelevant

product typesHedging

strategiesReporting

system

Investment and risk guidelines

In the financial services area, there are countless statutory norms and controlling bodies that monitor entered risks to protect the investor.

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3.9

SAP AG 1999


Mortgageloans

Borrower's note loans

Policy loans Other

loans

Fixed-termdeposits

Deposits atnotice

CommercialPaper

Product types

DerivativesForexLoansSecuritiesMoney market

Stocks Subscription

rights Investment

certificates Bonds Convertible

bonds Warrant bonds Warrants

Forexspotdeals

Forwardexchange deals

Forexswaps

Caps / Floors FRAs Swaps

- Interest rate- Interest rate curr.

OTC options- Currency- Interest rate- Security- Swaption

Futures

Hedginginstruments

Investment/Borrowinginstruments

In the short-term area, money market transactions and forex transactions allow you to bridge liquidity deficits or surpluses. In the medium to long-term area, investments and borrowings are additionally represented by securities transactions and loan transactions.

Derivative financial instruments, on the other hand, help you hedge against interest rate and currency risks.

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3.10

SAP AG 1999

Hedging

HedgingHedging

Hedgingstrategy

Hedgingrate

Hedgingobject

Overall position

Portfolio position

Single position

Macro hedge

Portfolio hedge

Micro hedge

Full hedge 100%

Partial hedge x%

* Release not yet specified

Hedging is a way of counteracting risk. It involves setting up an offsetting position, which develops in the opposite way to the underlying position.

Risk objects are either cash flows resulting from an operating business or from Treasury transactions/positions such as loans, securities, or money market transactions.

Exchange rates, interest rates and volatilities are all sources of risk. You can match risk and hedged items and hence determine hedged and non-hedged items using the

Market Risk Management component. Hedge transactions are usually forward transactions (symmetrical instruments) or options (asymmetrical

instruments) as well as combinations of these.

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3.11

SAP AG 1999

Earnings/risk targets

Revision of planned targets

Feedback

Adjustments

Documentation and control functions

Analysis and trading process

Transaction and position management process

Analysis(planning)

Decision

FinancialFinancialtransactionstransactions


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 earnings targets you have defined. SAP Treasury provides special tools and methods with which you can perform an integrated analysis of your company's financial and risk situation.

If you have decided to conclude certain financial transactions, you enter the trading processes for these transactions in SAP Transaction Management (TM). Transaction Management also supports functions for managing transactions and the related financial positions at later stages.

All Treasury activities are supported by common documentation and control functions. This ensures that analyses of specific instruments or of various instrument groupings can be performed at each stage of the Treasury process. This fulfills the various documentation and control requirements of both Financial Accounting and Treasury.

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3.12

SAP AG 1999

SAP Treasury Overview: Unit Summary

The SAP Treasury component is divided into three main areas:- Cash Management, - Treasury Management / Loans Management - Market Risk Management.

You can represent financial transactions in Treasury Management using different processes

The SAP Treasury Management module includes functions that enable you to manage your financial transactions from the trading stage through back office processing to Financial Accounting

(C) SAP AG AC030 12

4

SAP AG 1999

Liquidity Management in the Short andMedium Term

Contents:

Cash Management

Money Market

Foreign Exchange

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4.2

SAP AG 1999

Liquidity Management in the Short and Medium Term: Unit Objectives


Provide an overview of the entire liquidity management process in the short and medium term

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4.3

SAP AG 1999



Liquidity Management in the Short Liquidity Management in the Short and Medium Termand Medium Term

Introduction



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4.4

SAP AG 1999

Cash Management Functions

Our model company has to deal with the integration of electronic banking into Cash Management before it is in a position to use the liquidity analysis options.The company has identified a liquidity surplus on its bank accounts for a particular value date in Cash Management.A series of examples show us how this liquidity surplus came about and how it can be interpreted.On the one hand, it is worth noting the business causes behind the individual cash flows, and on the other hand, their effect on the system. Different cash flow views in different areas provide information about the company's overall liquidity situation, andthe short-term liquidity on its bank accounts.

Liquidity Management in the Short and Medium Term: Cash Management Scenario

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4.5

SAP AG 1999

InformationprocurementInformation

procurementTargetsTargets

Instruments Methods Measurements

Identification ofappropriate financial transactions

Simulation of alternative results

Select one alternative

Trading Back office Accounting Reporting

Internal: - Liquidity

status - Risk

position External:

Market data

Earnings/Earnings/risk targetsrisk targets

Assessmentof possiblesolutions

Assessmentof possiblesolutions

DecisionDecision Processingcontrol

Processingcontrol

Controlling

Analysis and Trading Process


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4.6

SAP AG 1999

1) % of all companies surveyedSource: Price Waterhouse Top 500 Survey (Germany) 1994

1 Ensure liquidity 95

2 Optimize financing costs 92

3 Optimize yields on financial assets 74

4 Hedge costs (e.g. against possible exchange rate fluctuations) 61

5 Hedge sales (e.g. against possibleexchange rate fluctuations) 52

6 Contribute to profit through activemanagement of open items 30

1)Priority Target %1)%1)

Main Targets of Treasury

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4.7

SAP AG 1999

11 Ensure liquidityEnsure liquidity

using SAPCash Management

Priority Target %

Liquidity Management

The main tasks of a cash management system are: To ensure the liquidity of a company To analyze the business activities in closed posting periods To recognize and map future trends in the financial planning as soon as possible.

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4.8

SAP AG 1999

Comprehensive valuation of liquidity situation

Data from the operative systems: Financial Accounting, Logistics, and Treasury

Electronic banking functions

Cash position: Daily bank account balances by value date, payment advices

Cash concentration: Concentrated bank account balances

Cash pooling: Interest paid on bank accounts

Liquidity forecast: Expected inflows/outflows from customers and vendors, planned data

Monitoring value dates, payment advices, conditions, checks cashed ...

Cash Management: Functions

SAP Cash Management offers the following tools, designed to make cash flows clear: The cash position, which illustrates short-term movements in your bank accounts The liquidity forecast, which illustrates medium-term movements in the subledger accounts too.

The cash position shows you how your bank accounts will move in the next few days. In contrast, the liquidity forecast illustrates liquidity changes in the subledger accounts. The system also supports functions which you can use to obtain relevant information on expected payment flows. This information appears in the form of memo records in the cash position, or as planned items in the liquidity forecast.

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4.9

SAP AG 1999

Aim: Simplify bank account management

Cashed checks

Electronic and manual account statements

...

Establishing most current bank account balances to determine daily cash position

Electronic Banking: Functions

SAP Cash Management has the same goals as conventional cash management systems, namely to:

Safeguard company liquidity so that payment obligations can be met

Monitor payment flows

SAP Cash Management uses the cash position to reflect movements in bank accounts, while movements in the subledger accounts are represented using the liquidity forecast.

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4.10

SAP AG 1999

Dataadministration

lists

Subledgerdocuments

G/L documents

Inputdata

Manual orelectronic entry

Temporarydataset

Electronic Banking: General Process

External bank data is imported to the SAP System manually or electronically, and is initially stored in a temporary dataset for bank data. The system then generates the documents for the bank and/or subledger accounting in addition to various lists.

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4.11

SAP AG 1999

Check deposit:

Entry of incoming checks Storage/correction of check deposit list Postings to G/L accounts and customer accounts Batch input sessions or online

12001200CheckCheckOne thousand two hundredOne thousand two hundred

Walldorf, Walldorf, 12/29/YY12/29/YY

11

11

22

22

Au

tom

ati

c

Cash mgmt and forecast $, UNI, ...

Check deposit list

Incoming check clearing

Customer account

BankAcct statement(only bank postings)

OP 100

100 100

100

100

Session 1

+1day

Session 2

11

11

Electronic Banking: Check Deposit

You can use the Check deposit facility in SAP Cash Management to enter checks received. The manual check deposit function is a fast entry tool that substantially reduces the amount of manual

work involved in entering checks. You only enter the checks received, not the posting records. The system then automatically makes the postings to the bank clearing account and customer account,

along with the payment clearing. You have two options here: Immediate posting Create a batch input session, then run it

Postprocessing differs, according to which of these options you choose. When you have finished entering checks, there are additional functions you can use to process them

further. For example, you can print out a check deposit list and give it to the bank along with the checks.

The check deposit list is written, but not posted, after the checks are saved to the database. You can make changes in the list while it has this status. Once the posting process has been initiated, no further changes are possible.

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Bankdata

ApplicationApplication--specificspecificprocessingprocessing

Manualaccount

statement

Cash position and liquidity forecast

Banks

Subledger

03/15

100

25

SWIFT MT940

MultiCash

Lockbox

BACS

ETEBAC

CODA

FIDES

CSB43

ZENGINKYO

EU

EU

USA

UK

F

BE

CH

E

JP

Czech Rep.

Sweden

Bankpostings

Subledgeraccounts

Link to payment program

Automatic/manual account statements

Various formats supported

Postings to G/L and customer/vendor accounts

Bank polling

Current bank information polled

Electronic Banking

Electronic bank statement processing in SAP Cash Management is based on the MultiCash format. Other formats are supported, such as SWIFT MT940 and BAI, but you are best advised to use MultiCash.

The system uses the bank data to create two files (STATE.TXT and ITEM.TXT), which are then imported into the SAP System, where more data is added. The system looks for the business transaction codes (BTC) and other information relevant to the posting (interpretation of the where-used fields).

As with other Cash Management objects, you can work with batch input sessions or make postings immediately. The postprocessing activities differ accordingly.

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Monitoring correct payments processingfor planning

Control Functions

Aim: Monitor bank account movements

Compare value dates

Reconcile payment advice and account/account statements

Analyze cashed checks

Account interest

Compare bank conditions

You use the value date comparison to compare the planned or agreed value date (for example, from the check deposit or the preliminary posting) with the value date posted by the bank in the bank statement. The program searches for the balance sheet account postings relating to all the cleared items in a bank clearing account. If there are any differences, the program lists both postings. If there is more than one clearing item for a posting, the program takes the first one it finds.

You can use the payment advice comparison to archive individual records which are no longer valid. This report selects payment advices from the selected planning period and compares them with the bank postings. If you work with the electronic bank statement and manual individual records, it is vital that you run the payment advice comparison.

Compare with AccountThis section shows the manual and automatic comparison of individual records with account postings.

Compare with Bank StatementThis section shows the manual and automatic comparison of individual records with bank data store information, and the selection of archived records.

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Banks 09/01 09/02 09/03

Grouping:

:

BANKA 90 130 60

Level: BANKA 09/01 09/02 09/03

F0 Subledger 40 80 20

B2 Incoming checks 60 60 60

B1 Outgoing checks 10- 10- 20-

Accounts: Subledger 09/01 09/02 09/03

Account 1 10 30 10-

Account 2 20 70 20-

Account 3 10 20- 50

BANKB 40- 20- 30-

Current bank account balances as per posting date and value (bank postings and payment advices)

Accounts managed in local/foreign currency

Time scale 0-2 days

Documentation and audit functions

Current liquidity position on bankaccounts per specific date

Cash Position

The cash position reproduces the activity in your bank accounts for the next few days, and is the result of the entry, by value date, of all the payments in a given, short time horizon.

It is fed by three sources:

FI postings to G/L accounts that are relevant to cash management

Memo records entered manually

Cash flows from business transactions managed with the Treasury Management application component.

You use the grouping to set up the display.

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The company code is an independent accounting unit.Legally required balance sheets and profit and loss statements are prepared at this level.

Levels describe the logical origin and significance of cash flows in business terms.

Accounts (cash position) and groups (liquidity forecast) describe how payments are allocated.Examples:

Account: DBGIRO describes the expected incoming/outgoing payments for a current account.

Groups: Domestic customers describes the expected incoming/outgoing payments within the group of domestic customers.

Structure/Views of Liquidity Analysis

The format of the cash position and the liquidity forecast is determined by two features: Both reports contain levels. These supply high-quality information on the commercial reasons for a

movement in an account - that is, they explain how the account opening and closing balances came about. For example, levels tell you whether a balance in a bank account is the result of a bank posting or of a memo record entered manually. They can also be classified according to how secure the receipt is - for example, by confirmed or unconfirmed memo record.

In the cash position, accounts (bank and bank clearing accounts) supply information on the current balance.

The liquidity forecast contains groups instead of accounts. Vendors and customers are assigned to a planning group by means of an entry in the master records. Each group reflects certain features, procedures, or risks.

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External bank 4External bank 3

Company 2Company 2Company code 2Company code 2

External banks

External bank 2


CentralCentral TreasuryTreasuryCompany codeCompany code 11


Liquidity statusCompany codes 2+3

Liquidity statusCompany codes 1-4

internal financialtransactions

external financial transactions

external financialtransactions

Corporate Group Evaluations

Alongside the chart of accounts, the company code is the main element for integration to SAP Financial Accounting. A company code is the smallest organizational unit for which a set of accounts can be drawn up for external reporting purposes. This includes recording all the activities that require posting, and preparing all the legally-required documents, such as balance sheets and profit and loss statements.

If you use the company code as an evaluation unit, you can reproduce different corporate structures, and therefore reflect the different entities within a corporate group.

You can define each company division (e.g. subsidiary or central Treasury department) as a company code.

You can perform liquidity and risk analyses for each company code (that is, for each individual company) and also across all company codes (from a corporate group viewpoint).

This enables you to display the foreign currency exposure of a subsidiary and the overall group position. In other words, you can display a currency-specific total position for all the subsidiaries. However, this does not include settling receivables and payables for specific company codes.

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Status Status beforebefore concentrationconcentration afterafter concentrationconcentrationBank 1 1200 5Bank 2 100 5Bank 3 400 1337Bank 4 -350 3

1350 1350

Cash Concentration

Clearing proposal on the basis of selection criteria Interactive manual adjustment Credit transfers and correspondence

Concentrated bank accounts

Having established your liquidity situation from the cash position of the bank accounts, it is time to transfer any resulting deficits and surpluses to one account, for example, to the account you use for making financial investments. The aim of cash clearing is to concentrate the balances of various bank accounts in one target bank account, while also taking the defined minimum amounts into consideration. At the same time, the information in Cash Management has to be updated to generate the related payment advices automatically, and to initiate the necessary bank transfers.

If you use the Cash Management component throughout your corporate group, you can also use the cash concentration function for currency-related cash concentration across all subsidiaries. In this case, you can use the function for generating payment advices automatically to transfer the necessary payments between the subsidiaries.

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Liquidity Forecast

France (E4)

(E2) Bank collection (E1)

Payer of net amount

(E3)

FI =Posting/sales

FW =Bill of exchange

XA = Blocking reason 'A'

Groups:- Customers with similar payment history- Customers of particular interest

Groups:- Customers with similar payment history- Customers of particular interest

Levels:- Balances specified according to level

Levels:- Balances specified according to level

(E5)(E5)

Integrated data basis including customers, vendors, and planned items

Expected cash inflows/outflows over a time scaleof 1-24 weeks

Support for optimizing financial investments and borrowings

Monitoring liquidity situation

The liquidity forecast reproduces the liquidity movements in the subledger accounts. The incoming and outgoing payments per open item from accounts receivable and payable form the

basis of the liquidity forecast. Since planning and forecasting these payments is usually long term, the probability of payment being made on the planned day is less than the payment probability stated in the cash position.

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Exercise: Cash Management Functions

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Cash position Liquidity forecast

Bank accounts in currency:Account 1

:Account nTotal

Payment transactions in transition:- incoming- outgoing

Financial investments and borrowings

Subledgers:- A/R- A/P- Purchase orders- Orders

TRADINGCash

management decision

Market information

Cash Position and Liquidity Forecast

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Cash position Liquidity forecast

TRADINGCash

management decision

Market information

LogisticsFinancials

G/L G/L accountsaccounts

Customers/Customers/vendorsvendors

TreasuryTreasury MM/SDMM/SDFIFIFIFI

TRTR--TMTM OrdersOrders

Integration with Other SAP Modules

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Treasury Management Functions

This unit gives you an overview of the Treasury Management functions.It presents the general analysis and trading process used as a basis for concluding Treasury transactions. Managing Treasury transactions is the basis for the transaction and position management process. This consists of the following key phases:The “Trading” area includes functions for entering transactions and exercising rights, for supporting evaluations and calculating prices (e.g. option price calculator).In the “Back-office” area, you can complete the transactions (for example, with account assignment information and payment details).You can also use correspondence functions, such as automatic letters of confirmation. Position management functions for securities, for example, securities account transfers or corporate actions are also included here.The "Accounting" area includes tools for updating the general ledger, as well as flexible functions for handling payment transactions, and valuation and accrual/deferral procedures.

Liquidity Management in the Short and Medium Term: Treasury Management Scenario

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Market RiskManagement

Priority Priority TargetTarget




4 Hedge costs (e.g. againstpossible exchange rate fluctuations) 61

5 Hedge sales (e.g. againstpossible exchange rate fluctuations) 52

6 Contribute to profit through active management of open items 30

TreasuryManagement

%

Treasury and Market Risk Management

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SAP AG 1999

Earnings/risk targets

Revision of planned targets

Feedback

Adjustments

Documentation and control functions

Analysis andtrading process

Transaction and position management process

AnalysisAnalysis(planning)(planning)

DecisionDecision

FinancialFinancialtransactionstransactions



If you have decided to conclude certain financial transactions, you enter the trading processes for these transactions in SAP Transaction Management (TM). Transaction Management also supports functions for managing transactions and the related financial positions at later stages.

All Treasury activities are supported by common documentation and control functions. This ensures that analyses of specific instruments or of various instrument groupings can be performed at each stage of the Treasury process. This fulfills the various documentation and control requirements of both Financial Accounting and Treasury.

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Create new offer/ order/contract

Exercise/expiration Notice Rollovers Exercise rights

User authorizationLimit management

Release

Settlement/control Interest rate adjustment Netting Referencing Confirmation letters Securities account transfers Corporate actions

TradingTrading Back officeBack office AccountingAccounting

Postings Payment transactions Reversals Accruals/deferrals Valuation

Transaction and Position Management Process

The basic structure of the trading and transaction management process is the same across the Treasury components. This forms the basis for integrating and processing transactions within the SAP System and provides the framework for adapting the way transactions are represented in the system to suit 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 from different divisions. This enables you to separate trading, back office, and accounting functions as needed.

You can also define the release requirements for each processing step (such as further processing of securities transactions) and you specify the transaction amounts that fall within the release procedure. You can choose which release principle you want to use. In doing so, you specify for each product and transaction type whether a special posting release is required.

Besides enabling you to assign user authorizations to activity transitions, the limit management function enables you to assign a range of different amounts to different transactions.

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SAP AG 1999

Treasury Management: Functions

Complete financial transaction and position management

Support for trading and back-office functions

Functions to track, check, and release transactions

Data transfer to Financial Accounting(including accruals/deferrals and valuation)

Flexible settings to accommodate company-specific transaction and position management processes

Financial transactions assigned to portfolios and managed in securities accounts

Flexible reporting and portfolio analysis

Datafeed interface

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Active Liquidity Management using Money MarketTransactionsOn the basis of the liquidity situation established in Cash Management, your company decides to place a fixed-term deposit to shift the present excess cash flows to the future. In this example, you also see the various ways in which you can set up the transaction and position management processes for treasury transactions. The basic concepts, such as product types or business partner, are explained in detail on the basis of this fixed-term deposit. The example covers all the stages involved in the process - from entering the transaction in the trading area, to checking it in the back office area, through to transferring the data to Financial Accounting. From a process-oriented view, the interaction with Cash Management is extremely important: Treasury transactions are always viewed in the context of their current statuses, ensuring that the cash manager has the most up-to-date information at his fingertips. The example also outlines the typical reaction between the single phases of a financial transaction and Cash Management. By shifting the cash flows to a future period, the example demonstrates how to bridge over future anticipated liquidity shortfalls at the same time as smoothing out short-term liquidity gluts.

Liquidity Management in the Short and Medium Term: Money Market Scenario

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Fixed-termdeposits

Deposits atnotice

CommercialPaper

Product types


Hedginginstruments

Investment/borrowinginstruments

Money Market: Product Types

Money market transactions are for short- to medium-term investments or borrowings. You can make cash management decisions in the Money Market area based on the surpluses or deficits calculated in Cash Management. In Cash Management, you can see the immediate impact your transactions have on your company's liquidity (by value date at the time of the investment/borrowing and on the due date).

The product types in the Money Market area are:- Fixed-term deposits (overnight deposits, time deposits)- Deposits at notice- Commercial Paper- Cash flow transaction

In the Money Market area, cash flow transactions allow you to represent a wide range of transactions flexibly by manually entering not just the term, but also the cash flow generated for the transaction as a result of position changes, expenses, earnings, payments, and so on.

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Transaction and Position Management Process: Example of a Fixed-Term Deposit

PostingsPayment transactionsAccruals/deferralsValuationReversals

Create new offer/contractRolloversReversalsTransaction history

Settlement/controlNettingConfirmation lettersReversalsTransaction history

User authorizationlimit management

Release


The sequence of events in Treasury transaction management can be divided into several stages: You can create a money market transaction as an offer or directly as a contract. The activity sequence is determined by the processing category you choose in Customizing

(with/without settlement). Within transaction management, you can branch from each application to the partner management

functions to create business partners, display them, change them, and maintain their payment details. Each activity within transaction management (such as contract) can be analyzed in the cash management

and forecast function. You can enter offers for fixed-term deposits and for spot exchange and forward exchange transactions in

the Money Market area. You can create simulated transactions with the activity category simulation for foreign exchange

transactions and fixed-term deposits.

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Trading: Entering a Fixed-Term Deposit

Financial transactions

are assigned to the related organizational unit (company code) within the entire company

various organizational structures are 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 are user-definable

can be created with different processing forms

The Trading area contains the important functions for entering and changing transaction data. To represent transactions efficiently in the system, you first have to enter the following basic data:

Which organizational entity (company code) is concluding the financial transaction? In cases where the organizational structure of a company is more complex (for example, in central Treasury management), this entry allows you to distinguish between different corporate divisions.

Which financial transaction is being concluded? Here, you specify the product type, transaction type, and the related processing rules.

With whom are you concluding the financial transaction? Each transaction is linked to a business partner. The data entered for the business partner offers considerable scope for rationalization. If, for example, you always use the same bank and payment details with a business partner, these can be linked to the transactions automatically. You can also restrict the range of product types that may be traded with a business partner.

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Creating Contract Data: Fixed-Term Deposit

Company code 1000 IDES AG

Product type

Transaction type

Partner

51A Fixed-term deposit EXTERN

100 Investment

Deuba Deutsche Bank

Specifications

Currency

External number assignment

Transaction

Portfolio

instead of currency of comp. code

Mast. agreement

The next section describes the following key terms and the related automatic functions in greater detail:- Company code- Product type- Transaction type- Business partner

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Organizational Units

Company codeCompany code

Controlling areaControlling area

Client Business areaBusiness area

SecuritiesSecuritiesaccountaccount

PortfolioPortfolio

The Treasury modules use the central SAP organizational structures. This ensures the integration of the Treasury system with the other SAP applications.

A client is a closed entity within an SAP System from a commercial, organizational, and technical viewpoint. It has separate master records and its own record of tables. Client data can be used by all company codes and all organizational structures. The client usually represents the corporate group.

A company code (FI) is the smallest organizational unit for which a complete set of accounts can be drawn up for external reporting purposes. The company code is the unit for which you record all the posting activities and generate all the statements for individual accounts (balance sheet, profit and loss account).A client can include several company codes, which enables you to manage the accounts for several independent companies at the same time.

Business areas (FI) are organizational units of internal financial accounting. You manage the payment transactions for G/L accounts here for internal evaluation purposes (internal balance sheet/P&L). You can define business areas across all company codes.

Controlling areas (CO) are organizational units within an enterprise for which you can perform comprehensive cost accounting.

You can make further subdivisions in SAP Treasury by defining Treasury-specific evaluation groups, such as portfolios and securities accounts. You can assign your own financial transactions to portfolios / securities accounts.

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Basic Principles of Transaction Management (1)

USER LEVEL

- Fixed-term deposit

- Forex- CAP/FLOOR- Interest rate swap- Currency swap

:

510 Fixed-termdeposit

600 Forex610 CAP/FLOOR620 SWAP

- Investment- Borrowing- Spot- Forward- Purchase- Sale- Swap

:

100 Investment200 Borrowing

:

10 Contract

11 Rollover:

1 Order-Contract-Settlement

2 Contract3 Contract-

Settlement

SYSTEM LEVEL

Product categoryProduct category Transaction categoryTransaction category Activity categoryActivity category Processing categoryProcessing category

Product typeProduct type Transaction typeTransaction type

Product categories cover the various basic categories of financial borrowing and investment transactions and are used to classify the financial instruments. Product categories are predefined in the system and apply for all company codes. They cannot be modified by the user. Product types represent a refinement of product categories at user level and, unlike the product categories, they are user-defined.

The financial transaction type is fundamental to the processing of financial transactions, since it determines the types of transactions that can be managed with a certain product type. User-specific values for financial transaction types are determined on the basis of predefined financial transaction categories. You can define your own values in the Money Market, Foreign Exchange, Derivatives, and Securities areas. In the Loans area, the transaction types are represented in the system internally.

When you process a transaction, it undergoes a series of activities that are indicated by the activity information. Activity categories are predefined in the system.

You can set up the processing sequence of a financial transaction using processing categories. Processing categories are also predefined in the system and describe the processing steps you have to follow - from entering a transaction through to processing it in accounting.

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Business Partner - Roles and Functions

BorrowerAgent/counterpartyLawyerSurveyor

Naturalperson

Organization

IssuerDepository bankTrusteePayer/payeeAssigning instituteGuarantor

Interested party

Treasury partner

Beneficiary

A business partner is eithera natural personan organization a group of people or an organization in which a business interest exists.

In Treasury, you conclude transactions with business partners. Banks, brokers, or central treasury departments are all examples of typical business partners.

You create a data master record for each business partner.

You can assign several roles/functions to each business partner.A role (= role category) is a specification of the characteristics a business partner must have before certain business transactions can be processed with that business partner. The functions of the business partner in the transaction are defined via business partner roles. Example: A business partner acts as a borrower or a Treasury partner.

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Company code data

Generaldata

Role overviewRole data

Credit standingFiscal data

Reporting dataControlBank

Account managementAccount interest

Autom. pmnt transact.Payment dataDunning data

Reporting dataControl

Relationships

Business partner

Central data

NameAddress overview

Bank detailsPersonal data

Employment dataLegal dataFiscal year

Additional dataRelationships

Business Partner - Data: Overview

The user interface for the business partner data was redesigned as part of the Enjoy project. The new screen layout that uses tab pages now means that you can navigate to the business partner between the individual views. You can still navigate as before using the menu.

The data you can maintain for business partners is divided into three areas: Central data

Data is available for every business partner, regardless of the partner role. General data

Data is held centrally for all roles. Access to this data can vary according to the role category, depending on the settings in Customizing (role-view-assignment).

Company code-dependent data Data that only applies for a particular role category in a certain company code.

Each of these areas is divided into different views:Example: The "central data" area contains 9 views:- Name- Address overview- Bank details- ...

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Traderauthorization

Business partnerauthorizationTrader and business partner

AuthorizationTreasuryTreasury

Money marketMoney market

Fixed-term deposit

51 A Fixed-term deposit100 investment200 borrowing

Deposit at notice

52 A Deposit at notice 100 investment 200 borrowing

Authorization

Business Partner and Trader Authorization

You use transaction authorizations to control which transactions can be concluded with a particular business partner. Business partner authorizations automatically guarantee that financial transactions can only be concluded with business partners that have the necessary authorization. You can assign transaction authorizations at the following levels:

Contract type Product category Product type Transaction type You have to assign authorization explicitly to each business partner in each company code. When you assign transaction authorizations for traders, you can restrict the trading powers to certain

financial instruments (such as money market or foreign exchange), product categories, product types, or transaction types. A higher-level authorization means that a trader is allowed to create any transaction below this level. For example, a trader, who is authorized for the Money Market area, can automatically conclude a fixed-term deposit or a deposit at notice.

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Exercise: Creating a New Business Partner

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Company code IDES AG

Product type Fixed-term deposit EXTERN

Transaction type Investment

Business partner ...

Investment Term

Flow type Principle increase Start

Amount End

Interest structure

Percentage rate

Int. calc. meth.

...

Creating a Fixed-Term Deposit: Structure

Structure StatusManagement Other flows Payment details Cash flow Memos

1000

51A

100

1100

1M UNI -

08/10/YY

++2

2.6

act/360

Tab pages for navigation

When you create a financial transaction, the system automatically generates flows. For example, when you create a fixed-term deposit, the system generates principal increase, nominal interest, and final repayment flows.

The structure tab contains information that relates purely to the product types, such as the amount, term, and interest structure. Here, you can use various key codes for entering amounts and dates (for example, M = million, T = thousand, 0 = today, ++2 = 2 months).

From here, you can branch to the entry screens for general transaction management functions. Using the tab pages, you can navigate between the different screens.

Administration: Information on portfolio assignment, account assignment references for position postings.Other flows: You can add information to the flows generated automatically by the system on the other flows screen (such as charges, commissions).Status: Information on correspondence, activities, release status....

On the payment details tab, you enter the relevant payment details for this transaction. If you have maintained the payment methods as standing instructions, these appear as proposals that you can correct yourself.

As well as the the main flows you enter at the start of term or on the rollover date for fixed-term deposits and deposits at notice, you can enter other changes to the capital structure during the term.

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Entry and editing functions- Standing instructions- Copying functions- Shortcuts and tree structures- Fast entry- Collective/fast processing

Field selection control

Market dataPartner

Transaction partner Transaction partner managementmanagement

Standing instructions

Transaction authorizations Payment details Correspondence Derived flows

Automatic checks- Working day checks- Trader and business partner authorization

Valuation tools- NPV calculator- Option price calculator

Dealing slips Change documents

Optional: OfferOptionalOptional: : OfferOffer ContractContractContract

MarketMarketdatabasedatabase

Trading Support

Traders can use a whole range of practical functions to optimize trading. These include utilities, data entry monitoring functions, as well as other features to make trading easier, such as:

Fast entry screens for the most common transactions. Entry codes (for amounts and due dates) and default values for fields. Proposals for prices/rates and swaps, net present value calculator, multicurrency system. Notebook functions for the trading, back office, and accounting areas. Date check (to determine whether the requested due date falls on a working day). Securities area: option to branch directly to the securities account overview. Option price calculator to enable you to compare the option prices offered with your own calculations

based on market data. Using the field selection control, you can can access the majority of fields and determine which of them

you want to display. You can set up how the display screens for TR Transaction Management appear to suit the business conditions. You group the visible fields into field groups according to the business criteria. You can assign an attribute to each of the field groups available to determine what the user sees. This enables you to hide field groups, display them, or define them as required entries.

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Financial Transactions: Cash Flow

ACTUALACTUAL

Investment 4/1/YY 1m UNI made

Interest 7/1/YY 10,000 UNI anticipated

Repayment 7/1/YY 1 m UNI anticipated

Cash flow (example)Cash flow (example)

TransactionTransactionAmount

invested/borrowed

Amountinvested/borrowed

ConditionConditionPLANNEDPLANNED

Basis for

Updating Cash Management

Updating Financial Accounting using flexible account determination

Payment triggering

Item updating

Accrued/deferred interest

Foreign currency valuation

Yield calculation

The cash flow for financial transactions is used as the basis for all trading, transaction and position management processes, as well as for the evaluation activities within Treasury.

Financial mathematics are used to determine cash flows in Treasury. The system provides a range of formulas based on the "building block principle" that take into account

the flexible organization of the Treasury application. In Treasury Management, application-specific control programs are used to call up central financial

mathematical function modules, for example, to calculate the interest and repayment schedules. On the basis of the conditions belonging to a financial transaction and the specified calculation period,

these function modules for financial mathematics generate and, if required, calculate a series of payment flows for the transaction in the application (for example, stock purchase, swap). This series of flows is known as the cash flow.

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Financial Transaction Architecture

Product type

Transaction type

Business partner

Transfer flow

Valuation flow

Accrual/deferral flow

Flows describingstructure characteristics

Paymentinformation

Postinginformation

Calculationbases

Cur

renc

ies

Bal

. she

et a

cct

Gen. infoGen. info

Inte

rest

Rep

aym

ntConditionsConditions

Cas

h f

low

When you create a financial transaction, the system uses the structure characteristics of the transaction, the conditions types, and the flow types to determine the cash flow. This cash flow contains all the information that is relevant to the transaction in the form of flow records. For instance, the amount invested, the interest payments, or the repayment methods are concentrated in one or more flow records. The transaction cash flow is made up of flow records which can be generated in various ways:

Flows entered manually, such as disbursements or charges.Derived flows generated from the conditions (via the flow types assigned to the condition type) and from flows entered manually. These can be interest flows, repayment flows, accrued interest, or price/rate gains.Flows calculated by special programs. This category includes, for example, write-downs or interest accruals/deferrals.Accruals/deferrals of earnings and expenses generated from transaction expenditures and revenues.Valuation of transactions, for instance, to calculate price gains and losses from foreign currency transactions.

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Condition Types/Flow Types

USER LEVEL

AA - InflowTD - Dividend

InterestRepayment

:

AA - InflowTD - Dividend

Condition group 01: StockCondition group 02: Floater

- Expected dividend- Bonus paid- Variable interest- Repayment- Interest rate adjustment

- Repayment price:

1000 - Purchasesecurity

5013 - Dividend

SYSTEM LEVEL

Condition/Flow categoryCondition/Flow category CalculationCalculationcategorycategory

Flow typeFlow typeCondition typeCondition typeProduct typeProduct type

Transaction typeTransaction type

Condition groupCondition group

Product categoryProduct category

TransactionTransactioncategorycategory

Flow types explain the possible changes to the cash flows. Flows are the basis for generating the cash flow in financial mathematics and are used for valuing the cash flow, further processing, and posting. Typical flow types are fixed or floating interest, increases in nominal amounts, or commissions. Each flow type is assigned to exactly one flow category. However, several flow types can be assigned to the same flow category. For example, the flow types for fixed interest and floating interest are assigned to the flow category "interest".

Cash flows and postings are controlled by two indicators, which you have to assign to each flow type. The flow category controls the way the flow is processed for accounting purposes. The calculation category controls the cash flow processing.

Examples of flow categories include accounting flows, such as inflow (security purchase), outflow (repayment), expense or revenue. Flows relevant for generating the cash flow include security purchase/sale, interest, repayment, or charges.

Condition categories represent the financial mathematical basis of product types and the related financial transactions. They also represent a further classification of flows and conditions, and their related financial transactions. Condition categories are used to interpret the significance of conditions in business economic terms. Examples of condition types include principal increases, final repayments, nominal interest, or different premiums, such as option premiums. You can define your condition types on the basis of the condition categories, and assign them to the respective product type.

(C) SAP AG AC030 42

4.43

SAP AG 1999

Assign planning levels

IDES AG

10/02 10/03 10/03 later10/05

Cash Management: Display Levels

Le

BanksBanksDescription 10/02 10/03 10/04 later10/05

TB Time depositsTime deposits 132,323 xxx,xxx xxx,xxx xxx,xxxxxx,xxx

. . .. . . . . .. . .. . . . . . . . . . . .. . .

OBOB Currency optionsCurrency options xxx,xxx

. . .. . . . . .. . .

DBDB ForexForex

Balance

. . . . . . . . . . . .. . .

1000

Fixed-term deposit51A

Time deposits - banksTB

Contract10

xxx,xxx xxx,xxx xxx,xxx xxx,xxx

xxx,xxx xxx,xxx xxx,xxx xxx,xxx xxx,xxx


Financial Transactions in Cash Management

Each activity (status) within a business transaction (contract, settlement, etc.) is displayed in Cash Management automatically (with the exception of orders). You can view and analyze the activity using a separate level, if required.

When you enter a transaction, the cash flows generated by the transactions (irrespective of whether they have already been posted) can be seen immediately in Cash Management and can be used for planning purposes.

In Customizing, you have to maintain the planning levels at which you want to display your information for G/L accounts and/or subledger accounts. You do this for each of the relevant product types and activity categories (statuses).

If you want to compare the operational data with the Treasury transactions in the context of MRM evaluations (for example, in exposure reports), you must create groupings that do not contain any Treasury transactions.

(C) SAP AG AC030 43

4.44

SAP AG 1999

Exercise: Integrating Trading Functions toCash Management

(C) SAP AG AC030 44

4.45

SAP AG 1999

Cash Flows in Cash Management

Cash flow: Treasury Management

Sept 01 1000- Fixed-term deposit 1,000Oct 01 1120+ Final repayment 1,000Oct 01 1200+ Nominal interest 200

E2 Domestic customers + UNI DB GIRUN- UNI DB GIRUN

Subledger accounts Sept 01 Oct 01 Bank accountsTB Bank deposits/loans - 1000 + 1200 TB Bank deposits/loans

E2 Domestic customers DBGIRUN

Alternative 1

Payment details not known

Alternative 1

Payment details not known

Alternative 2

Payment details known

Alternative 2

Payment details known

Business partnerPlanning groups

Business partner / Financial transactionPayment details and house banks

When you update financial transactions in Cash Management, you have two options:

Alternative 1: If no payment details have been maintained in the transaction, in other words, the bank accounts are not known, you cannot display the cash flow for a bank (clearing) account. However, to enable you to display the cash flow in CM, the system displays the amount relating to the subledger accounts. The system takes the planning group entered in the master record for the business partner.

Alternative 2: If the payment details for a transaction are known, in other words, the bank accounts are known, the cash flow is displayed in CM at the level that is assigned to the corresponding bank (clearing) account.

(C) SAP AG AC030 45

4.46

SAP AG 1999

Collective Processing: Money Market

Overview of money market transactions that correspond to the selection criteria entered

Process the relevant transaction

Create Change Display Roll over Give notice Settle Reverse History

Branch directly to the individual transaction

Connection to the ABAP List Viewer

The collective processing function helps you to manage your transactions systematically by displaying a list of all the transactions with common selection criteria. The list includes key information about each transaction as well as a range of processing functions.

From this processing list, you can branch to the individual transactions. The link to the ABAP List Viewer provides you with a whole range of display options. You can

structure your list by column or row, sort the list, and display totals. You can save these display variants and use them later on.

When you have finished processing a transaction, a processing indicator is set.

(C) SAP AG AC030 46

4.47

SAP AG 1999

Transaction Management: Worklist and Collective Processing

Processing financial transactions for all product categories

Managing financial transactions for specific users

Selecting and displaying Treasury transactions

Branching to individual processing for transactions

Displaying transactions using the ABAP List Viewer

You can process financial transactions for all the following product categories: Fixed-term deposits and deposits at notice Commercial Paper Cash flow transaction Spot/forward exchange transaction Interest derivatives OTC options Futures Securities

You can store any number of selections as variants and manage them in collective processing in a tree view for specific users or for all users.

The display variant controls the layout of the list. You can store the following information in a display variant: Column layout Sort criteria

(C) SAP AG AC030 47

4.48

SAP AG 1999

Money Market - Fast Processing

Deuba UNI

1000 1

1,000.000 2.700 03/24/YY Payment Deutsche Bank

51A 100 Fix.-term

Deuba UNI

1000 2

10,000,000 2.900 03/25/YY Deutsche Bank

Deuba UNI

1000 3

5,500,000 2.800 03/25/YY Deutsche Bank

51A 100 Fix.-term

51A 100 Fix.-term

Total amount Int. rate End of term Int./Rollover Cap. Partner

New New New New New PTyp TTyp Name

Fixed-term deposits invested

Deposits at notice invested . . .

Partner Currency

CoCd Transaction

Payment

Payment

When you use the Fast processing function, which lists a short overview of fixed-term deposits and deposits at notice, you can add amount data, the interest rate, and the new end of term.

This function enables traders to process the transactions they want to roll over or give notice on much more easily.

This Fast entry function is restricted to certain key fields. It helps you save time by enabling you to carry out the majority of the repetitive daily tasks on one screen.

The fast-processing function for time deposits enables you to select and process fixed-term deposits and deposits at notice for several company codes in one step.

(C) SAP AG AC030 48

4.49

SAP AG 1999

1. Specify release procedure

2. Define release conditions

3. Assign roles / users

SAP Business Workflow

To use the workflow to release transactions, you must define release procedures and conditions, as well as assign roles and users.

Which procedure you choose depends on the settings you have made in Customizing for the company code, the product type, and the transaction type. You define release procedures and conditions for this purpose.

In the release conditions screen, you enter the number of release steps and indicate whether a release is necessary for the particular activity category and activity.

The Release steps field determines how many people have to release the object to complete the release (for example: dual-control principle - 1 employee, 1 person responsible for release).

You are free to set up the release restrictions yourself (for example, you can specify whether processing is permitted during the release process).

You have to create the users in the system for the individual approvals. You have the option of creating several users/positions who should be notified in cases where deadlines have been missed.

You can also display a reporting overview that shows you which release was processed, when it was processed, and by whom, for each Treasury transaction.

(C) SAP AG AC030 49

4.50

SAP AG 1999

Transaction and Position Management Process: Example of a Fixed-Term Deposit




PostingsPayment transactionsAccruals/deferralsValuationReversals

Release


The back office area includes functions for controlling and changing transactions. When you settle a transaction, you also complete it and check it.

You settle a contract in the back office area and can add any information that is relevant for posting and payment.

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

If a transaction has the activity category "WITH settlement activities", you can only post the contract after it has been settled.

The characteristics for a specific company are based on modelling these types of activity chains, where the processing sequence of transactions is managed by activity categories or status transfers.

(C) SAP AG AC030 50

4.51

SAP AG 1999

Back Office

CorrespondenceCorrespondence

Accounting

Collective processing Netting Referencing Interest rate changes Securities account

transfers Capital change

activities

Confirmation management(incoming/ outgoing)

Payment details

Curr. Bank Acct

. . . . . . ...

Settlement/control Payment details

Back officeBack office

Confirmation Confirmation

ManagingManagingpositionspositions

TransactionTransactionprocessingprocessing

Depending on the structure of your company, you can transfer financial transactions you have entered in the Trading area to the Back office area. The back office area includes functions for controlling and changing transactions. The key aspects of postprocessing are as follows: Adding transaction data to include other data that is relevant for processing. Preparing postings and payments, for example, controlling the accounts that are used later in the

automated processes. This is your last opportunity to assign an account assignment reference and payment details to your transaction.You need this information to be able to post the Treasury flows to Financial Accounting (see account assignment reference).

Generating Correspondence in the form of dealing slips, confirmation letters, or confirmation files. Position management tasks, such as securities account transfers.

When you save a settlement activity, the system changes the activity category of the transaction in order

to record how it is monitored and processed in the back office area.

(C) SAP AG AC030 51

4.52

SAP AG 1999

Business partner ABusiness partner ABusiness partner A

Payment detailsPayment details

Assign Assign

CorrespondenceCorrespondence Derived flowsDerived flows

Assign

- Derivation procedure- Confirmation - Print- Fax- SWIFT, IDOC- E-mail

- Counterconfirmation

- House bank and related bank account

- Business partner bank details

Business Partner - Standing Instructions

Payment details include all the information that is relevant for processing payments. These include the details of your own (house bank) account and any bank details for the business partner.You can enter different payment details for each currency and for each business partner.You assign any payment details that you might want to use to the relevant transactions as standing instructions. Here, you can also assign the payment details to the contract type and product category levels, through to the transaction type level.When you conclude a transaction with business partner A, the system automatically takes the payment details assigned to this type of transaction in the standing instructions. This saves you a lot of time.

The standing instructions for correspondence control how external correspondence, i.e. the correspondence with a certain business partner should be generated.Here, you specify (from contract type level through to transaction type level) whether you want the correspondence with this business partner to be generated in print form, sent by fax, e-mail, IDoc, or by Swift. These entries are absolutely necessary if you want to generate correspondence with a business partner.

Derived flows are used in the Money Market, Foreign Exchange, and Derivatives areas to make it easier to calculate taxes. To do this, you have to assign a relevant derivation procedure to your business partner.

(C) SAP AG AC030 52

4.53

SAP AG 1999

Correspondence

E.g. Confirmation letters, via fax, e-mail, SWIFT, IDOC

Fax

E.g. Dealing slips

External Internal

Confirmation Confirmation

Correspondence is a means of recording and matching the transactions you have concluded. You can define your correspondence using either internal (e.g. dealing slips) or external (e.g.

confirmations) correspondence types. This allows you to confirm all the transactions you have concluded with a business partner over a certain period of time in one correspondence run. You can either print out the data or send it directly from the system by telefax. You also have the option of sending the confirmation by e-mail or IDoc. To send e-mails, the communication interface SAPconnect must be set up. The correspondence function supports the generation of SWIFT files MT320 for fixed-term deposits and MT300 for foreign exchange transactions. With the help of a user exit, you can use FX match for outgoing confirmations (only MT320).

You control the timing of the correspondence in Customizing for product types, transaction types, and activities. You can also specify whether you want the correspondence to be generated automatically when you create, change, or reverse a transaction, in other words, when you save it. Correspondence that has been generated is stored in the financial transaction data.

The confirmation status (that is, the information about the time, the activity, the processor, the form used, and the output medium for incoming and outgoing confirmations) is recorded in the transaction.

(C) SAP AG AC030 53

4.54

SAP AG 1999

Business Partner: Standing Instructions - Correspondence

Correspondence

Print Fax SWIFT ... C. address CConf.

BP ABP A

Correspondence type: external

Assign

TreasuryTreasury


Fixed-term dep.

51 A Fixed-term dep.100 Investment200 Borrowing

Deposit at notice

52 A Deposit at notice100 Investment200 Borrowing

Additional standing instructions determine the handling of correspondence with a certain business partner. You can set up external correspondence types for a particular business partner using standing instructions for correspondence. You set up internal correspondence types for all business partners.

Correspondence is normally sent to the regular address of the business partner. If you correspondence to be sent to a different address, you must enter it in the "Address ID" field.

(C) SAP AG AC030 54

4.55

SAP AG 1999

Standing Standing instructionsinstructions

Current Paymentdetails ID

Payer/payee

Partnerbank ID

Pmntmeth.

Paymentactivity

Housebank

AcctID

UNI 01 2 UXBank1 GIRUN

USD 01 Bank1 GIRUS

COUNTER-PARTY

...... Paymentrequest

Individualpayment

Samedirection

Pmntmths

Groupdeterm.

Determinegrouping (text)

...... X X X EUS

X...... EUS

......

......

......

Business Partner - Payment Details (1)

The system uses the standing instructions to default to the payment details to be used. These include proposals for the house banks you want to use, to save you from having to enter them manually in the trading or back-office areas. They also include the triggering of automatic payment activities to ease your workload. The system either uses the business partner bank details you defined for the business partner, or you enter them manually in the transaction. In the same way, you can also enter the payment details for payers/payees if they are not the business partner. Using standing instructions, you can make other settings for the payment and posting logic (for customer accounts or G/L accounts).

You can define a number of possible payment details for each business partner and for each currency. The system identifies valid payment details using a Payment details ID that you are free to assign together with a currency.

In the House bank and Account ID fields, you enter your own house bank data. If the payment involves a payment activity or payment request, you enter the Payer/payee so that the

system can use the payment program to generate the corresponding payments. Otherwise the postings are made to the G/L accounts defined in the account determination. If you explicitly want to choose a bank account for the counterparty, you must specify a Partner bank ID here. You define this partner bank ID in the business partner master record.

(C) SAP AG AC030 55

4.56

SAP AG 1999

Business Partner - Payment Details (2)

Paymentdetails

Incoming Outgoing

TreasuryTreasury


Fixed-term dep.

51 A Fixed-term dep.100 Investment200 Borrowing

Deposit at notice

01 01x x

Assign

Currency Paymentdetails ID

Housebank

AccountID

UNI 01 Deuba GIRUN

USD 01 Deuba GIRUS

......

......

......

Business partnerBusiness partner:: Standing instructionsStanding instructions -- Payment detailsPayment details

......

......

......

BPBP AA

......

......

......

Assignments are a means of controlling which payment details are valid for the respective transaction types. The assignment can differentiate between incoming or outgoing payments either at product category level, product type level, or transaction type level. Example: When you create a fixed-term deposit in UNI, the system uses the payment details 01.

The system uses the house bank and the account ID defined in the payment details for the business partner to determine the bank account to which the posting is being made.

It is vital that you assign payment details once you have created them. This means that you can manage different products and/or different directions in separate accounts. The system supports multi-level payment methods. By entering a bank chain, you can process payments

via several banks. You can use up to 3 intermediary banks.

(C) SAP AG AC030 56

4.57

SAP AG 1999

Transaction Settlement / Control

Account assignment reference

DB000001 Deutsche BankFixed-term deposit

G/L account: 113113

Zahlungs-verbindungs-ID

Regu-lierer

Partner-bank-ID

Zahl-weg

Zahlungs-vorgang

Haus-bank

Konto-ID

01 DB GIRO

01 DB USD

Company code 1000 Product type 51A Fixed-term depositTransaction type 100 Investment

D Curr. Effective FType HBank Acct ID Pmnt Pmnt req.

- UNI Deuba GIRUN + UNI Deuba GIRUN

Transaction: Payment details

Depending on the structure of your company, you can transfer financial transactions you have entered in the Trading area to the Back office area. The back office area includes functions for controlling and changing transactions. The key aspects of postprocessing are as follows:

Generating correspondence in the form of dealing slips, confirmation letters, or confirmation files. Adding transaction data to include other data that is relevant for processing. Preparing postings and payments, for example, controlling the accounts that are used later in the

automated processes. This is your last opportunity to assign an account assignment reference and payment details to your transaction. You need this information to be able to post the Treasury flows to Financial Accounting (see account assignment reference).

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

(C) SAP AG AC030 57

4.58

SAP AG 1999

Exercise: Confirmation Management and Control Functions in the Back Office Area

(C) SAP AG AC030 58

4.59

SAP AG 1999

Transaction and Position Management:Example of a Fixed-Term Deposit




PostingsPayment transactionsAccruals/deferralsValuationsReversals

Release


After you have entered your transactions at the Trading stage, and checked and completed them in the Back office, they are processed for accounting purposes. Accounting functions include the transfer of data to financial accounting (such as posting programs, or position management posting), where the Treasury component makes use of functions in SAP Financial Accounting. Financial transactions and positions in the closing activities must also be correctly handled. The accounting area includes functions such as the accrual/deferral of expenses and revenues for a particular accounting period, and valuation activities.

You can only post transactions that have reached either contract or settlement status (depending on the processing category) at internal level (system level).

If you do not want to post the flows for a particular transaction for the time being, you can block these flows for posting.

(C) SAP AG AC030 59

4.60

SAP AG 1999

Accounting

Fixed-term deposit 1 month 4.5

Financial AccountingFinancial Accounting

FI interfaceSelection of transactions and flows relevant for posting

Sept 01 1100 - Fixed-term deposit 1,000,000

Oct 01 1120 + Final repayment 1,000,000

Oct 01 1200 + Nominal interest 3,750

The Treasury information that is relevant for posting is transferred to Financial Accounting via an interface. The posting logic is based on the flow types generated and the account assignment reference that belongs to the transaction as well as the user-specific account determination.

As a rule, you can post the individual flows via G/L accounts or to customer accounts. If you want to actively trigger the payment activities, you can use the FI payment program on the basis of the postings to the customer accounts. You also have the option of using an extended payment program for payment requests via which active payments can be made on the basis of postings via non-customer accounts. In this case, payment requests are first generated in Treasury and are paid later either individually or jointly via the TR payment program. You have the following four posting options:1. G/L accounts without payment requests: Flows are posted to bank clearing accounts and cleared via manual or automatic bank statements. 2. Customer accounts without payment requests: Flows are posted to customer accounts and cleared by active payment triggering via the FI payment program. The bank clearing accounts to which postings have been made are cleared by the bank statement.3. G/L accounts with payment requests 4. Customer accounts with payment requests: A payment request is generated for each flow and posting is triggered by the payment requests clearing account or customer account. The subsequent payment run makes postings to the bank clearing accounts.

(C) SAP AG AC030 60

4.61

SAP AG 1999

Payment Transaction Handling

House bankDEUBA

IDES

Fixed-term deposit investment

Bank statement

... using clearing accounts

Fixed-term dep. account(Deuba)

House bank account(Deuba)

100 m 100 m

Fixed-termdepositinvestment

Bank clearing account

100 m 100 m

Physical payments are not generally made for financial transactions concluded with business partners who are also the company's house bank.

Instead, the corresponding flows are posted to the bank account by the business partner. The flows from Treasury Management that are 'preposted' via the bank clearing accounts are then cleared again by the electronic bank statement.

(C) SAP AG AC030 61

4.62

SAP AG 1999

Postings: Account Assignment Reference

Fixed-term deposit Date Sept 01

1,000,000.00 Term 1 monthNominal interest 3.5%Deutsche Bank

UNI

Acct ass.ref. Short text

DB000002 Deutsche Bank deposit at notice

DB000001 Deutsche Bank fixed-term deposit...

DetailsDetails

Business areaCost center

General ledger

.

.

113113

Company code 1000

The Account assignment reference controls the G/L account (balance sheet account) to which the current transaction should be posted. You can structure the balance sheet differently using different account assignment references.

Besides entering the account for managing your positions in the account assignment reference, you can also assign a cost center (only relevant for posting category 4) and a business area to the account assignment reference.

The account assignment reference function is part of the account determination function, which you can set up according to the currency and/or the account assignment reference. This flexibility enables you to structure postings in different ways. For example, in the account determination for revenue and expense postings in the Securities area, you can see (according to the account assignment reference) whether affiliated or non-affiliated companies issued the respective securities.

In the Money Market, Foreign Exchange, Derivatives, and Loans areas, you enter the account assignment directly in the relevant transaction. In the Securities area, you enter the account assignment reference in the respective position indicator.

(C) SAP AG AC030 62

4.63

SAP AG 1999

Customizing: Account Determination

Money Market

Functions

Define SettingsCheck

Accounting

Account Determination

Application 0105 Treasury: Money market

Flow type Payment transactn1100 +

Direction - CompDebitCreditDocument type

40 1 Balance50 3 Bank clearing

.SA Posting cat. 13

Posting specifications

Application 0105 Treasury: Money market

Chart of accts INT Sample chart of accounts

Acct symbol Acct assignment ref. Currency G/L account

34.1.14.1.34.2.24.2.34.2.4

++++++

++++++

++++++++++5273100220000479100465000465001

Account assignment

Accounts Symbols

Chart of accounts

Acct symbol Description

...

3 Bank clearing

4.1.1 Interest received

...

Account symbols

You define the account determination for the relevant application in Customizing.

The account determination function specifies which accounts are used for posting activities. It includes the posting specifications, the account symbols used for these, and the accounts assigned to the symbols.

The following requirements must be met before you can post a transaction to Financial Accounting:

- You must have created all the accounts you need and set them up correctly.- The document types must appear in the document types table and allow the required account types to be posted.- The number range linked to the document type must have internal number assignment in Financial Accounting- The posting period must be open for posting.

(C) SAP AG AC030 63

4.64

SAP AG 1999

Fixed-term deposit 1 month 4.5% Acct assignment ref. DB000001

Sept 01 1100 - Fixed-term deposit 1,000,000

Oct 01 1120 + Final repayment 1,000,000

Oct 01 1200 + Nominal interest 3,750

Fix.-term dep.acct 113113

Deposit

Finalrepayment

D1,000,000

C

1,000,000

Balance sheet accountacc. to acct assignment reference

Interest earned 273100

Nominalinterest

D C3,750

Bank clearing acct 113105

FT depositNominal int.Finalrepayment

D C1,000,000

3,750

1,000,000

Deb.bal.sheet Credit bank

Debit bank Credit bal.sheet

Debit bank Credit int. earned

Flow type

Posting specifications

1100 -

1120 +

1200 +

Posting a Transaction: Summary

When you process financial transactions (money market, forex, derivatives, securities, loans), they become business transactions that have to be entered in the accounting system. These automatic postings and the related offsetting entries on FI accounts may be carried out online.

The posting specifications you enter determine how individual business transactions are posted. In the posting specifications you define the rules for posting and for account determination for each flow type when you configure the system.

The flow type determines the correct posting specifications for each flow 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 that is passed on directly to the financial accounting module. In addition, the posting category and the account symbols in the posting specifications contain the relevant information for determining the concrete G/L and subledger accounts via the Treasury posting interface.

From the display screen for an accounting document (for example, FI document), you can see where the posting originated in Treasury. To do this, choose Original document from the Environment menu (Display document, transaction FB03) on the display screen for the FI document in the general ledger. The system displays an overview of the flows in Treasury, which resulted in postings to FI.

(C) SAP AG AC030 64

4.65

SAP AG 1999

Treasury Management and Cash Management

Fixed-term depositFixed-term deposit Via activity atfixed-term deposit level

Via activity atfixed-term deposit level

Change toclearing accounts

Change toclearing accounts

Change tobank account level

Change tobank account level

Clearing entry viaaccount statementClearing entry viaaccount statement

Post flows toclearing account

Post flows toclearing account

The example above represents an ideal workflow describing how Treasury Management and Cash Management interact with each other and also showing how postings are made to Financial Accounting.

As a rule, payments are triggered by the business partner (bank) and processed further by electronic bank statements in Cash Management.

(C) SAP AG AC030 65

4.66

SAP AG 1999

Transfer to Financial Accounting -Logical Process


IDES AG1000

Fixed-term deposit51A

Time deposits - banksTB

Contract10

10/02 10/03 10/03 later10/05


Le

BanksBanksDescription 10/02 10/03 10/04 later10/05

TB Time deposits 150,000 xxx,xxx xxx,xxx xxx,xxxxxx,xxx

. . .. . . . . .. . .. . . . . . . . . . . .. . .

B5B5 ClearingClearing 150,000

. . .. . . . . .. . .

F0F0 BanksBanks

Balance

. . . . . . . . . . . .. . .

xxx,xxx xxx,xxx xxx,xxx xxx,xxx

150,000 xxx,xxx xxx,xxx xxx,xxx xxx,xxx


Each activity (status) within a business transaction (contract, settlement, etc.) is displayed in Cash Management automatically (with the exception of orders). You can view and analyze the activity using a separate level, if required.

When you enter a transaction, the cash flows generated by the transactions (irrespective of whether they have already been posted) can be seen immediately in Cash Management and can be used for planning purposes.

In Customizing, you have to maintain the planning levels at which you want to display your information for G/L accounts and/or subledger accounts. You do this for each of the relevant product types and activity categories (statuses).

Example: Concluded time deposits transaction: TB level - time deposits

(Pre)posted time deposits transaction: B5 level - bank clearing account

After receipt of bank statement: F0 level - bank account

(C) SAP AG AC030 66

4.67

SAP AG 1999

Exercise: Posting Due Flows to FI and Evaluating them in Cash Management

(C) SAP AG AC030 67

4.68

SAP AG 1999

Payment Transaction Handling

1st fixed-term deposit

2nd fixed-term deposit

...using a clearing account for payment requests

Fixed-term depositaccount (broker)

House bankaccount (Deuba)

100 m 150 m

Paymentorder

Payment requestclearing account Bank clearing account

150 m 150 m

50 m

100 m

50 m 150 m

Payment (trigger paymentrequest run)

Bank statement

Payment

Fixed-term deposit

IDES

House bankDEUBA

BrokerBroker

If you conclude transactions with a business partner with whom you do not have a house bank account, you can generate payment requests. This option applies in cases where the payment details of the business partner are known, but 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 when to use the payment program:- You conclude several transactions with a business partner that is not a house bank;- When you post to the fixed-term deposit account, you generate payment requests at the same time- All transactions are managed on 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- At the same time, a payment medium is generated that is passed on to the house bank- When the bank statement is received, the payment amount is posted to the bank account the following day

(C) SAP AG AC030 68

4.69

SAP AG 1999

Posting using the Payment Program

Current parameters

Advicenote

Bank transfer

Eurocheck

Check

Proposal data setProposal data set

Print data setPrint data set

Paymentsummary

IDOC

Proposal runProposal runProposal run

Payment runPayment run

Edit proposal

Payment control

Documents

PaymentrequestMasterMaster

Print programPrint programPrint program

Together with the account determination function in the Treasury posting interface, you can control whether payment activities involve a flow of funds.

The payment program can do the following:

- Automatically select the requests to be paid- Create payment lists and logs- Create payment documents (customer / vendor / G/L accounts)- Create payment medium (forms / advice notes / disks).

As a rule, you first activate the payment proposal run. This creates a proposal data set, which you can check and process before you perform the actual run.

There are two different payment programs depending on the task you are performing: - The standard payment program from FI which settles open items from the accounts receivable/payable area. - The enhanced payment program which also allows you to make postings via G/L accounts, as well as via customer/vendor accounts.

(C) SAP AG AC030 69

4.70

SAP AG 1999

Linear, pro rata temporis

Pro rata interest

Financial mathematics

Linear, pro rata temporis

Pro rata interest

Financial mathematics

Difference procedure

Reset procedure

Difference procedure

Reset procedure

Accrual/deferral Accrual/deferral proceduresprocedures

Accrual/deferral Accrual/deferral methodsmethods

Accrual/Deferral Procedures and Methods

To reflect the earnings of a given period correctly in the balance sheet, they have to be assigned to the correct accounting period, irrespective of when they are due for payment. You use the accrual/deferral function to calculate the expenses (outgoings) and revenues (incomings) for a period on a certain key date/period-end closing (for example, at the end of a fiscal year).

The accrual/deferral method describes how the amount to be accrued/deferred is calculated. You use the financial mathematical accrual/deferral method, for example, for Commercial Paper. The accrual/deferral procedure, on the other hand, describes how the amount to be accrued/deferred is updated to the expenses and revenues accounts.

You use the difference procedure to transfer any expenses and revenues that have arisen since the last accrual/deferral run and the present accrual/deferral run from the accruals/deferrals accounts to the related income statement accounts.The reset or accumulation procedure adjusts the income statement accounts on the accrual/deferral key date by the amount of accrual or deferral calculated, and subsequently resets the adjustment.

(C) SAP AG AC030 70

4.71

SAP AG 1999

Interest Accruals/Deferrals: Customizing

When you define a flow type, you indicate whether a flow is relevant for accrual/deferral

You enter the accrual/deferral procedure (reset or difference) and the resulting flow types for each flow when you define accruals/deferrals

Difference procedure: Accrued/deferred interest remains the same

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 reset)

The accrual/deferral is based on the flows of the business transactions selected. The main variables for calculating the amount are the accrual/deferral period and the flow types that are indicated as being relevant for accrual/deferral.

Accrual: "A future income/expense, which is assigned to the accrual/deferral period on a pro rata basis". These types of income/expense may not legally appear as accruals/deferrals on the balance sheet (for example, receivables to income).

Deferral: "An already due income/expense, which is assigned to the accrual/deferral period on a pro rata basis". The amount is transferred from the expense/income account to the prepaid expenses/income account" (prepaid expenses to expense account and income account to prepaid income).

(C) SAP AG AC030 71

4.72

SAP AG 1999

Exercise: Interest Amount Accruals/Deferrals at Year End

(C) SAP AG AC030 72

4.73

SAP AG 1999

Transaction History

History: Activity sequenceHistory: Activity sequence

Activity Act. category Date Active status

SettlementSettlement

Administrative Data

CoCdPTypTTyp

000151a100

SAP AGTrans.ActivityAct.cat.Order

47111Basic Data

CoCdPTypTTyp

000151a100

SAP AG TransactionActivityAct.cat. Order

47111

Administrative Data

CoCdPTypTTyp

000151a100

SAP AG Trans.ActivityAct.cat.Contr.

47111Basic Data

CoCdPTypTTyp

000151a100

SAP AGTrans.ActivityAct.cat. Contr.

47111

Verwaltungsdaten

BukrPartGart

000151a100

SAP AG GeschäftVorgangVorg.Typ Prol.

47111Grunddaten

BukrPartGart

000151a100

SAP AG GeschäftVorgangVorg.Typ Prol.

47111

Verwaltungsdaten

BukrPartGart

000151a100

SAP AGGeschäftVorgangVorg.Typ Abrech.

47111Grunddaten

BukrPartGart

000151a100

SAP AGGeschäftVorgangVorg.Typ Abrech.

47111

10/01/YY

10/02/YY

10/31/YY

1

2

4

3

Order

Contract

Rollover

Settlement 10/02/YY

Replaced

Replaced

Replaced

5

Replaced

30.11.JJ

5 Settlement Active

. . .. . . . . . . . .

OrderOrder ContractContract RolloverRolloverSettlementSettlement

Administrative Data

CoCdPTypTTyp

000151a100

SAP AGTrans.ActivityAct.cat. Sttlmnt

47111Basic Data

CoCdPTypTTyp

000151a100

SAP AGTrans.ActivityAct.cat. Sttlmnt

47111

11/30/YY

Use the history function to display the activity sequence for a particular transaction. You see a list of activities, which are either active, reversed, or have been replaced by a follow-up activity.

The transaction history enables you to trace each activity (status) and the corresponding details.

The system also stores the main changes to transactions in change documents. This records which user changed/corrected the structure characteristics of a transaction at a particular time.

(C) SAP AG AC030 73

4.74

SAP AG 1999

Managing Currency Risks in Cash Management using Foreign Exchange Transactions

This unit focuses on analyzing the currency side of forex transactions, and displays the currency situation both in UNI and USD. The UNI and USD sides should be viewed both separately and jointly in Cash Management.Unlike the Market Risk Management evaluations described later, these analyses only include fixed cash flows. It is clear that the existing cash flows represent a risk if the USD exchange rate changes. Forward rate transactions are concluded to illustrate how these currency risks can be influenced. In this case too, the UNI and USD sides must be analyzed both separately and jointly.

Liquidity Management in the Short and Medium Term: Foreign Exchange Scenario (1)

(C) SAP AG AC030 74

4.75

SAP AG 1999

Liquidity Management in the Short and Medium Term: Foreign Exchange Scenario (2)

Managing Currency Risks in Cash Management using Foreign Exchange Transactions

In the example, the initial situation in Cash Management is outlined, the foreign exchange transactions are then concluded, and the impact on Cash Management is explained. To be able to draw up the balance sheet, your company needs to calculate the (un)realized gains and losses from foreign currency transactions. The procedure typically used for key date valuations and for determining the related unrealized gains/losses is described using forward exchange transactions as an example. Finally, you will learn how to calculate realized gains and losses after a forward exchange transaction has been concluded.

(C) SAP AG AC030 75

4.76

SAP AG 1999

Foreign Exchange: Product Types

Product types


Forex spotdeals

Forwardexchangedeals

Forex swaps

Hedging instrumentsInvestment/borrowing

instruments

The integration of Cash-, Treasury, and Market Risk Management allows you to analyze the effects of forex trading on the liquidity situation of your company as well as the resulting currency risks. The current market data is supplied by means of realtime datafeed.

Forex trading incorporates the following product types:Spot exchange and forward transactionsForex swap transactionsOTC currency options

Currency options are handled in derivative financial transactions.

(C) SAP AG AC030 76

4.77

SAP AG 1999

Creating an Order: Forward Exchange Transaction

Purchase Sale

Currency Currency

Amount Amount

Rate/Value date

Rate Invers

Spot

Swap

Liquidity

Value date

Contract data

Contract date Trader

Contact person External ref.

1,000,000.00

USD UNI

1.82

++2

09/29/YYYY

Current rate !!

Company code1000 IDES AG

Product type60AForexEXTERN

Transactiontype102Forwardtransaction

PartnerDeuba...

...

You enter the order data on this screen. The execute order activity assigns the contract status to the transaction.

(C) SAP AG AC030 77

4.78

SAP AG 1999

From To RatioITL UNI 1000 : 1

1 = Current rateM = Middle rateG = Bid rate

Currency Cal. IDCurrency Cal. ID

UNIUNI 0101

L curr. F curr.L curr. F curr.ITLITL UNIUNI

CURRENCYCURRENCY

Rate types

Translation ratios

CalendarCalendar

Leading Leading currenciescurrencies

Enterexchange rates

ExRT Frm To Dir.quot.M ITL UNI 1.20

Currency Master Data

You use the rate type to define exchange rates for different purposes on the same date in the system. The system uses rate type 'M' for currency translation when you post and clear documents. This rate type must be entered in the system.

The translation ratios indicate the units of measure in which you interpret the exchange rates entered.Example: A rate entry for ITL in UNI with the above translation ratio means:

1000 ITL costs x UNI costs x UNI When you enter exchange rates, the system uses the relevant Customizing tables when you choose

Environment - Market data - Manual market data entry in the application.To enter an exchange rate, you enter a rate type, a currency pair, and the valid-from date. In the example above, the middle rate is 1.20 Uni for 1000 Italian Lire.

Treasury-specific settings affect the calendar and the leading currencies:- Calendar: You assign a calendar to each currency. When you enter a transaction, the system carries out a working day check for the calendar assigned to the transaction currency.- When you enter an exchange rate in the transaction, for example "1.20", the system determines whether to read the rate as 1.20 Uni (following currency) for Italian lire or as Italian lire for Uni. It does this according to how you defined the leading currency and following currency.

(C) SAP AG AC030 78

4.79

SAP AG 1999

Market Data: Exchange Rates

Change View “Currency Exchange Rates”: OverviewChange View “Currency Exchange Rates”: OverviewTable view Edit Goto Choose Utilities System Help

11:03 AMOVRhs9011DIS(1)

Entry 1 of 264Position

To Exch.rateValid from Translation ratiosExRt From

B ATS UNI 08/01/YY 0.14220 1 : 1B ATS UNI 07/01/YY 0.14280 1 : 1B ATS UNI 01/01/YY 0.14000 1 : 1B ATS FRF 07/01/YY 0.55000 1 : 1B ATS GBP 01/01/YY 0.50000 1 : 1B BEF UNI 02/28/YY 4.86000 100 : 1B BEF UNI 08/08/YY 0.05000 1 : 1B BEF UNI 01/01/YY 1.10000 1 : 1B CAD ATS 05/01/YY 15.33000 1 : 1B CAD AUD 05/01/YY 1.56000 1 : 1B CAD BEF 05/01/YY 39.46500 1 : 1B CAD CHF 05/01/YY 1.77000 1 : 1... ... ... ... ... ... ...

New entries Var. list

The rate type indicates whether the exchange rates entered are, for example, bid rates, middle rates, or ask rates.

The rate with the most recent valid from date (before today's date) is interpreted as the current rate.

(C) SAP AG AC030 79

4.80

SAP AG 1999

Datafeed Architecture

SAP R/3 Datafeed providers

selective refresh

request

req

ues

t

reply Internet/ RFC

TR applications

Informationsproviders

Externalinterfaceprogram Datafeed

LogDatafeedserver

Translation table

Marketrisk

mgmt.Securities Forex . . .

operativeSAP tables

reply

Marketdata

buffer

In Treasury, you can import data (such as security prices, exchange rates, interest rates, volatilities) to SAP tables or to the market data buffer using the datafeed function. The data you save in the market data buffer is overwritten when you call up the datafeed function again.

A translation table ensures that the SAP internal names are assigned to the notations used by the external data provider. A variety of tools support the automatic maintenance of this table.

You can call up data synchronously or asynchronously. When you call the data synchronously, you are connected to the data provider until the requested data is imported. If you call up the data asynchronously, the connection to the data provider is interrupted once the market data request has been sent. It is only reactivated when the data provider is ready to supply the requested information.

(C) SAP AG AC030 80

4.81

SAP AG 1999

Exercise: Managing Currency Risks in CashManagement using Forex Transactions

(C) SAP AG AC030 81

4.82

SAP AG 1999

Foreign Exchange in Cash Management


IDES AG IDES AG 1000

Foreign exchangeForeign exchange60A

Forex banksForex banksDB

ContractContract20

10/02 10/03 10/03 later10/05


Lev

Banks Banks

Description 10/02 10/03 10/04 later10/05

TB Time deposits xxx,xxx xxx,xxx xxx,xxx xxx,xxxxxx,xxx

. . .. . . . . .. . .. . . . . . . . . . . .. . .

OBOB Currency optionsCurrency options xxx,xxx

. . .. . . . . .. . .

DBDB ForexForex

Balance

. . . . . . . . . . . .. . .

xxx,xxx xxx,xxx xxx,xxx

123,456 xxx,xxx xxx,xxx xxx,xxx


E.g. forwardexchange transactionsE.g. forwardE.g. forwardexchange transactionsexchange transactions

Inflow in foreign currencyInflow in foreign currencyInflow in foreign currency

DBGiroDBGiro - 1.48 m UNI- 1.48 m UNI

Outflow in local currency Outflow in local currency Outflow in local currency

DBUS$DBUS$ +1.00 m USD+1.00 m USD

Display accountsDisplay accountsDisplay accounts

xxx,xxx

xxx,xxx

Each activity (status) within a business transaction (order, contract, settlement, etc.) is displayed in Cash Management automatically. You can view and analyze the activity using a separate level, if required.

Such a function is particularly useful for cash managers for planning purposes. They can view the cash flows from Treasury transactions whose value date is known, even if the flows have not yet been posted.

In Customizing, you have to enter the planning levels at which you want to display your information for the G/L accounts and/or subledger accounts. You do this for each of the relevant product types and activity categories (statuses). This enables you to display a contract, for example, at different levels depending on the particular activity.

When you display foreign exchange transactions, such as forward rate transactions, you have to make sure that there is an inflow on one currency side and an outflow on the other. If you first perform evaluations according to levels (for example, at forward exchange transaction level), you should only see the difference between the two currency amounts. You only see the incoming or outgoing cash flows on the individual currency accounts when you branch to the accounts.

(C) SAP AG AC030 82

4.83

SAP AG 1999

Netting and Payment Requests

Administrative Data

CoCdPTypeTType

000151a100

SAP AG TransactionActivityAct.cat. Contract

47111Basic Data

CoCdPTypeTType

000151a100

SAP AG TransactnActivityAct.cat. Contract

47111

Administrative Data

CoCdPTypeTType

000151a100

SAP AG TransactnActivityAct. cat. Sttlmnt

47111Basic Data

CoCdPTypeTType

000151a100

SAP AG TransactnActivityAct.cat. Sttlmnt

47111

NettingNetting

Create Netting Transaction: Data

Cat.No.Partn

KMP001DB

Netting

Deutsche BankVal.dte 01/01/YY

PostingPosting

Treasury: Posting of Flows

TestmandantWalldorf

Treasury: BuchungenProtokoll

TRTRTRTR

NettingNettingAccountsAccounts

FIFI PaymentPaymentrequestsrequests

FIFI

SettlementSettlementContractContract

TransactionsTransactions

Netting is a special form of joint payment of transactions. As a rule, all transactions can be paid jointly. Netting represents a specific part of these transactions.

The decision to create a netting transaction is not usually taken until shortly before the due date of cash flows. This normally takes place the 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.

You can group flows together in netted transactions provided they have

the same company codethe same business partnerthe same payment datethe same payment methods

and other payment program criteria

(C) SAP AG AC030 83

4.84

SAP AG 1999

Exercise: Active Liquidity Management using Netted Money Market and Forex Transactions

(C) SAP AG AC030 84

4.85

SAP AG 1999

Valuation: Valuation Units

Macro view Micro view

Selection ofvaluationobjects

Global selectionoperativeunderlyingtransactionsTreasurytransactions

Valuationunit:

Hedgeunit*

ValuationAccountingvaluation:

E.g. Recognition ofloss principle

TRTR--MRMMRM

TRTR--TMTM

Valuationunit:

Portfolioposition*

Valuationunit:

Single transaction

Risk-/market-oriented valuationValue-at-RiskMark-to-market

The valuation requirements for accounting purposes are covered both in Financial Accounting and in Treasury Management on a single transaction basis.

* In development: Release not yet specified

(C) SAP AG AC030 85

4.86

SAP AG 1999

Foreign Currency Valuation (FCV Determination: 2)

Example: Forward exchange transactionExample: Forward exchange transactionForex transaction: USD/UNI

Contract date: 03/01/YY

Value date: 05/31/YY

USD purchase amount: 1,000,000 USD (forward rate)UNI sale amount: 1,700,000 UNI

Spot rate: 1.65Forward rate: 1.70

Valuations on 03/31/YY and 04/30/YYFinal valuation on 05/31/YY

Local currency = UNI

(C) SAP AG AC030 86

4.87

SAP AG 1999

Foreign Currency Valuation

1st valuation: 03/31/YY

2nd valuation: 04/30/YY

Final valuation: 05/31/YY

Forward rate: 1.70 Local currency = UNI

DateDate Fwrd rateFwrd rate UNIUNI Not realizedNot realized RealizedRealized

03/01/YY 1.70 1,700,00003/31/YY 1.65 1,650,000 - 50,00004/30/YY 1.72 1,720,000 + 20,00005/31/YY 1.69 1,690,000 - 10,000

Example: Forward exchange transactionExample: Forward exchange transaction

This example shows you how to create and reverse provisions, and how to disclose realized losses. The valuation on 04/30/YY shows an unrealized gain. According to German law, this does not have to

be disclosed.

(C) SAP AG AC030 87

4.88

SAP AG 1999

Foreign Currency Valuation (1) - G/L Accounting

Liability provisionsAsset provisions

UNI bank account

Balance sheet

P + L

1st valuation: 03/31/YY

Unrealized loss50T1

Clearing account

USD bank account

Realized loss Realized gain

Unrealized gain

Closing forwardrate: 1.70

Market forward rate: 1.65

50T 1

Create liability provisions and disclose unrealized loss

(C) SAP AG AC030 88

4.89

SAP AG 1999


Liability provisionsAsset provisions

UNI bank account

Balance sheet

P + L

Unrealized loss

50T

Clearing account

USD bank account


Unrealized gain1

20T

20T

2 50T 150T2

50T 2 2


Market forwardrate: 1.72

Reverse liability provisions, create asset provisions, and disclose unrealized gain

2nd valuation: 04/30/YY

(C) SAP AG AC030 89

4.90

SAP AG 1999


Liability provisionsAsset provisions 20T

UNI bank account

Balance sheet

P + L

Final valuation: 05/31/YY (after posting transaction)

Unrealized loss50T

Clearing account

USD bank account


Unrealized gain

3

1

50T20T

20T

2

2

2

1.70M UNI

1M USD

1.70M UNI 1M USD10T 3

10T3

50T 1

50T 2 20T3


Market spot rate: 1.69

The final valuation of the forward exchange transaction is carried out with the help of a currency clearing account. To do this, you update the transaction using the forward rate fixed in the transaction. You also translate the foreign currency amount at the market rate.

The difference amount (realized gain / loss) is calculated by the final valuation. It is entered as a valuation flow in Treasury and transferred in the posting run to the Financial Accounting department.

You have to post your transactions before the realized gains and losses can be calculated.

(C) SAP AG AC030 90

4.91

SAP AG 1999

Limit Management

As part of the end-of-day processing, you also want to check the limit utilization for money market and foreign exchange transactions. You particularly want to evaluate the business partner/counterparty limits and the trader limits.

Liquidity Management in the Short and Medium Term: Limit Management

(C) SAP AG AC030 91

4.92

SAP AG 1999

Limit Management (1)

Limits are updated on the basis of the following characteristics:

Company code

Trader

Business partner

Currency

Portfolio

Limit product group

Country key

Industry key

Rating indicator

Limit utilization

Business partner: Dt.

Limit amount: 100 m

Utilization: 30 m

Above/below: 70 m

As offline report

Limit management enables you to monitor transactions according to their different amounts by recording limit utilizations. Limits are determined according to volume, based on the position of the transactions on the key date. You specify limits/volumes on the basis of limit characteristics, which you can combine in any number of ways.

If you do not want all transactions to be included in a limit type, you can specify which product types or transaction types you want to include using the 'limit product group' characteristic. You are free to define your own limit product types and assign them to the product type/transaction type level for money market and foreign exchange transactions, currency options, loans, and bonds in the Securities area. This enables you to examine limits (risks) in greater detail.

You can therefore conclude fixed-term deposits up to a predetermined total volume with a specific business partner. You do this by assigning the product type/transaction type "fixed-term deposit" (lending or borrowing) to a limit product group and combining this group with business partner characteristics.

You also have to specify whether you want the limit utilizations for assets or liabilities transactions to be calculated separately, together, or whether you want to offset them against each other after clearing. You can call up an overview showing the current utilization amount of a limit and the amount still available.

You can assign limits according to time and use the ABAP List Viewer when you display the limits and the limit utilizations. You can also branch from the limits to the limit utilizations.

(C) SAP AG AC030 92

4.93

SAP AG 1999


Limit type:

Dres. bank

L1 : Limit characteristic: Business partner:

90 m

Dt. bank 100 m

Total FTD (Fixed-term deposit)Total FX (Foreign exchange)Total DE (Derivatives)

70 m50 m70 m

Limit type:

MM values Limits

FGDEVDV

40 m30 m50 m

Limit type: L3L3 : Limit characteristics: Partner / Limit product group

Dres. bank

FGDEVDV

50 m40 m60 m

Dt. bank

L1

Dres.90

Dt.100

L3

FTD40

FTD50

L270

L1

L2 : Limit characteristic: Limit product group

By combining any number of limit characteristics for which limits are defined, you can represent a whole range of limits.

Characteristic values are defined for each limit type for the characteristics assigned, and a limit amount is assigned to each of the values/value combinations.

Above examples:

L1: Limit type 1 - Business partner limitYou may conclude transactions (money market, spot exchange, forward exchange

transactions and options) of up to 100 m UNI with the business partner Deutsche Bank

L2: Limit type 2 - Product-/Transaction type limitYou may conclude fixed-term deposits (total, across all partners) at 70 m UNI.

L3: Limit type 3 - Partner/Transaction limitYou may conclude fixed-term deposits at 50 UNI with the business partner Deutsche

Bank.

(C) SAP AG AC030 93

4.94

SAP AG 1999


- Edit limits for limit types:Limit type L3: BP LPG Amount

Dres. Bank FTD 40 m Dt. Bank FTD 50 mDres. Bank FX 30 m. . .

- Generate utilizations- Overview of utilizations

Customizing:

Define limit type: L3 Limit characteristics

- Characteristic 1: Business partner (BP)- Characteristic 2: Limit product group (LPG)

Before: 1. Define LPG 2. In product type/transactiontype: assign LPG

Application:

assign

Customizing:When you define the limit type, you have to specify the limits and limit utilizations to which the (combination) of limit characteristics relate.You also have to specify whether you want the limit utilizations for assets or liabilities transactions to be calculated separately, together, or whether you want to offset them against each other after clearing.

If you use the "limit product group" characteristic, you can restrict the number of transactions you include in a limit.

Application:You define the values for the combinations of characteristics for each limit type and assign the limits accordingly.

The report program "Generate Limit Utilizations" calculates the utilizations for all limit types on the key date. You can schedule this program as a job. The selection methods Risk of default and Foreign currency risk differ in the way they include the transactions from the Foreign Exchange area.

The report program "Overview of Limit Utilizations" displays a comparison of limits with the amount of the current limit utilization and the amounts still available. Any limits that have been exceeded are in color.

(C) SAP AG AC030 94

4.95

SAP AG 1999

Liquidity Management in the Short and Medium Term: Unit Summary (1)

Overview of Cash Management

Active liquidity management using money market transactions

Transaction management processes in Treasury Management

Trading and back-office functions and transfer to Financial Accounting

Interest accruals/deferrals using fixed-term deposits

(C) SAP AG AC030 95

4.96

SAP AG 1999

Liquidity Management in the Short and Medium Term: Unit Summary (2)

Risk management using foreign exchange transactions

Trading, back office, and transfer to Financial Accounting

Foreign currency valuation using forward exchange transactions as an example

Managing limit utilization

(C) SAP AG AC030 96

4.97Data for the "Liquidity Management in the Short and Medium Term" Unit

Explanation of the symbols in the exercises and solutions

Exercises

Solutions

Course objectives

Business scenario

Tips & tricks

Warning and caution

Data used in the exercises

Data Data in the training system Data in the IDES system

Company codes TR00 to TR20 1000

General ledger accounts 113100, 113105, 113113113913, 118888

113100, 113105, 113113118888

Treasury business partners

DEUBA – Deutsche BankCITI – Citibank broker

1000 – Deutsche Bank1002 – Citibank

(C) SAP AG AC030 97

(CM) groupings BANKEN (Bank account history Germany), BANK-IST (Status of available bank accounts), PERSONEN (Customers, vendors and clearing accounts), GESAMT (Total display)

BANKEN (Bank account history Germany), BANK-IST (Status of available bank accounts), PERSONEN (Customers, vendors and clearing accounts), GESAMT (Total display)

Notes on the exercises:

Create transactions in the following currencies: UNI, CHF or USD. Exchange rates are only maintained for these currencies.

Do not delete or change any of the existing Customizing entries. You are only allowed to add new data.

(C) SAP AG AC030 98

4.98Liquidity Management in the Short and Medium Term

Exercises

Unit: Liquidity Management in the Short and Medium Term

Cash Management functions

Liquidity analysis in your company is the basis for your investment or borrowing decisions. By analyzing the short-term liquidity and including the expected cash flows from logistics, you can identify the liquidity surpluses.

1-1 Analyze the total liquidity position of your company using the cash position and the liquidity forecast functions.To do this, use the grouping ‘Total display’ and only look at the cash flows in your company code TRXX.

1-2 What is the difference between levels and groups/accounts?

1-3 What does it mean to access a transaction via levels and then to switch to groups, or to start with groups/accounts and then switch to levels?

(C) SAP AG AC030 99

Unit: Liquidity Management in the Short and Medium

Term

Creating a new business partner

To take full advantage of the excellent conditions offered by a new bank, use the bank as your new business partner for all Treasury transactions.

4.99

2-1 Create a business partner PartnerXX in the role of Treasury partner.

2-2 Authorize this partner for the following Treasury transactions:- Money market- Foreign exchange- Securities- Derivatives

2-3 Enter the following in the Company code data: – Reconciliation account 140 000– Planning group E2, domestic customers.

(C) SAP AG AC030 100


Term

Active liquidity management using money market transactions.Integration of trading functions into Cash Management

The new business partner offers you good conditions for a fixed-term deposit, which you want to enter in your trading department.

3-1 Fixed-term deposit

Create a fixed-term deposit.As you do this, check the cash flow and add other flows to your transaction (e.g. charges)

(Note: Do not enter an account assignment reference or payment details!

Make a note of your transaction number, You will need it later on for settlement and posting activities: _________

3-2 Display the cash inflows and outflows in Cash Management.



Term

Active liquidity management using money market transactions.Confirmation management and control functions in the back-office area.

After the fixed-term deposit has been entered by the trader, it is processed in the back office. You agree to send your partner a letter of confirmation about the financial transaction and your partner agrees to send counterconfirmation back to you. After this has been checked, the bank chains and the balance sheet accounts are checked and the transaction is then settled.

4-1 In the case of fixed-term deposits, you want the transactions to be confirmed and counterconfirmed. Use the standing instructions function to set up the correspondence media for your business partner (“PartnerXX”).

4-2 4-2-1 First check the account assignment reference again in the old transaction and check the payment details.

4-2-2 Now assign payment details to your business partner (PartnerXX) using the standing instructions.

4-2-3 Check the general ledger account again and the payment details in theold transaction. Has anything changed?


4-3 Create a new fixed-term deposit with your business partner. Check the payment details in the new transaction.(Note: For the second fixed-term deposit, select a start of term date that is later than that of the first transaction. This makes the impact on Cash Management much more noticeable.)

Transaction number (new transaction): ___________

4-4 4-4-1 Generate a letter of confirmation for the fixed-term deposit you have just created. Now check the correspondence status in the transaction.

4-4-2 Assume the counterconfirmation has been received. Enter this in thesystem and check the correspondence status again.

4-5 Use the collective processing function to settle the fixed-term deposit, and check the account assignment reference and the payment details. Then refresh the collective processing display.

4-6 Take a look in Cash Management. Have there been any changes compared with the previous exercise?If so, why?If now, why not?

4-7 When you define payment details for the business partner, how does this affect the way the (new) fixed-term deposit is displayed in Cash Management? Explain the difference.



Term

Active liquidity management using money market transactions.Posting flows that are due to Financial Accounting and evaluating them in Cash Management

At the start of term, the posting run for all the flows that are due is triggered in Financial Accounting. This offsets the principal increase against the bank clearing account, which is later cleared when the bank statement is imported.

5-1 Fixed-term deposit

5-1-1 Look at the cash flow in your second fixed-term deposit.

5-1-2 Post the first flows (in other words, the principal increase) of yoursecond fixed-term deposit.In the posting log, click the flow to display the generated FIposting.

5-1-3 Notice the change to the posting status in the cash flow.

5-2 Take a look in Cash Management. Are there any changes?



Term

Active liquidity management using money market transactions.Accrual/deferral of interest amounts at end of year

To carry out year-end tasks, you have to assign interest rate flows to the correct accounting period. You use the reset procedure to perform this accrual/deferral in your company.

4.100

6-1 Create another fixed-term deposit with a longer term that goes beyond the end of the year.

6-2 Post the deposit amount.Note: Before you post the transaction, you have to settle (or control) it in the back office.

6-3 Perform an interest accrual/deferral run for your fixed-term deposit for a date between the start and the end of the term. In this case on 12/31/YY.

4.101



Term

Managing currency risks in Cash Management using foreign exchange transactions

In your liquidity evaluations you discover a deficit of USD in three months. You transform the resulting foreign currency risk by a suitable forward exchange transaction, in other words, you purchase USD and sell UNI.

7-1 Make sure that the payment details for foreign exchange transactions are maintained for UNI and USD in the standing instructions for your business partner.

7-2 Create a forward exchange transaction with your business partner to purchase 100,000 USD in exchange for UNI with a value date in three months. Create and execute an order. Then settle and post it.

Display the impact of the transaction in the various Cash Management views.



Active liquidity management using netted money market and forex transactions

In order to meet your payment commitments in UNI, you set today’s fixed-term deposit and the forward exchange transaction. You should only pay the difference between the fixed-term deposit and the forward exchange transaction to the Citibank broker as a netted payment.

8-1 Create a fixed-term deposit and a forward rate transaction with the same value date with the Citibank broker (CITI).Make sure that the payment details for the UNI side of the transaction (particularly the house bank and house bank account) are the same.

Also make sure that you set the payment requests indicator when you enter the payment details and you enter the payer/payee and the partner bank.

Then settle the transactions.

8-2 Group both transactions together using the netting function. First display the proposal list, then assign the transactions and display the netting.

8-3 Then carry out the posting run and discuss the outcome.


4.102 Liquidity Management in the Short and Medium Term: Solutions


1-1 To create a variant, choose:

Accounting Treasury Cash Management Information System Reports on Cash Management Liquidity Analyses Liquidity Forecast

Enter: Company code: TRXX (XX is the group number)Grouping: Total display

Goto Variants Save as variant or Click Save

Execute variant


1-2 To differentiate between levels and groups:

a) Cash position ( “Accounts”):

Accounting Treasury Cash Management Information System Reports on Cash Management Liquidity Analyses Cash Position

Enter your data...(Grouping: Bank account history)You see: Summarization: Deutsche

Accounts: DBGIROLevels: FI banks

Time deposits

b) Liquidity forecast ( “Groups”):

Accounting ... Liquidity Forecast

Enter: Data ...(Caution: Only set the “Liquidity forecast” indicator!;Grouping: Customers/vendors and clearing accounts)

You see: Summarization: RevenuesGroups: E2 (domestic customers)Levels: Foreign exchange

c) The (planning) accounts and groups show how payments are assigned. These are the names given to the bank accounts or customer/vendor groups, which are affected by this cash activity. The accounts and groups contain quantitative information.

(Example: Account “DBGIRO” groups together the inflows and outflows of the corresponding current account)


The (planning) levels tell you where the cash flows recorded in the accounts or groups have come from. They contain qualitative information.

(Example: The flows related to DBGIRO actually come from the (levels) “time deposits”, “Payment advice notes confirmed” ...)

d) Additional information:

View liquidity forecast w i t h bank accounts: Accounting ... Liquidity Forecast

(Here, you set the “Cash position” and “Liquidity forecast” indicator!;Grouping: Total display[This includes both the groupings “bank account history” and “customers/vendors and clearing accounts”])

You see: Summarization: 1. Bank account historyGroups: DBGIROLevels: FI banks

Time deposits

and2. Customers/vendors and clearing accountsGroups: E2Levels: Forex

1-3 Solution:

Case 1: Levels; Groups/accountsCase 2: Groups/accounts; levels

Both cases produce the same total balances.

Case 1 primarily allows you to draw overall conclusions about the underlying transactions. From there, you can branch down from the individual transactions into the relevant groups/accounts.

Case 2, on the other hand, first gives you an overview of the accounts/groups. It then tells you which transactions relate to these accounts.



Term

2-1 To create a business partner:

Accounting Treasury Treasury Management Basic Functions Master Data Business Partner Create

Enter your data ...

Field name or data type Values

Business partner PartnerXX

Grouping TR02

Role category 1000 (Treasury partner)

Classification E.g. Choose an organization

Enter your data ...

Save

Additional information: ... Business partner Change

Enter: PartnerXX (do not enter a role category).You see: Role overview. After selecting the role (double-click), you can enter the General data and the Company code data for the business partner by choosing Goto.


2-2 To enter authorizations for the business partner:

Accounting ... Business Partner Standing Instructions Transaction Authorizations

2-3 To maintain the planning group:

Accounting Treasury Treasury Management Basic Functions Master Data Business Partner Change


Business partner PartnerXX

Role category 1000 (Treasury partner)

In the role overview: Role category 1000: Double-click; Goto Company code data Account managementorIn the role overview: Role category 1000: Double-click; Company code data button


Reconciliation account 140000 (Trade receivables - domestic)

Planning group E2: (domestic customers)

Save



3-1 To create a fixed-term deposit for your business partner:

Accounting Treasury Treasury Management Money Market Trading Fixed-term deposit Create

Enter your data ...

Tab page: Cash flow Tab page: Other flows; (enter data) Tab page: Status ( Note correspondence fields)

Save

(Ignore the messages “No account assignment reference in transaction/No payment details entered for transaction” by pressing “Enter”).

Transaction no. ________________

3-2 To analyze your data in Cash Management:




Company code TRXX

Liquidity forecast Only set indicator here

Grouping PERSONEN (Customers/vendors and clearing accounts)

Delta display with balances (Click All selections button)

Execute

You see: Summarization: RevenuesGroups: E2Levels: Time depositsDouble-click amount:Evaluation view of Treasury transactions to be triggered.

Additional Cash Management analysis:


Company code TRXX

Cash position Set indicator

Liquidity forecast Set indicator

Grouping GESAMT (Total display)

Delta display with balances (Click All selections button)

Execute

You see: Summarization: Bank account history: No changeCust./vend. & clearing accts:

Groups: E2 Levels: Time deposits



4-1 To specify the correspondence type for your business partner:

Accounting Treasury Treasury Management Money Market Master data Standing instructions Correspondence

Enter your data ... (Money market: Set an indicator for ‘Print’ and ‘CConf’) Save

4-2 4-2-1 To check the general ledger account and the payment details (for the old transaction).

Accounting Treasury Treasury Management Money Market Back office Fixed-term deposit Change

Enter your data ...

Check general ledger account:Tab page: Administration; The drop-down menu for the account assignment reference field is for information purposes; leave field blank

Check payment detailsTab page: Payment details (Note: No payment details have been assigned in the old transaction (which was created before payment details were assigned to the business partner!))


4-2-2 To define standing instructions for your business partner (partnerXX):

Accounting... Money Market Master data Standing instructions Payment details

Enter your data ...


Currency UNI

Payment details ID E.g. 01

House bank DB

Account ID GIRUN

Assign: Select row; Click: Assign entry (Money market, Securities, and Derivatives: Incoming; outgoing)

Save

4-2-3 To check general ledger account and payment details (for old transaction):

Path: see 4-2-1

Check general ledger account: No changes

Check payment details: No changes(This is because any payment details entered later (as standing instructions) for the business partner are not updated in the old transaction!)


4-3 To create a new fixed-term deposit:

Accounting Treasury Treasury Management Money Market Trading Fixed-term deposit Create

Enter data:- Account assignment reference:

Tab page: Administration: leave blank- Payment details;

Tab page: Payment detailsOmit entry since the payment details defined for the business partner (as standing instructions) appear automatically.

SaveTransaction no. ____________________

4-4 4-4-1 To generate letters of confirmation:

Accounting... Money Market Back office Correspondence Outgoing correspondence


Company code TRXX

Transaction Your transaction number

Correspondence type 001

Select printer and print preview Execute

Print


After the update run, you can now see the correspondence information in the transaction:

Accounting... Money Market Back office (or Trading) Fixed-term deposit Display

Tab page: Status

Correspondence: “Confirmation executed”

4-4-2 To enter a counterconfirmation:

... Money Market Back office Correspondence Incoming confirmations

Enter: Exact data that you see on the letter of counterconfirmation from your business partner.

(Choose Enter: The transaction is displayed, assigned, and the confirmation status in the transaction is matched).

Save

Check correspondence status in the transaction: See the path above

4-5 To settle a fixed-term deposit:

Accounting ... Money Market Back office Collective processing Money market

Here, you can make any selections you require. Execute

Select transaction Choose Settle


Check account assignment reference and general ledger account:Tab page: AdministrationDrop-down menu for “Account assignment reference” fieldYou see: Account assignment reference ‘DB000001’ with G/L account no.__________

Enter: Account assignment reference (DB000001) Save

If required: When you check the G/L account:

Accounting Financial Accounting General Ledger Master records Individual processing In company codeEnter: General ledger account no.: see above (113113) Display

Check the payment details:Tab page: Payment details

The system automatically suggests the payment transactions via our house bank DB and the house bank account GIRUN for amounts in UNI.

Saving the transaction after you have checked it, triggers the activity transition Contract Contract settlement (you can also see this in Collective processing: Refresh)

Additional information: View history:

- When you are in the collective processing function: Select the transaction in the display screen; Choose: History.

Otherwise:

... Money Market Back office or Trading Fixed-term deposit History


4-6 To analyze the impact on Cash Management:

Since payment details exist for the (new) fixed-term deposit, the cash flows are displayed as follows:

In the Liquidity forecast with bank data:

(“Cash position” and “Liquidity forecast” are selected; Grouping: Total display; Delta display)

You see: Summarization: 1. Bank account historyGroups: DBGIROLevels: Time depositsHere you see the new transaction

and2. Customers/vendors and clearing accountsGroups: E2Levels: Time depositsHere you see the old transaction

In the cash position: Grouping: Bank account history (Delta display)

You see: Summarization: DeutscheAccounts: DBGIROLevels: Time depositsHere you (only) see the new transaction

In the Liquidity forecast: (Grouping: Customers/vendors and clearing accounts; Delta display)

You see: Summarization: RevenuesGroups: E2 (Domestic customers)Levels: Time depositsHere you only see the old transaction

Summary:

If no payment details are assigned to the transaction (either as standing instructions with the business partner or when a transaction is created), money market transactions do not appear in the cash position, as this relates to the bank data. In this case (no payment details), you only see money market transactions in the liquidity status if a relevant financial planning group has been defined for the business partner.


(Example: old transaction; business partner has planning group: E2).

The transaction does not appear in Cash Management without the payment details or the planning group.

When you assign payment details to the transaction, the system can access bank data and display the money market transaction in the cash position.

(Example: new transaction)



5-1 Fixed-term deposit:

5-1-1 To look at the cash flow: Accounting Treasury Treasury Management Money market (Trading or) Back office Fixed-term deposit Display

Tab page: Cash flow

You see: Posting status (PS): 1 - Flagged for posting(since transaction has been settled but not yet posted).

Also select the display variant Posting view.

5-1-2 To post the first flows (the principal increase):

Accounting Treasury Treasury Management Money market Accounting Posting Execute


Enter your data ...


Company code TRXX

Transaction Transaction no. of new fixed-term deposit

Upto and including due date Day the time deposit is created

Execute

After the update run:

In the posting log: Single-click to call up the FI document.

FI document no.: _________________

Note: The date "upto and including the due date" refers to the dates of the flows for your transaction, which you now want to post.

Example:

Date of the investment amount:The investment amount is now posted.

Due date:The investment amount, the repayment amount, the interest and any other flows are now posted.


5-1-3 To see the posting status in the cash flow:

Path: see 5-1-1

You see: (Posting status (PS) 0 for flows created)Posting status (PS) 1 for settled flows Posting status (PS) 2 for posted flows

Also select the display variant Posting view.

5-2 To look in Cash Management:

In the Liquidity forecast w i t h bank data:

("Cash position" and "Liquidity forecast" selected; Grouping: "Total display"; Delta display with balances)

You see: Summarization: 1. BanksGroups: DBZWIUNILevels: Int. post

Here you see the new transaction

and (unchanged, as it is not yet posted)2. Customers/vendors and clearing accounts

Groups: E2Levels: Time deposits:

Here you see the old transaction.

When you post the fixed-term deposit, the display in Cash Management changes from the "DBGIRO" account ("Time deposits" level) to the "DBZWIUNI" account ("Interim posting" level), in order to display the fixed-term deposit as a ‘fixed transaction’. At the same time the change of level shows that only the real bank posting is still outstanding. This is updated in the system when the bank statement has been received.

If the bank statement has been created - either manually or automatically - and hence the transaction has been posted to the current account, the outflow for the fixed-term deposit is displayed in Cash Management in the "DBGIRO" account ("FI banks" level).



6-1 To create a fixed-term deposit:

Accounting Treasury Treasury Management Money market Trading Fixed-term deposit Create

Enter your data.

6-2 To post the investment amount:

First settle the transaction: Accounting Treasury Treasury Management Money market Back office Fixed-term deposit Settle

Enter: Data (for last transaction); check (do the account assignment reference and payment details exist?) Save

Now: post the flow: ... Money market Accounting Posting ExecuteEnter your data


The "upto and including due date" field refers to the date up to which the remaining flows will be posted. (In this case, it is the date the fixed-term deposit was created)

6-3 To perform an accrual/deferral run on 12/31/YY:

... Money market Accounting Accrual/deferral Execute

Enter: Data ... (Key date: 12/31/YY ...); Execute

You see: Accrual/deferral log and posting logAfter the update run:Click the document numbers to display the relevantposting documents.



7-1 To check the standing instructions:

Accounting Treasury Treasury Management Foreign exchange Master data Standing instructions Payment details

Enter:

a) Assign existing payment details "01" for UNI to foreign exchange: Select row; click Assign entry button (Foreign exchange: Incoming; Outgoing)

b) For USD:


Currency USD

Payment details ID E.g. 01US

House bank DB

Acct ID GIRUS

Select row; click Assign entry button (Foreign exchange: Incoming; Outgoing)

c) Save


7-2 To create a forward rate transaction:

a) Create order (Trading)

Accounting Treasury Treasury Management Foreign exchange Trading Spot transactions/forward transactions Create

Enter your data ...(- Purchase currency, payment amount; - Sale currency; - Rate; value date)

Note: Confirm your entries with "Enter".The system then calculates the offsetting amount (in this case, upon sale) automatically. Only then should you save the transaction.

- Cash Management: Accounting Treasury Cash Management Information System Reports on Cash Management Liquidity Analyses Cash PositionEnter: Data ... (Grouping: Banks; Click All selections: Delta Display;)

You see: No change when you create an order.


b) Execute order (Trading):

... Foreign exchange Trading Order ExecuteEnter your data ...; Save

- Cash Management: See the above path.

You see the foreign exchange purchase.

Summarization: Deutsche[In this case, you only see the difference between the value of the forward rate in UNI and foreign currency amount at the current exchange rate];

The individual amounts appear as follows:

Accounts: - DB-USD; Levels: Forex

- DBGIRO; Levels: Forex

Note: The dollar amount is displayed in UNI and is calculated at the rate that is maintained in the rates table (in Customizing):

Foreign exchangeEnvironment Market data Manual market data entry Enter exchange rates


c) Settle order (Back office):

... Foreign exchange Back office Spot transaction/forward transaction SettleEnter: Data ... (Check and save entry data).

- Cash Management: see above.

You see the foreign exchange purchase:

Summarization: Deutsche;Accounts: - DB-USD; Levels: Forex

- DBGIRO; Levels: Forex

d) Posting to FI (Accounting)

... Foreign exchange Accounting Posting Execute

Enter your data.

- Cash Management: see above.

You see the foreign exchange purchase:Summarization: Deutsche;Accounts: DBZWIUNI;Levels: Int. post



8-1 To create and settle fixed-term deposits and forward rate transactions: Compare previous solutions;Note: The payment details that are maintained for the business partner CITI. You have to generate payment requests for netting; set up the payment details accordingly.

8-2 To display the proposal list for netting and for assigning transactions:

Some prerequisites for possible nettings are:- Same business partner- Same value date- Same currency (compare slide on netting and payment requests

Accounting Treasury Treasury Management Money market Back office Netting Proposal list Execute

Select transactions for netting.

Click the Check button

Save


To display the netting:

Accounting Treasury Treasury Management Money market Back office Netting Display


Netting 1

Your company code TRXX

One of your transactions

Note the net amount calculated by the system. This is then paid in a later payment run in one record.

Relevant fields in the transactions are blocked against further changes.

8-3 To perform a posting run: Accounting Posting Execute

Enter and execute the transaction numbers of the money market and forward exchange transaction.The posting run triggers payment requests to the payments request clearing account. These are paid jointly via the payment run of the extended payment program (payment request).


5

SAP AG 1999

Financial Transactions in the Medium andLong Term

Contents:


Loans Management

(Loans taken)

(C) SAP AG AC030 1

5.2

SAP AG 1999

Financial Transactions in the Medium and Long Term: Unit Objectives


Provide an overview of the entire process for

- financial investments in the form of securitiestransactions

and

- procuring capital by taking out a loan

(C) SAP AG AC030 2

5.3

SAP AG 1999


Liquidity Management in theShort and Medium Term

Introduction

Financial Transactions in the Medium and Long TermFinancial Transactions in the Medium and Long Term

Market Risk Management and ManagingRisk Positions


(C) SAP AG AC030 3

5.4

SAP AG 1999

Financial Transactions in the Medium and Long Term: Securities Management Scenario

Due to a change in the level of interest rates on the capital market, you want to restructure your securities position. Reduce your stock portfolio and invest in bonds.To purchase new securities, you have to enter the corresponding data. In other words, you maintain position indicator class data and securities account data, if required.During the course of the year you receive and post interest and dividends.At the end of the year, you perform an account-based valuation of your securities position.

Other means of long-term investment is procured by taking out a loan.

(C) SAP AG AC030 4

5.5

SAP AG 1999

Market RiskManagement

Treasury and Market Risk Management

Priority Priority TargetTarget




4 Hedge costs (e.g. againstpossible exchange rate fluctuations) 61

5 Hedge sales (e.g. againstpossible exchange rate fluctuations) 52

6 Contribute to profit through active management of open items 30

TRTR--TMTMTRTR--

MRMMRM

TreasuryManagement

%

(C) SAP AG AC030 5

5.6

SAP AG 1999

Treasury Management: Functions

Complete financial transaction and position management

Support for trading and back-office functions

Functions to track, check, and release transactions

Data transfer to Financial Accounting(including accruals/deferrals and valuation)

Flexible settings to accommodate company-specific transaction and position management processes

Financial transactions assigned to portfolios and managed in securities accounts

Flexible reporting and portfolio analysis

Datafeed interface

(C) SAP AG AC030 6

5.7

SAP AG 1999

Securities

Subscription rightsFixed-interest bondsVariable rate bonds

Perpetual bondsZero bonds

Unit-quoted part. cert.Perc.-quoted part. cert.

Warrant bondsPart. cert. with option

Convertible bondsIndex warrantsEquity warrants

Currency warrantsBond warrants

Perc.-quoted shareholdings

Domestic stocks

Investment certificates

Foreign stocks

Unit-quoted shareholdings

010 Stocks

020 Investment cert.

030 Subscr. rights

040 Bonds

060 Warrant bonds

070 Convert.bonds

160 Shareholdings

110 Warrants

Financial instruments Product categories Product types

Examples

Product Categories - Product Types

You use product types as a basis for creating financial transactions and managing positions.

In the SAP System, you classify the financial instrument "security" by assigning it to product categories that are predefined in the system. You use this classification as a basis for a more detailed structure by defining corresponding product types in accordance with specific company requirements.

The modular structure of financial instruments enables you to create different evaluations or determine processing sequences according to product type. For example, the product type "Fixed-interest bond" is different from the product type "Variable-rate bond" as far as the conditions are concerned. This difference is taken into account by product type-specific entry screens for creating master data, which simplify data entry and prevent inconsistencies.

(C) SAP AG AC030 7

5.8

SAP AG 1999

PTyp Text Prod. categ. Cond.gr

01A Stocks 10 10

02A Investment certificates 20 30

: : : :

04I Fixed-interest bonds 40 40

: : : :

DoubleDouble--click Detailsclick Details

Class Master Data: Product Types - General Data

Product types are user-defined values for predefined product categories, which is why when you define a product type, you must specify the product category to which you are assigning it. The system uses this internal key to process the objects defined in the product type.

You can usually differentiate between product types by means of different condition structures.For example, dividend and/or bonus conditions belong to the product type stock; nominal interest and repayment conditions belong to the product type bonds. By assigning the relevant conditions to the product type, you can ensure that you only have to enter the corresponding condition items when you create a security.

It is possible for several product types to have the same conditions, depending on the degree of detail in which you define the various product types. If, for example, you define the product types domestic stocks and foreign stocks, you can use the condition types dividend and bonus in both cases.

As a result, condition types (that belong together) are grouped to form condition groups. This simplifies the lengthy process of assigning multiple condition types. You assign the relevant condition group to the product type.

(C) SAP AG AC030 8

5.9

SAP AG 1999

USER LEVEL

1104 Scheduled repayment

5000 Nominalinterest

5013 Dividend

010 Stock

040 Bond...

01 A Stock

04 H Variable-ratebonds

04 I Fixed-interest bonds...

10 Stocks40 Fixed-int. sec.(perc.-quot.)42 Float.-int. sec.(perc.-quot.)

A InflowTD DividendsTTEN Final repaymentTZ Nominal interest

Key : “ ” = is assigned to

111 Dividend113 Bonus100 Interest (perc.)263 Final

repayment...

Product Type Product Type -- Conditions Conditions -- FlowsFlows

Product categoryProduct category Flow categoryFlow category

Flow typeFlow typeCondition typeCondition typeProduct typeProduct type

Condition groupCondition group

A InflowTD DividendsTTEN Final repaymentTZ Nominal interest

Calculation cat.Calculation cat.

SYSTEM LEVEL

You assign a condition group, which represents a cluster of different condition types, to each product type.

The system represents cash flows created by conditions as flows that are generated automatically. This means you must assign flow types to condition types, when these flow types represent changes to the payment flows and are part of the cash flow.

Flow types defined at user level contain more detailed information about the flow categories predefined in the system.

(C) SAP AG AC030 9

5.10

SAP AG 1999

In our model company the treasurer uses position analysis to obtain an overview of the securities position. This describes the status (position of stocks and bonds) of the two securities accounts.

Financial Transactions in the Medium and Long Term: Scenario - Evaluating the Securities Position

(C) SAP AG AC030 10

5.11

SAP AG 1999

Position overview*

Position trend list*

Capital recovery (revenue list)*

Securities account statement

Position information

Standard reports

Standard Reports: Examples (Securities)

Examples:

Position overview: Position evaluation for a specific key date (flexible data output) Position trend list: Lists the acquisition values, number of units/nominal values, book values on a start

and final date, and displays the relevant changes. Revenue list: Displays the capital flows relating to securities. You can select both the planned or actual

flows, e.g. to evaluate the realized earnings and anticipated earnings, such interest or price gains. Securities account statement: Displays the position trend for specific securities accounts for each

security, including the changes in the book value and the acquisition value. Position information for securities: Tells you for which ID numbers and in which securities accounts

position indicators exist for a specific key date. Detailed information such as average book value/acquisition value for each ID number in foreign currency and local currency.

Regulatory reporting: Evaluations of positions in accordance with reporting requirements and German State Central Bank requirements.

* You can use the data output options described later for these reports.

(C) SAP AG AC030 11

5.12

S A P A G 1 9 9 9

C l a s s i c a l d r i l l d o w n r e p o r t

A B C1 8 , 2 3 4 . 9 7 2 7 , 2 7 6 . 0 8 8 7 , 7 5 1 . 8 42 9 , 9 3 2 . 0 7 3 8 , 3 7 3 . 4 2 3 2 , 7 5 6 . 4 4

. . . . . . . . .

O b j e c t l i s t

G r a p h i c a l r e p o r t o u t p u t

0

2 0

4 0

6 0

8 0

1 0 0

A B C D

R e p o r t s

Many evaluations allow to choose between several forms of data output.

(C) SAP AG AC030 12

5.13

SAP AG 1999

Sample Evaluation using Position Information

Position overview: Flexible position information for a specific key date, e.g. per company code or per ID number

Evaluation of a portfolio comprising two securities accounts kept with different banks

The securities account is the unit generally used for position management and valuation (usually at a bank)

A portfolio is a grouping of financial transactions and positions used for aggregated position management or valuation purposes

You can perform valuations both at securities account level and portfolio level

(C) SAP AG AC030 13

5.14

SAP AG 1999

0SEPOSOVW SE Position overview From date MM/DD/YYYY

Display currency UNI Key date reference 4 position value date Key date MM/DD/YYCompany code TR00

Pos. ID number Sec.acct No. of sec. TotNomPC Price% Acq.c.un.PC Acq.c. PC Book value PC Book value LC Current value PC Current value LC

EUR 113495 Deuba Acc1 200,000.00 102.10 204,200.00 204,200.00 399,380.49 225,000.00 446,907.15

EUR 113501 150,000.00 95.00 142,500.00 142,500.00 278,705.78 166,755.00

UNI 270144 100,000.00 99.85 99,850.00 99,850.00 99,850.00 102,550.00

Deuba Acc1 450,000.00 777,936.27

EUR 519000 Deuba Acc2 5,000.00 27.30 136,500.00 124,250.00 243,011.88 134,250.00 262,570.18

UNI 555700 10,000.00 74.65 746,500.00 746,500.00 746,500.00 912,000.00 912,000.00

102,550.00

326,144.43

875,601.58

EUR 716463 500.00 398.57 199,285.00 199,285.00 389,767.58 206,275.00 403,438.83

Deuba Acc2 15,500.00 1,379,279.46 1,578,009.01

Securities: Position Overview Object List

You can use the ABAP List Viewer to set up the position overview as you wish according to certain predefined selection criteria. You can make your own adjustments to the report, depending on the information you want to display and the order in which you want to display it.

You can either mail or fax the list, and convert it to other formats (such as a word processing file, or spreadsheet).

(C) SAP AG AC030 14

5.15

SAP AG 1999

The treasurer in our model company decides to sell a particular stock.Taking account of the company's medium-term liquidity, the part-sale of this stock is represented, thus demonstrating the typical business process involved in buying and selling securities.This example shows the changes to the position and the impact on the portfolio and securities account structures.Once the transaction has been concluded, you can see both the impact of the stock on the cash flow and the updated incoming cash flows in Cash Management.

Financial Transactions in the Medium and Long Term: Concluding Securities Transactions

(C) SAP AG AC030 15

5.16

SAP AG 1999

SecAcct1

7.5 % 10-year federal bond6.25 % 10-year federal bond

10-year federal bond

Portfolio 1

Proportion of stocks too high

Shift to bonds

SecAcct2

Telekom stockBMW stockSAP stock

Sample Evaluation

(C) SAP AG AC030 16

5.17

SAP AG 1999

Due to portfolio restructuring, you should sell Telekom stocks ID number 5557XX to favor fixed-interest securities.

Part sale of ID number 5557XX from securities account 2

Settle and post transaction

Transaction status described by activity category

Control processing sequence using processing categories

View transaction in cash position

Part Sale of Stocks

(C) SAP AG AC030 17

5.18

SAP AG 1999

Postings Payment

transactions Reversals Accruals/deferrals Valuation

Create order/contract Exercise/expiration Exercise rights


Release

Settlement/control Interest rate adjustment Netting Reference Confirmation letters Securities account transfers Corporate actions


Transaction and Position Management Process

Transaction and position management processes are split into the following areas:

You use the trading area mainly for creating transactions and exercising rights.

In the back-office area, you settle the transactions you have entered, in other words, you control them. You also manage the processes relating to position management, such as securities account transfers. The accounting area includes posting activities. Examples of these are incoming payments postings (such as interest earned or dividends) or depreciation postings that result from a position valuation.

(C) SAP AG AC030 18

5.19

SAP AG 1999

Partner master data

Securities account master data

Position indicator per ID number and per securities account

Transaction management

Position management (if appropriate)Position management (if appropriate)

Transaction Management: Prerequisites

Class master data

Basic data Conditions Other data

You create master data for the following areas: Business partner: In addition to the minimum data entries (name and address) in the master record,

you have to define the role of the business partner. Class: You have to enter master data for each security managed in the position. This is a

prerequisite for any position changes in the trading and back office areas. Class master data contains all the general structure characteristics of securities as well as product-specific conditions. You can create links between securities by entering references. For example, you can define the relationship between old and new stock by entering a suitable reference.

Securities account: You manage and administer securities positions in securities accounts. Position indicator: You define the parameters for position management and valuation in the

company code for all securities for each specific securities account.

(C) SAP AG AC030 19

5.20

SAP AG 1999

SEC

III Create settlecontract

Trading Back office Accounting

II Create order execute

IV Createcontract

post

post

post

Process View: Trading - Back Office - Accounting

I Create order execute settle post

The transaction management function offers two main initial variants for entering transactions. The organizational process can be divided into several steps:

Creating an order (changing/adding to order data, if necessary) Executing an order or creating a contract Settling the executed order or contract Posting the transaction

You specify your preferred transaction entry process in Customizing.

(C) SAP AG AC030 20

5.21

SAP AG 1999

Basic Principles of Transaction Management Basic Principles of Transaction Management

USER LEVEL

Product typeProduct type


010 Stock:

040 Bond:

- Purchase- Sale- Forward purchase

- Forward sale:

Transaction typeTransaction type

Transaction cat.Transaction cat.

100 Purchase

200 Sale

Activity categoryActivity category

10 Order

20 Contract:

1 Order - Contract

2 Order - Contract -Settlement

Processing cat.Processing cat.

SYSTEM LEVEL

- Fully-paid stock- Partly-paid stock

:- Varios- Fixed-interest bond

:

Product categories cover the basic types of financial borrowing and investment transactions and represent a classification of financial transactions. Product categories are predefined in the system, apply to all company codes, and may not be modified by the user.Product types represent a refinement of the product categories at user level and, unlike the product categories, they can be defined by the user.

You set up the processing sequence of a financial transaction in the Securities area using processing categories.

Processing categories determine the sequence of the individual activities within a financial transaction. They describe the processing steps involved in the respective areas of the company - from entering a transaction in the trading area, via processing it in the back-office area, through to transferring the data to Financial Accounting.

As a result, you determine the company-specific chain of activities that a particular transaction has to pass through.

(C) SAP AG AC030 21

5.22

SAP AG 1999

Company code TR00

ID number

Transactn type

5557XX

200 Sale

Deuba Deutsche Bank

Dt. Telekom

Partner

Activity

Order O Contract

TransactionExternal number assignment

Create Order: Initial Screen

You go to the main menu for the Securities area by choosing Accounting => Treasury => Treasury Management => Securities.

When you create a security transaction, you are representing an order or a contract for the sale or purchase of securities. You specify the class and the business partner to/from which securities are to be bought or sold.

(C) SAP AG AC030 22

5.23

SAP AG 1999

Create Order

Structure

Stock swapBasic data

Securities acct

Order date

Deuba Acc1

No. of units

Stock swapLimit

Limit type

Limit date

05

01/31/YY

Limit price 90.00

Partner Deuba

Stock swapTrading

Trader Maier Stock swapContract data

Contact person Mr. Brown

01/20/YY

3,000.00

Company code

ID number

Transaction type

TR00

5557XX

200 Activity Order

Transaction data includes: Basic data:

Here, you enter the nominal amount for percentage-quoted securities and the number of units for unit-quoted securities. (You can find out whether a security is unit-quoted or percentage-quoted in the class master data of the relevant ID number).

The order date indicates when the order was issued/created.

Limit data: Here, for example, you can enter a suitable minimum/maximum price and a date up to which the order is effective.

(C) SAP AG AC030 23

5.24

SAP AG 1999

Execute Order

Structure

AktientauschPosition

Sec. account

Position excl.

Deuba Acc1

Position incl.

AktientauschDate details

Pos. value date

Calculation date

MM/22/YY

-1

Payment date 0

Partner Deuba

AktientauschAmounts

Number of units

10,000.00

7,000.00

Company code

ID number

Transaction type

TR00

5557XX

200 Activity Contract

UNI

UNI

UNI

3,000.00

Price 92.00

Payment amount UNI276,000.00

To execute an order after you have placed a purchase/sales order, you have to enter this change in the system.

To do this, you execute the order. You have to add to or change the existing order entries by entering the actual transaction data. For example, you enter the actual execution price.

Date details (in the sample data, the system assumes you want to execute the order the day the order is placed):- The position value date tells you when the position is available in the system (usually order date plus 2 days).- Calculation date: relevant for financial mathematics as regards the conditions. This date enables you to calculate, for example, the interest accrued for interest-bearing securities and indicates the last day the vendor is entitled to earn interest (usually order date plus 1 day).- When you execute an order, the payment date refers to the day you post the payment amount and update the transaction to Cash Management. (usually order date plus 2 days).

Input help: "+/- X" adds/subtracts X number of days to/from the current date or the position value date; “0” copies the date entry for the position value date.

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5.25

SAP AG 1999

- Basic data- Other flows- Cash flow- Any payment details- Correspondence

Control:

(Any release that is necessary)

Back Office: Overview

You settle transactions in the back-office area. This settlement satisfies control purposes: The transaction data is checked, and data is added, if required.

(C) SAP AG AC030 25

5.26

SAP AG 1999

CoCd Transactn Activity cat. Trans.type Name ID number Short name Sec. account Unit PriceTR00 353 Contract 200 Sale 5557XX Telekom Deuba Acc2 3,000.00 92TR00 354 Order 100 Purchase 716463 SAP Deuba Acc2 1,000.00 510.1

Settle ReverseOrder expiration Cash flow History

Collective Processing: List

The collective processing function enables you to process transactions efficiently. From the collective processing list, you can branch to the relevant transaction, to the cash flow, or to the

history. You can also use a number of important processing functions: For example, you can change, settle, or reverse the transactions you have selected.

The collective processing function provides you with a flexible list display via the ABAP List Viewer. You can:

- Define and save your own display variants- Sort according to any field- Filter according to any values- Form group totals

(C) SAP AG AC030 26

5.27

SAP AG 1999

Company code TRXXID number 5557XXSecurities acct Deuba Acc1

Pos.val.date FType Name FStat No. units Curr. Sttlmnt amnt Sett.curr.

01/21/YYYY 1000 Purchase I 10,000.00 UNI 746,500.00 UNI

3012 Comm. not cap. I 0.00 UNI 1,000.00 UNI

05/16/YYYY 2000 Sale P 3,000.00 UNI 276,000.00 UNI

8114 Sec. price gain P 0.00 UNI 52,050.00 UNI

07/21/YYYY 5013 Dividend P 7,000.00 UNI 10,500.00 UNI

... ... ... ... ... ... ... ...

Double-click - details

Securities Account Cash Flow

The securities account cash flow reflects the cash flow for a company code for one ID number in a particular securities account. Double-click on any item to display more detailed information.

(C) SAP AG AC030 27

5.28

SAP AG 1999

Post Transaction

TransactionTransaction

postpostpost

Posting logPosting log

40 113105 276,000.00 UNI D40 113105 276,000.00 UNI D

5050 4504445044 276,000.00 UNI276,000.00 UNI CC

AccountingAccounting document created in FIdocument created in FI

113105

276,000.00

133020

276,000.00

When you post a transaction, the system generates a posting log showing you what the Financial Accounting document will look like.

You must ensure that the relevant accounts and the required document types already exist in Financial Accounting for the posting activities.

(C) SAP AG AC030 28

5.29

SAP AG 1999

Company code

ID number

Securities account....

Posting data

SEC posting doc. no.

Fl document number

to

to

to

to

...

....

...

...

TR00

execute

CoCd Daybk no. ID number SecAcc FType Name PC amnt Pos.curr.

TR00 000000056 5557XX Deuba 1 200 Sale 276,000.00 UNI

double-click to FI document

Pstg date Doc. no. PK Debit acct PK Credit acct

05/18/YY 100000132 40 113105 50 133020

General selections

5557XX

Position Management Posting Journal: View

The position management posting journal in the securities area gives you detailed information about all the flows that have been posted according to the selection criteria entered. Double-click the document number to branch directly to the FI document.

The posting journal offers you a flexible list display via the ABAP List Viewer. You can:

- Define and save your own display variants- Sort according to any field- Filter according to any values- Form group totals

(C) SAP AG AC030 29

5.30

SAP AG 1999

Exercise: Concluding Securities Transactions Integration to Cash Management

(C) SAP AG AC030 30

5.31

SAP AG 1999

Incorrect chronological orderPurchase stock100 units @ 230

IncorrectIncorrectprice lossprice loss

New price loss 6000 planned(60 x 100 units sold)

t

Price gain/loss determined as 6000 actualPrice gain/loss determined as 6000 actualNo further postings possible during this periodNo further postings possible during this period

Period-end closing

Purchase stock100 units @ 270

Sell stock100 units @ 190

Price loss 8000 planned (80 x 100 units sold)

New ave. price 250

Period-End Closing: Securities

Realized price gains/losses from sales of securities are initially kept in the system as planned records. This ensures that price gains/losses are always recalculated even if sales and purchases of securities are not entered in the system in chronological order.

Period-end closing concludes a period in the past, posts the current up-to-date price gains/losses, and ensures that no further purchases or sales are posted during this period.

(C) SAP AG AC030 31

5.32

SAP AG 1999

Financial Transactions in the Medium and Long Term: Create Class Master Data

Having decided to invest the funds in a new bond, our model company now has to specify the class master data for this bond.After purchasing the bond using the funds available, it reviews the portfolio/securities account evaluations and the impact on Cash Management.

(C) SAP AG AC030 32

5.33

SAP AG 1999

Security ID number: 2132xx

Term: 10/21/YYYY - 10/20/YY+10

Interest rate: 5.25 %

Issue price: 100%

Class Data Notation

New bond with the following conditions:

(C) SAP AG AC030 33

5.34

SAP AG 1999

USER LEVEL

SYSTEM LEVEL

010 Stock:

040 Bond:

- Fully-paid stock- Partly-paid stock- Variable-rate bond

- Fixed-interest security . .

SAP comm.SAP pref.

Federal bond. . .

Class

Product typeProduct type ClassClass


Purchases and sales are the main types of transactions in the securities area. Each security traded on the capital market is described by its class. Class (master) data contains all the characteristic data of a security that stays the same regardless of the transaction.

Example 1: The nominal value, the stock type (common stock), or the stock form (old stock) are defined for class SAP common stock.

Example 2: The issue start, the due date, and the interest structure are defined for class 6 % Federal bond 1996II/2006.

(C) SAP AG AC030 34

5.35

SAP AG 1999

StockStock

Subscription rightSubscription right

Investment Investment certificatecertificate

Equity warrantsEquity warrants

Currency warrantsCurrency warrants

Bond warrantsBond warrants

Index warrantsIndex warrants

BondBond

Warrant bondWarrant bond

Convertible bondConvertible bond

Class

ShareholdingShareholding

Classes: Product Categories - Overview

You create each security with a specific ID number and assign it to a product type. Each product type is based on one of the product categories predefined in the system.

You can create class master data for each product type for the following product categories:Stocks, subscription rights, investment certificates, bonds, warrant bonds, convertible bonds, equity warrants, currency warrants, bond warrants, index warrants, and shareholdings.

(C) SAP AG AC030 35

5.36

SAP AG 1999

Create Class: Bond

ID number 2132XX

Names

Short name Fixed-interest bond 96/06

Search crit.

Fixed-interest bond 96/06

Classification...

Product category 040 Bond

Product type 041 Fixed-interest bonds

The class master data for bonds comprises basic data, conditions, and other data.

(C) SAP AG AC030 36

5.37

SAP AG 1999

Create Class: Bonds - Basic Data

Stock swap

ID number Fixed-interest bond 96/062132XX

Basic data

Issue

Issuer

Issue currency

West LB

UNI

Nominal value 1,000.00 Nominal per TU 1,000.00

Westdeutsche Landesbank

Structure

Quotation Perc.-quoted

Security type Bearer security

End of term

Issue rate 100.0000

Issue start 10/21/YYYY 10/21/YY+10

The class master data for bonds comprises basic data, conditions, and other data. Selected fields in the basic data screen for bonds are described below:

Nominal value: Nominal value per individual security.Nom.per trading unit: Minimum nominal value that can be traded Quotation: Percentage-quoted

Unit-quotedSecurity type: E.g. Bearer security

Registered securityRegistered security with limited transferability

(C) SAP AG AC030 37

5.38

SAP AG 1999

Create Class: Conditions

ID number 2132XX

Conditions

Stock swapInterest calculation

Int. calc. method Act/ActP

Calc. datePercentEff. fromCondition type text

Condition items

Interest 10/21/YYYY 5.25 10/20/YY+1 12

CR

1

Due date

10/21/YY+1

CR Frq

Fixed-interest bond 96/06

Stock swapRepayment

Repayment type Maturity

Curr.

UNI

Final repayment 10/21/YYYY 0.00 10/20/YY+10 0110/21/YY+10UNI

A condition item consists of several entries for a condition type. Selected fields in the conditions screen for bonds are described below:

Effective from: Date from which the condition is validPercent: Nominal interest rateCalculation date: Last day when interest is calculated in the current interest periodDue date: Day when the interest payment is dueCalendar rule (CR): The calendar rule allows you to shift the relevant date entries

to a working day, if required. Examples: 0 : No shift

1 : Following working day3 : Previous working day

Shifting the due date to a working day makes it easier to reconcile the accounts when interest payments are made. The calculation date is the basis for the financial mathematical activities. It is fixed and is usually managed by calendar rule "0". Frequency (Frq): Number of months in the interest-paying period

(C) SAP AG AC030 38

5.39

SAP AG 1999

Exercise: Creating Class Master Data

(C) SAP AG AC030 39

5.40

SAP AG 1999

Alternative I:

Bank account

Dividends Nominal interest P

Bank clearing account I

automatic posting

Account statement

Bank clearing to revenue

Bank to bank clearing

FI

Automatic Posting I

The automatic posting function enables you to automatically process flows that occur regularly whose dates and amounts are fixed in advance. It can be used, for instance, for posting interest, dividend or repayment flows, in other words, flows generated by the conditions.

Planned records must exist (such as planned records for interest received) before you can perform automatic posting. In principle, you can process flow types belonging to all flow categories here.

To use the automatic posting run, you first have to post all the flows that change the position for the ID numbers and securities accounts you have selected up to the due date you want the automatic posting to take place.

There are two procedures for processing regularly recurring flows:- Alternative I:When you use the one-step procedure, you post the flows directly to the bank clearing accounts. These are cleared in Financial Accounting when the account statement is imported.- Alternative II:When you use the two-step procedure, you first post the expected payments to receivables accounts.

After the account statement has been imported, the bank clearing accounts are cleared in subledger accounting and the incoming payment is triggered.

(C) SAP AG AC030 40

5.41

SAP AG 1999

1

1

IP

IP

F I

Dividend / Nominal interest P

automatic posting Receivables to income

Receivables account IBank clearing account P

Account statement Bank to bank clearing

Bank account

Incoming payment Bank clearing to Receivables

Bank clearing account I

Alternative II:

Automatic Posting II with Incoming Payments

Two-step procedure:

In the first step, you post the selected planned records as actual records in Treasury using the automatic posting function. The corresponding posting records are transferred automatically to G/L accounting in FI (in this case, via the interim receivables accounts).At the same time, the system generates the corresponding planned records for incoming payments.

[In G/L accounting in FI, a cash receipt triggers posting to the bank clearing account.]

In the second step, the incoming payments planned records that were generated by the automatic posting function are posted as actual records in Treasury. The corresponding posting records are transferred automatically to G/L accounting in FI. There, both the receivables account and the bank clearing account can be cleared.The incoming payments flows are generated in settlement currency and in position currency. This means that you can also represent interest payments for euro bonds in USD.

You use the incoming payments function to postprocess and post flows that were created using the automatic posting function. Whereas the automatic posting function posts several activities together, you can only process one activity at a time when you use the incoming payments function. The same also applies to manual posting as for the incoming payments function, in that you can only process flow types belonging to certain flow categories.

(C) SAP AG AC030 41

5.42

SAP AG 1999

As a result of the good conditions offered by one of the model company's house banks, the company opens another securities account with this bank.Having discussed the various position management options, the company decides to assign the new securities account to the existing portfolio and to manage positions at portfolio level. The company buys and sells the newly-issued bond again for this new securities account and focuses its attention on the updating of acquisition and book values relating to the portfolio.

Defining Organizational Elements:Portfolios and Securities Accounts

(C) SAP AG AC030 42

5.43

SAP AG 1999

Company codeCompany codepositionposition

PortfolioPortfolioposition 1position 1

Sec. acctposition 1

Sec. acctposition 2

Singleitems

PortfolioPortfolioposition 1position 1

Securities Account and Portfolio

Singleitems

Securities accounts are valuation and management units used for position management and valuation. They are needed for all financial transactions that require position management. This mainly applies to listed securities.

You can carry out typical functions such as securities account statements, position evaluations, and transfers on the basis of securities accounts. Securities accounts are usually linked to an existing securities account with a bank.

A portfolio is an organizational entity within a company code which allows you to group certain financial transactions and positions and to perform aggregated position evaluations. You can also use the portfolios as valuation units to calculate, for instance, the average price of the various purchase prices paid for securities (average cost price).

Portfolios also act as a risk management instrument for controlling and evaluating a company's risk positions.

(C) SAP AG AC030 43

5.44

SAP AG 1999

Company code TR00

Portfolio Portfolio name

BESTAND_1 Securities portfolio 1

BESTAND_2 Securities portfolio 2

BOND Bond portfolio

FXPORT Forex portfolio

KREDIT Credit portfolio

MONEY_1 Money market portfolio 1

U_UMLAUF Current assets

V_ANLAGE Fixed assets

MONEY_2 Money market portfolio 2

Treasury: Portfolio

TR00

Define Portfolios

Portfolios are defined according to the company-specific requirements using the settings in Customizing. One possible example is a trader portfolio.

You assign financial transactions or positions to portfolios either directly via the entry for the transaction or indirectly via securities accounts.

(C) SAP AG AC030 44

5.45

SAP AG 1999

Securities Account Master Data

Company code

Securities account

Sec. account name

Deuba Acc4

TRXX

Stock swapBank information

Depository bank

Sec. account no.

DEUBA

22224446

Clearing account 44555677

Deuba Securities Account 4

Stock swapHouse bank

House bank

House bank account

DB

GIRUN

Stock swapDisposition block

Blocking type

Block flag until

Stock swapAssignments

Business area

Portfolio Portfolio 1

The securities accounts you create in the SAP System are usually linked to an existing securities account with a bank.

Below is a description of selected fields for the securities account master data:Depository bank: Partner ID of the bank where the securities account is kept. You must first create the bank as a business partner in the role of "depository bank".Securities account no.: Number used to manage the securities account at the depository bank.Clearing account: Account number of the cash clearing account at the depository bank.House bank: Name of the bank at which the cash clearing account for the new securities account is kept.House bank account: Name of the cash clearing account within the SAP System.Blocking type: You have to enter the blocking type if a restraint on disposal applies to the entire securities account. Block flag until: Date until which restraint on disposal applies to the securities account.Portfolio: Securities accounts are assigned to a portfolio.

You have to set the portfolio indicator in Customizing if you want this field to be displayed.Business area: The system uses the business area entered in the securities account master data when you post a transaction. If no entry is made, the system uses the entry for the account assignment reference.

You can delete securities account master data if no position indicator and no transactions exist/have existed.

(C) SAP AG AC030 45

(C) SAP AG AC030 46

5.46

SAP AG 1999

Company code

ID number

TRXX

2132XX

Entering position management and valuation parameters:

Securities acct DEUBA ACC4

Master Data: Position Indicator - Initial Screen

The position indicator determines how the positions relating to a specific ID number are to be managed and valued. For one ID number you can define this for both the entire company code and for a specific securities account. To display the assignment for a securities account, you enter the corresponding securities account in the selection screen.

The position indicator is used mainly for assigning the account assignment reference (automatically, if required), and assigning the valuation and position management parameters.

(C) SAP AG AC030 47

5.47

SAP AG 1999

Master Data: Position Indicator - Data

Company code

ID number

Securities account

TRXX

2132XX

SECACC4

Company code position data

Valuation class SEC FA

Exchange

Pos.mgt proc. Standard

Securities account position data

Valuation class SEC FA

Acct assign. ref. 42000000

Pos.mgt proc. Standard

Custody type

Frankfurt Stock Exchange

Valuation class: If portfolio valuation is not activated, you can set valuation parameters for this class that differ from

those defined in Customizing. You do this in the position indicator. Position management procedure:

The position management procedure determines whether price gains are calculated and amortization flows generated, and if so, how.

Exchange: Name of the exchange that is relevant for the securities valuation price.

Account assignment reference: Here, you define, for example, the securities balance sheet account.

You also define the data that is relevant for the German regulatory reporting. In the position indicator, you can either maintain data just for the company code position or for the

securities account position. In the latter case, the system calls up the data entered for the securities account. This means the securities account entries take preference.

(C) SAP AG AC030 48

5.48

SAP AG 1999

Exercise: Defining Organizational Elements:Securities Accounts and Position Indicators

(C) SAP AG AC030 49

5.49

SAP AG 1999

In addition to the position management options already dealt with, our model company needs to determine the (un)realized gains and losses from securities transactions before it can drawup its balance sheet. Using the example of the bonds bought and sold so far, the typical processes for valuation and calculation of the related (un)realized gains/losses are described.

Financial Transactions in the Medium and Long Term: Accounting Functions: Valuation

(C) SAP AG AC030 50

5.50

SAP AG 1999

Portfolio 1

SecAcct 1 SecAcct 2

SingleSingleitemsitems


for all securities accounts

at portfolio level

at securities account level

for single items

Position Management Alternatives

(C) SAP AG AC030 51

5.51

SAP AG 1999

Position management Valuation categoriesUpdating acquisition values and book values

Portfolio 1

SecAcct 1 SecAcct 2



For all securities accountsValuation category 20

At portfolio levelValuation category 20 and portfolio indicator

At securities account levelValuation category 21

For single itemsValuation category 10

VC - Valuation category10 Zero bonds: Single analysis - manual allocation11 not supported ! Single analysis - Allocation via FIFO12 not supported ! Single analysis - Allocation via LIFO20 Position management for all sec. accts (and valuation)21 Position management for spec. sec.accts (and valuation)

Position Management and Valuation Categories

The position management function in the securities component is controlled by the assignment of valuation categories. You can manage positions for all securities accounts, at portfolio or securities account level, or per individual item.

The acquisition values and book values are calculated automatically when you assign valuation categories.

(C) SAP AG AC030 52

5.52

SAP AG 1999

Notdisclosed

Disclosedup to

key date value

NotNotdiscloseddisclosed

Scenario 2

DisclosedDisclosedupup to max. to max.

acquisition valueacquisition value

Scenario 4

Disclosed Disclosed upup to to key date valuekey date value

Scenario 1

Gains

Losses

Scenario 3

Scenario 6

Scenario 5

Valuation Principles (One-Step): Scenarios

In the securities area, gains lead to write-ups, and losses write-downs. The general rules for creating write-ups/write-downs are defined by the valuation principles outlined in

Customizing. From the possible scenarios, the definitions are made in line with legal regulations.

(C) SAP AG AC030 53

5.53

SAP AG 1999

Valuation principleName of valuation principle

Valuation method 1

Valuation loss

Valuation gain

101

Valuation loss up to key date value2

2 Valuation gain up to acquisition value

1-step valuation LC basis

Valuation loss0 No valuation loss2 Up to key date value

Valuation gain0 No valuation gain2 Up to acquisition value4 Up to key date value

Disclosedto max.

key date value

DisclosedDisclosedupup to max. to max.

acquisition valueacquisition valueScenario 4

Valuation Principles (One-Step)

(C) SAP AG AC030 54

5.54

SAP AG 1999

Valuation classValuation class

Val.cl. VC VPr.Fixed 20 101Single 10 101Collect. 20 102Current 21 102

Val.cl. VC VPr.Fixed 20 101Single 10 101Collect. 20 102Current 21 102

Valuation areaValuation area

01 FinancialStatement

Tax balance sheetPortfolio viewBusiness view

01 FinancialStatement

Tax balance sheetPortfolio viewBusiness view

Valuation parameters per company code or sec. account position

Valuation parameters per company code or sec. account position

01 Financial StatementFixed assetsPortfolio valuation

02 Business viewCurrent assetsPortfolio valuation

01 Financial StatementFixed assetsPortfolio valuation

02 Business viewCurrent assetsPortfolio valuation

VPr - Valuation principle001 Valuation method, one-step:dependent on total amount in local currency

Valuation loss0 No valuation loss2 Up to key date valueValuation gain0 No valuation gain2 Up to acquisition value4 Up to key date value

002 Valuation method, two-step:split according to security price / exchange rate.......

VC - Valuation category10 Zero bonds: Single analysis - manual allocation11 not supported ! Single analysis - FIFO12 not supported ! Single analysis - LIFO 20 Position management for all sec. accts21 Position management for spec. sec. accts

General Concept: Securities Position Management and Valuation

Positions may be valued on any key date. You can also carry out simulation or test runs without generating postings.

The valuation class consists of a combination of the valuation principles and valuation methods. The valuation area restricts the area for which the valuation is valid. At present, it is planned to support

various valuation areas here. This will allow you to use several valuation classes for position valuation. Currently, only the financial statement is supported.

The valuation parameters consist of the valuation area and the valuation class. These parameters can be maintained for the entire company code position (as default values) or for a single securities account (by defining the position indicator). You can also define in these settings whether you want to perform valuation at portfolio level.

(C) SAP AG AC030 55

5.55

SAP AG 1999

Evaluation reports in the Information System

Integration to R/Integration to R/33 FFinancialinancial AccountingAccounting

Master dataMaster data

Master dataMaster dataBusiness partnerClass master dataSecurities account

master dataPosition indicator

Exchange ratesSecurities pricesOthers

Transaction Transaction managementmanagement

Purchases/sales

Exercise rights ...

PositionPositionmanagementmanagement

Valuation

Corporate actions

Transfer postings ...

Securities Management: Overview

The securities management module enables you to manage securities transactions and positions. The resulting posting activities are transferred to the Financial Accounting module automatically.

To use the management processes, you must first create master data. For example, you have to create a security as a class with its relevant structure and condition characteristics, before you can represent the purchase (or sale) of this security in the system.

In the information system, you have the option of generating evaluations both using master data and transactions and positions.

(C) SAP AG AC030 56

5.56

SAP AG 1999

Loans Taken

Our model company has long-term financing requirements.We have decided to finance our activities by taking out a loan with our house bank.

Financial Transactions in the Medium and Long Term: Scenario: Loans Taken

(C) SAP AG AC030 57

5.57

SAP AG 1999

LoansManagement


General loans

Policy loans

Mortgage loans

Loans Given - Loans Taken

General loans

Mortgage loans

Loans taken=

Loans received

Loans given=

Loans granted

The SAP Loans Management module supports various loan forms:Mortgage loans:Loans that are linked to a lien upon real property (encumbrance).Borrower's note loans:Loans based on a borrower's note. Policy loans:Loans related to a policy (such as a life insurance policy).General loans:You choose this option for all other forms of loan (for example, loans to employees).

Loans given: All loan forms are supported Loans taken: "Mortgage loans" and "General loans" are supported

(C) SAP AG AC030 58

5.58

SAP AG 1999

Integration with R/3 Financial Accounting / TR Cash Management

Master dataMaster data

Business partnerCredit standing checkNew business tablesFiled documentsCollateralObject master dataCollateral values

Transaction mgmtTransaction mgmt

Inquiry by interested party

Application

Offer

Contract

Rollover

Process management

Transfer postings

. . .

Position mgmtPosition mgmt

Evaluation Reports - Information System

New Loan Transactions: Process Overview

The Loans Management component takes a process-oriented view. You can manage loans at each stage and link them to different master data.

Numerous position management functions are available for loans that have been entered in the system. The transactions in Loans Management are integrated with the R/3 Financial Accounting and TR Cash

Management components. Several programs are available for running evaluations according to different criteria.

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Evaluation Reports - Information System


ContractContractContract offerContract offerInterested partyInterested party ApplicationApplication ContractContract

• Mortgage loans • Mortgage loans• General loans

• Mortgage loans• General loans

• Mortgage loans• General loans

Possible Procedures for Loan Processing

There are separate menus for each type of loan. These contain the possible steps in the loan process. The process is most complex for mortgage loans. All loan forms are integrated with R/3 FI and TR-CM, and can be evaluated according to various

criteria.

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Loans Given/Taken and Posting

Loans given

Posted to customeraccounts

- Yes- No payment details

(PD)- Use of FI payment program

- Yes- PD can be used- Payment program for

payment requests can be used

- No

- Yes- PD can be used- Payment program for

payment requests can be used

Loans taken

Not posted to customeraccounts

If a product type is not managed on the basis of customer accounts, you can permit the user to enter payment details in the transaction by activating the corresponding indicator in the detail screen for the product type in Customizing. The following functions are then available: Maintenance of payment details for the loan/borrower's note order; possible to let the system default to

data from the business partner standing instructions. Update in Cash Management using the house bank and house bank account specified in the payment

details. Use of the replacement rule in account determination for the house bank account that is specified in

the payment details. Generation of payment requests. Netting with other payments processed using payment requests.

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SAP AG 1999

1. Disbursement: a) "Preliminary posting": Bank clearing to Balance sheet

b) Bank statement: Bank to Bank clearing

2. Debit position: a) "Preliminary posting": Balance sheet to Bank clearingInterest expense

b) Bank statement: Bank clearing to Bank

I. Without customer account

General Posting Options I

If the loan is not managed on the basis of customer accounts, the postings are made directly to G/L accounts (I).

If you do not use customer accounts, the functions for entering payment details are available for payment processing.

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SAP AG 1999

General Posting Options II

1. Disbursement: a) "Preliminary posting": PR clearing to Balance sheet

b) Payment progr. for PR: Bank clearing to PR clearing

c) Bank statement: Bank to Bank clearing

2. Debit position: a) "Preliminary posting": Balance sheet to PR clearingInterest expense

b1) We pay by direct debit:

Bank statement: PR clearing to Bank clearing

Bank clearing to Bankorb2) We pay by bank transfer:

b) Payment progr. for PR: PR clearing to Bank clearing

Bank statement: Bank clearing to Bank

II. Without customer account, using payment program for payment requests (PR)

If you do not use customer accounts, the functions for entering payment details are available for payment processing. In this case, you can either make a "direct" posting (see I), or use a payment request (see II).

If you use payment requests, the posting logic is the same as for loans managed on the basis of customer accounts, except that the customer account is replaced by a clearing account for payment requests. This account can then be cleared by a payment program (SAPF111).

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(Current account) bank statement

Post interest payments/repayments due

Payment program and/or bank statement

Transaction Process: Example

(Application / Offer) / Contract

Contract disbursement

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SAP AG 1999

Application Transfer to contract

Offer Transfer tocontract

Application Transfer to Transfer tooffer contract

or:

Decision-making

3

2

1

4Application Transfer to

contract

Createcontract

Transfer to contract

Transfer to contract

Transfer to offer

Application

Offer

Contract - 4 Ways of Entering Contracts in the SAP System

Once you have entered a contract and posted the disbursement, the system creates a corresponding loan position in the balance sheet.

You can also map the process leading up to conclusion of the legally binding contract, and enter initial loan data in the form of an application. Further details can be added during the offer phase, or when you draw up the final version of the contract.

The stages through which a loan must (or can) progress (application, offer, contract) depend on your Customizing settings.

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Financial Transactions in the Medium and Long Term: Scenario: Create Contract

Create contract

The legally binding loan contract with our house bank has been signed.

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ContractContract

ChangeChange

DisburseDisburse

WaiveWaive Full waiver

Partial waiver

DisplayDisplayCreateCreate

ReactivateReactivate

Contract - Function Overview

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SAP AG 1999

Create Contract: Initial ScreenCreate Contract: Initial Screen

Company code

Loan number

Product type

0001

/internal/

33A

E N T E R

Business partner selectionRole category: Main loan partner

Loan - Initial Screen

As the borrower, you enter your business partner. You can specify a business partner that has already been defined in the system or create a new partner.

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Basic dataBasic data ConditionsConditions CollateralCollateral CorrespondenceCorrespondence

Loan type

Loan class (standard loan, interim loan) ...)

Contract currency (UNI, EUR ...)

Commitment date

Purpose of loan (personal loan, building loan, ...)

Term (term < 1 year ...)

Contract - Basic Data

Uses of basic data:

- Data for information purposes- Data for reporting evaluations- Values for determining the account assignment reference automatically

The following short forms help to speed up data entry:

Date entries: 0 : today+n : today + n days-n: today - n days++n: today + n months+++n: today + n years

Amounts: T or t for thousands, M or m for millions(You can rename the abbreviations T/t and M/m in Customizing.)

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Loan contractLoan contractLoan contract

Annuity repmntfrom 05/01/YY4.0%

Condition items

Condition header

Interestfrom 05/01/YY6.0%

Interestfrom 05/01/YY+35.5%

Fixed periodfrom 05/01/YY

04/30/YY+3

Fixed periodfrom 05/01/YY+3

04/30/YY+6

Chargesfrom 05/01/YYUSD 100

Condition Header / Condition Items

The combination of the condition header and the condition items provides a high degree of flexibility when you set up the loan conditions.

The condition header contains date details (such as Fixed until) as well as information relevant for all items (such as Disbursement rate, Effective interest rate or Effective interest method).

Each condition item contains information relating to that particular condition type (such as nominal interest). You assign an effective period to each individual condition. This allows you to represent a condition structure in which the conditions change within the fixed period (example: an interest rate that changes annually for a fixed period lasting several years).

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Condition header:

- Commitment capital

- Disbursement rate

- Repayment type (instalments, annuity, full repayment upon maturity)

- Start of term / end of term

- Fixed from / fixed to

- Effective interest method (PAngV, Braess ...)

- ...

Contract - Condition Header

The condition header contains the basic condition data for the loan, including:

- Start of term / end of term: Term of the loan- Fixed from / fixed to: The period for which the first set of conditions applies. The fixed from / fixed to period can be the same as or shorter than the loan term.

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Condition items:

For each condition type (fixed nominal interest / instalment

repayment / charge ...):

- Effective from

- Percentage rate or amount

- Calculation date

- Due date

- Exact payment form

- ...

Contract - Condition Items

You enter the individual conditions as condition items.

The calculation date relates to the calculations in financial mathematics. In the case of an interest condition, for instance, this would be the last interest date for the corresponding interest period.

The due date is the date on which payment is due.

The "exact payment form" (PE - Payment form with adjustment days) is the combination of the payment form (at the start of the period, mid-period, at the end of the period) and the frequency in months (monthly, quarterly, six-monthly ...). It tells you exactly up to when the amounts have been calculated and when they are due.

You can enter all the data for the condition items manually, or enter certain "initial values" and let the system fill the remaining fields. To use the latter option, you must specify the commitment capital, the effective period for the condition, the percentage rate or amount, and the exact payment form (or payment form and frequency).

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SAP AG 1999

Condition Items - Fields

Condition items

Cond.type text

Nominal int.

Inst. repaymnt

Eff.from Percent Amnt Curr. Lvl IS PF PE Frq Due on ED Calc.date MC CR

05/01/YY 6.0000 UNI 3 VN 3 06/30/YY 06/30/YY

305/01/YY 2,000 UNI VN 3 06/30/YY 06/30/YY

... ... ... ... ... ... ...... ... ... ...

Explanation of field names:

Lvl: Level number of condition items for recurring condition types

IS: Immediate settlement

PF: Payment form (at start of period, mid-period, at end of period)

Frq: Number of months in period

PE: Payment form - exact day (with adjustment days)

ED: End-of-month indicator for due date

MC: End-of-month indicator for calculation date

CR: Calendar rule. You can use the calendar rule to shift a public holiday, Saturday or Sunday to a working day. This is not usually applied to the calculation date (the interest calculation does not depend on whether the day is a working day), but is relevant for the due date (payments can only be made on a working day). Example: Due date 01/01/YY (relevant for calculating the capital amounts) is shifted using the calendar rule to the next working day 01/03/YY, and

(C) SAP AG AC030 73

referred to as the payment date (relevant for processing in accounting).

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SAP AG 1999

Basic loan dataBasic loan data

Condition header

Cash flowCash flow

Condition items

Planned records

------------------------------------------------------

Condition Structure

The condition structure in Loans Management is based on the central condition concept.

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SAP AG 1999

Calculate cash flowCalculate cash flow

Basic dataBasic data ConditionsConditions CollateralCollateral ObjectsObjects Correspon-dence

Correspon-dence

Loans - Cash Flow

Due on

05/01/YY06/30/YY06/30/YY09/30/YY09/30/YY12/31/YY12/31/YY03/31/YY+103/31/YY+106/30/YY+106/30/YY+109/30/YY+109/30/YY+112/31/YY+112/31/YY+103/31/YY+203/31/YY+2

Settlement amnt

100,000.001,166.671,333.331,726.672,000.001,691.672,000.001,656.672,000.001,621.672,000.001,551.672,000.001,516.672,000.001,481.672,000.00

Curr.

UNIUNIUNIUNIUNIUNIUNIUNIUNIUNIUNIUNIUNIUNIUNIUNIUNI

Bezeichnung P

SPPPPPPPPPPPPPPPP

FType

10011110112011101120111011201110112011101120111011201110112011101120

L_Loan disbursem.L_Interest payableL_Inst. rep. payableL_Interest payableL_Inst. rep. payableL_Interest payableL_Inst. rep. payableL_Interest payableL_Inst. rep. payableL_Interest payableL_Inst. rep. payableL_Interest payableL_Inst. rep. payableL_Interest payableL_Inst. rep. payableL_Interest payableL_Inst. rep. payable

On the basis of the conditions belonging to a financial transaction and the specified calculation period, the function modules for financial mathematics for the relevant application (such as stock purchase, swap, loan contract) calculate a series of payment flows for the transaction. This series of flows is referred to as the cash flow.

The cash flow for financial transactions is used as the basis for all trading, transaction management and position management processes, as well as for the evaluation activities within Treasury.Processes based on the cash flow include:- Effective interest calculation- Posting- Accrual and deferral of expenses and revenues

The cash flow display is linked to the ABAP List Viewer. Flow types explain the different changes to the cash flows. Together, all the flows of a transaction form

the basis for generating the cash flow, and for further processing, such as posting. The cash flow contains all the flow records in chronological order and is used as a basis for updating the transaction data in Financial Accounting, Cash Management, and Market Risk Management.Typical flow types are fixed or floating interest, increases in nominal amounts, or commission.

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SAP AG 1999

IDES AG

AIBD/ISMA Braeß Moosm. PAngV

Scaling period 05/01/YY to 04/30/YY+5

Contract no.: 10000000

Effective rate: 7.79600

Page 1

% PANGV

Value date

05/01/YY06/30/YY06/30/YY09/30/YY09/30/YY12/31/YY12/31/YY03/31/YY+103/31/YY+105/01/YY+106/30/YY+106/30/YY+1

Activity

L_DisbursementL_Instalment repmtL_Interest payableL_Instalment repmtL_Interest payableL_Instalment repmtL_Interest payableL_Instalment repmtL_Interest payableInterest capitalizationL_Instalment repmtL_Interest payable

Amount

100,000.00 1,333.33-1,166.67-2,000.00-1,726.67-2,000.00-1,691.67-2,000.00-1,656.67-6,777.93 2,000.00-1,621.67-

Balance

100,000.0098,666.6797,500.0095,500.0093,773.3391,773.3390,081.6688,081.6686,424.9993,202.9291,202.9289,581.25

Days

59

90

91

90

3059

90

Interest

1,179.34

1,754.03

1,705.73

1,620.57

518.261,099.18

1,611.57

Effective Interest Calculation

The system uses both planned and actual records to calculate the yield. The key flow information is derived from the condition items.A special feature in Loans Management is that the yield is calculated on the basis of the cash flow. This avoids the disadvantages of a conventional solution with mathematical formulas. It also allows you to include any of the various price components or flows (for example, insurance premiums) in the yield calculation. You can switch between different yield calculation methods and compare the results.

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SAP AG 1999

PAYMENT SCHEDULE Loan no. 10000000 05/01/YY

Mortgage loan

UNI 150,000.00

Universal currency

Loan type:

Commitment capital:

Display currency:

Conditions

L_Nominal int.

L_Instalm. rep.

Pmnt date

05/01/YY

06/30/YY

09/30/YY

12/31/YY

03/31/YY+1

Eff. from

05/01/YY

05/01/YY

Payment

2,500.00

3,726.67

3,691.67

3,656.67

Percent

7.00000 %

Interest

1,166.67

1,726.67

1,691.67

1,656.67

Amount

2,000.00

Frequency

Quarterly

Quarterly

Repayment

1,333.33

2,000.00

2,000.00

2,000.00

Calculation from:

Calculation to:

Start of term:

End of term:

Fixed period end:

05/01/YY

04/30/YY+5

05/01/YY

04/30/YY+10

04/30/YY+5

First

06/30/YY

06/30/YY

Other

IntCalcMth

360/360

360/360 Imm. settlem.

100,000.00

98,666.68

96,666.67

94,666.67

92,666.67

Remaining bal.

Payment Schedule

The system generates a payment schedule on the basis of the planned records in the cash flow. The payment schedule contains general loan data as well as the individual condition items. It lists all the payments for the fixed period, divided into interest payments and repayments, with the corresponding outstanding balance.

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SAP AG 1999

Exercise: Create Contract

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SAP AG 1999

Financial Transactions in the Medium and Long Term: Scenario: Disbursement

Disbursement received

Our house bank will credit the loan amount to our current account.We want to post the expected incoming payment in advance.The bank statement will tell us when the loan amount is actually credited.

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SAP AG 1999

Create Disbursement: Basic DataCreate Disbursement: Basic Data

Disbursement basic data

CoCd

Loan

Flow typeTextPayment dateIntValDateWithhold. up toPosting control

House bankAccount ID

L_Loan disbursement receivable

Capital dataCurrent contr. cap.Nominal capitalDisbursement in %Gross pmnt amountNet pmnt amount

Disbursement rate

General loan

Loan partner 00

0001

40000000

33B

1001

05/01/YY05/01/YY05/01/YY

100,000.00 UNI0.00

100.0000100,000.00 UNI

100.00000

99,900.00

Automatic debit position

Incl.

Contract: Disbursement

DBGIRUN

The entries for the disbursement have the following effects:- Payment date: Disbursement date that is transferred to FI and Cash Management- Interest value date inclusive/exclusive: Interest for the disbursement amount is calculated for the

disbursement date / is not calculated for the disbursement date- House bank: The system defaults to the house bank defined in the standing instructions (payment

details). - Disbursement in %: Full disbursement or partial disbursement- Net/Gross payment amount: If you have partial disbursements with incidental costs, you must

decide whether the incidental costs reduce the disbursement amount (net) or increase the disbursement amount counted towards the calculation capital (gross). (Gross: value-dated amount; net: payment flow)

Example: Capital 100,000 UNI. First partial disbursement 40%. Incidental costs 2,000 UNI. Case 1: Gross pmnt amount 40,000 --> net pmnt amount 38,000, or Case 2: Gross pmnt amount 42,000 --> net pmnt amount 40,000. Last partial disbursement 60%, no incidental costs: Gross/net Case 1: 60,000; Case 2: 58,000.

(C) SAP AG AC030 81

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SAP AG 1999

Disburse Contract: Incidental Costs

Create Disbursement: Incidental CostsCreate Disbursement: Incidental Costs

Capital amounts

Available capital Value-dated capital

Flows

Flow Name

Company code

Loan0001 33B

40000000

Due on WithheldSettlementamount

Pmt meth.

100,000.00 100,000.00

6145 05/01/YY 100.00 XProcessing charges

......

If you want to make charges for (one-time) incidental costs, you must enter these charges here. You define which flow types are permitted in Customizing.The incidental costs you enter here can be withheld from the disbursement amount (flag: W/H). Alternatively, you can post the incidental costs separately (W/H flag not set). If you want to trigger the payment yourself later on, you must enter a payment method for processing with the payment program.

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SAP AG 1999

Save / Post Disbursement

Disbursement

Save Post (manually)

P

Manual posting Automatic posting

"Automaticdebit position"

or"Manual

debit position"

"Automaticdebit position"

I I

I

Prerequisite: Field "Posting control":

Prerequisite: Field "Posting control":

You can either post the disbursement immediately (I = actual record), or save it first (P = planned record) and post it later.

The planned record for a disbursement you have saved can be posted in two ways: By calling up the disbursement data for the loan, you can post the individual record manually. Alternatively, you can let the system post the flow automatically with the mass processing function Post Planned Records.The entry you make in the Posting control field for the disbursement determines the type of posting permitted - manual posting only, or both manual and automatic posting.

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SAP AG 1999

Selection of financialtransactions/flows to beposted

Loan contract: Cash flowLoan contract: Cash flow

05/01//YY 150,000.00 Loan disbursement 1001

06/30/YY 1,720.83 Interest payable 1110

06/30/YY 639.05 Annuity rep. payable 1125

05/01//YY 150,000.00 Loan disbursement 1001

06/30/YY 1,720.83 Interest payable 1110

06/30/YY 639.05 Annuity rep. payable 1125

FI interface


Integration with FI

When you post the disbursement, the system calls up the interface to Financial Accounting. Before the disbursement posting, no loan data is transferred to FI.

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SAP AG 1999

Balance sheet account46020

Bank clearing account113105

1) 100,000 100 2)

Other expenses204000

2) 100

1) 100,000

4) 99,900

Technical clearing acct194200

100 3)4) 100

1) Loan disbursement2) Credit position incidental costs3) Incidental costs withheld: Outgoing payment4) Incidental costs withheld: Reduction of disbursement (only posted in FI)

Disburse Contract: Posting

3) 100 100,000 4)

Example: Disbursement of a loan with incidental costs

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SAP AG 1999

Cash flow in contract

Post disbursement

Cash flow in contract

Payment date Settlement amnt Name P FType

05/01/YY 100,000.00 Loan disbursem. P 1001

Payment date Settlement amnt Name P FType

05/01/YY 100,000.00 Loan disbursem. I 1001

'Plannedrecord'

'Actualrecord'

Planned -> Actual Record

Flows that have been entered, but not yet posted, are displayed in the cash flow as P - planned records. Posted flows are displayed as I - actual records.

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SAP AG 1999

Liquidity forecast / cash position

05/01/YY 146,500.00

L o a n d i s b u r s e m e n t

TR-CM interface FI interface

Disbursement postedDisbursement savedDisbursement posted



When you save a disbursement, the system generates planned records and writes them to the database. These records can already be used as a basis for the integration with Cash Management.

If you post the disbursement immediately, the records are also integrated with Financial Accounting. You can then display the corresponding FI document.

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SAP AG 1999

Exercise: Disburse Contract

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5.87

SAP AG 1999

Payment Options

Payment received from lender

By bank transferor

By check

Bank statement

BANK FileNote to payee

~~~~~~~~~~

BANK

Automatic bank statement Manual bank statement/

If the lender pays by bank transfer, we receive the money and the bank statement from our house bank with the corresponding information.

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SAP AG 1999

Bank statement

Manual entry

Interimdataset

G/L accountingdocuments

Postdirectly

Incoming Bank Transfer: Example of Manual Bank Statement

Once the payment appears in the bank statement, the flows for the corresponding account are updated in the system. On the basis of the data entered, the system generates an interim dataset, which then has to be posted. The flows can either be posted directly, or at a later stage using batch input.

The postings always affect the general ledger (bank account and bank clearing account).

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SAP AG 1999

Disbursement Payment (Bank Transfer): Posting

5) Bank statement

99,900 5)

Bank account113100



1) 100,000 100,000 4)


2) 100

1) 100,000

4) 99,900


100 3)4) 100

5) 99,900

3) 100 100 2)

(C) SAP AG AC030 91

5.90

SAP AG 1999

Financial Transactions in the Medium and Long Term: Scenario: Payments Due

Payments due

We want to make the repayments and pay the interest on the agreed due date.The corresponding amounts must be posted as due.

We have arranged to make the payment to the borrower by bank transfer.This payment needs to be triggered in the system.

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SAP AG 1999

Automatic Posting: Post Planned Records

?

to

to

to

to

0001

40000000

Company code

Contract number

Partner

Product type

Upto and incl. due date

x Test run

x Log

40 46020 UNIOther loans

1,333.33 D

40 UNIInterest expenses220000 1,166.67 D

50 113105Bank clearing account

UNI 2,500.00 C

Selection of planned records

Posting control

The future flows that have been calculated for a loan must be posted as "due" on the respective dates. The Post Planned Records function allows you to generate the postings in a mass processing run. For the loans you have selected, it posts all the planned records that have a due date less than or equal to the value entered in the field Upto and including due date.

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SAP AG 1999

6) Post planned records: Post (interest and repayment) amounts due ( P--->I)

Post Planned Records Due

99,900 5)

Bank account113100



1) 100,000 100,000 4)


2) 100

1) 100,000

4) 99,900


100 3)4) 100

5) 99,900

6) 1,333

Interest expenses220000

6) 1,167

1,333 6)

1,167 6)

100 2) 3) 100

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SAP AG 1999

Exercise: Post Amounts as "Due"

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5.94

SAP AG 1999

Outgoing payment to lender

Payment Options

Bank statement Payment program for payment requests

Bank statement

By bank transferorBy check

By direct debit

The processing steps for paying the amounts due depend on the payment option we choose:

If we opt for direct debit, the lender debits the money from our account, and we receive the debit information with the bank statement from our house bank.

If we pay by check or bank transfer, we trigger the payment using the payment run for payment requests. The money is transferred using the payment media generated by the payment program. The bank statement then informs us of the outgoing payment.

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SAP AG 1999

7) Outgoing payment for the due amounts, for example by direct debit

2,500 7)

Outgoing Payments

Bank account113100


1) 100,000


2) 100


100 3)4) 100

6) 99,900

6) 1,333

Interest expenses220000

6) 1,167

99,900 5)


100 2)1) 100,000

4) 99,9001,333 6)1,167 6)

7) 2,500

3) 100100,000 4)

(C) SAP AG AC030 97

5.96

SAP AG 1999

Financial Transactions in the Medium and Long Term: Closing Operations / Special Cases

Closing operations / special cases

To carry out the month-end closing activities, we want to gain an overview of the procedure for accrual/deferral and valuation.

We also want to know how to treat special cases.

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SAP AG 1999

Closing Operations / Special Cases

Special cases:

- Change cash flow

- Business operations

- Transfer postings

- Release

Closing operations:

- Accrual/deferral (interest, premium/discount)

- (Foreign currency) valuation

- Information system

(C) SAP AG AC030 99

5.98

SAP AG 1999

Accrual/Deferral: Overview

Accrual/deferral:- Reset procedure (for interest and similar flows, for discount)

- Difference procedure (for discount)

Reverse accrual/deferral

Reset accrual/deferral(for reset procedure)

To assign receipts and outgoings to the correct accounting period, you carry out accruals/deferrals. The accrual/deferral procedure determines how the expense and revenue accounts are updated.

The accrual/deferral run is based on the flows up to the accrual/deferral key date for the transaction activities you have selected. For each flow that is relevant for accrual/deferral, the system calculates the accrual/deferral amount and generates corresponding accrual/deferral flows.You can carry out the accrual/deferral run as a test run (accrual/deferral log), or as an update run that makes the actual accrual/deferral postings (accrual/deferral log and posting log).

If you are using the reset procedure, you reset the accrual/deferral by choosing Reset Accrual/Deferral. You can use the Reverse Accrual/Deferral function to reverse posted accruals/deferrals and the

reset postings. If both accrual/deferral and reset postings have been made, you must first reverse the reset posting before you can reverse the accrual/deferral posting.If you want to reverse several discount deferrals, you work backwards in chronological order.


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SAP AG 1999

Valuation: Position Valuation

Maintain exchange rateValuation logPosting log

Foreign currencyloansPosition valuation

When you produce your financial statements at the end of the month or year, you must value any foreign currency loans. You can value loan positions at any key date. This key date valuation uses the exchange rate for the key date to value the positions for accounting purposes.

You define the valuation parameters in Customizing.


5.100

SAP AG 1999

Calculate cash flowCalculate cash flow

Basic dataBasic data ConditionsConditions CollateralCollateral ObjectsObjects Correspon-dence

Correspon-dence

Loans - Cash Flow

Due on


Settlement amnt

100,000.001,166.671,333.331,726.672,000.001,691.672,000.001,656.672,000.001,621.672,000.001,551.672,000.001,516.672,000.001,481.672,000.00

Curr.


Name P

SPPPPPPPPPPPPPPPP

FType

10011110112011101120111011201110112011101120111011201110112011101120


Flow types explain the different changes to the cash flows. Together, all the flows of a transaction form the basis for generating the cash flow, and for further processing, such as posting. The cash flow contains all the flow records in chronological order and is used as a basis for updating the transaction data in Financial Accounting, Cash Management, and Market Risk Management.Typical flow types are fixed or floating interest, or commission.

The cash flow display is linked to the ABAP List Viewer.


5.101

SAP AG 1999

Contract --> Change --> Cash flow --> Select flow record --> Extras --> Change flow

Manual changes to flows in the cash flow

12/31/YY 12/31/YY 5,000.00 1120 L_Instalm. rep.

Due date Payment date Amount Flow type Text

Icon for change

Icon for fixing

Cash Flow: Making Changes

In some cases, it is useful to be able to make changes to the planned records quickly and simply, especially for loans taken.

Prerequisite:The conditions must be changeable. This is the case when a disbursement has been posted (full or partial disbursement), and not just saved.

Flows that can be changed:- Only condition-based flows- Only planned flows for the current fixed period

Data that can be changed:- Due date- Payment date- Settlement date for alternative settlement- Amount- Payment data (partner, partner bank type, payment method, dunning area, dunning block)

You can change flows manually. If you want the system to take these changes into account when the cash flow is recalculated, you must fix the changes.A calendar icon appears if you fix the due date/payment date.A lock icon appears if you fix the data for the whole flow.


5.102

SAP AG 1999

Calculate cash flowCalculate cash flow Basic view

Due date view

Calculation view

Posting view

View for manual changes

......

Loans - Cash Flow: Display Variants

Due on


Settlement amnt

100,000.001,166.671,333.331,726.672,000.001,691.675,000.001,656.672,000.001,621.672,000.001,551.672,000.001,516.672,000.001,481.672,000.00

Curr.


Name P

SPPPPPPPPPPPPPPPP

FType

10011110112011101120111011201110112011101120111011201110112011101120


The cash flow display is linked to the ABAP List Viewer.You can use the display variants to focus on different information. For example, one of the predefined display variants gives you the data for manual changes.

The cash flow is regenerated on the basis of the fixed changes. Should the changes result in new annuity or instalment amounts, or a reduction in the term, these flows must be calculated separately to take effect.


5.103

SAP AG 1999

What is a business operation (BO)?

An activity relating to a loan, which generates one or several flow records (unscheduled repayment, charge).

These flows are not posted using the automatic debit position function. Instead, the posting must be triggered specifically for this activity.

Business Operations for a Contract

A business operation (BO) can pass through three statuses. It is first entered, then activated, and then posted. - Entered business operations are included as simulated records in the (simulated) cash flow

calculation (within BO processing). If you delete the business operation, you cannot trace the history.

- Activated business operations contain fixed flows that can no longer be changed. These flows are saved to the database as planned records. If you delete an active business operation, you can still trace the history.

- Posted business operations cannot be deleted. They have to be reversed.


5.104

SAP AG 1999

Types of Business Operation

Enter Charges Individually

- Entry of one or several business operations

- Each business operation consists of one flow record

Enter Charges as Business Operation Unscheduled Repayment

- Entry of one or several business operations

- Each business operation can consist of several flow records

Each of the above functions allows you to enter one or several business operations. You use the functions Enter Charges as Business Operation and Unscheduled Repayment to enter one or several more complex business operations, which can also involve derived flows (such as rate gains or accrual/deferral flows) or incidental costs.

You post the flows generated by a business operation using the business operation function.Flows entered using the function Enter Charges Individually can also be posted using the Post Individual Records function.


5.105

SAP AG 1999

Enter Charges as Business Operation: Example

CoCdLoan

BO status Name First entered by First entered on

Entered Special charge Assistant, Mark MM/DD/YYYYActivated Posting charge Assistant, Mark MM/DD/YYYY

Flows for business operation

Activate Post Create Details

FTyp Amount Curr. Pmnt date Name Pmnt transact. PC

6145 100 UNI MM/DD/YY Special charge x 21

6146 50 UNI MM/DD/YY Extra charge x 216147 10 UNI MM/DD/YY Process. charge x 21

100000060001

The overview contains all the business operations of this BO type for the contract that have not yet been posted.

You define the flows the user is permitted to enter for each business operation in Customizing. The system automatically enters the value "21" (manual debit position) in the Posting control field.

The setting for the Payment transaction indicator depends on the Customizing settings.


5.106

SAP AG 1999

Position: Account 2

Position: Account 1

Capital position 1

Capital position 2

Capital position n

Capital position x

Capital position 1

Capital position a

Capital position b

Capital position y

Transfer Postings: Overview

Balance sheet transferBalance sheet transfer

Capital transfer:Capital transfer:Group contractsGroup contracts

Capital transfer:Capital transfer:Split contractSplit contract

You can use the Balance Sheet Transfer function to transfer loan positions relating to a contract between different G/L accounts in Financial Accounting. In this case, the transfer only affects the FI general ledger.

The Capital Transfer functions allow you to transfer positions between different contracts. This affects both the loans subledger and the FI general ledger.

Grouping contracts usually involves transferring capital amounts from several contracts to one target contract. Splitting a contract usually involves transferring the capital amounts from one contract to several contracts.


5.107

SAP AG 1999

Data Further processing

- Loan master data- Business partners- Objects- Business operations- Capital transfers- Reversals- Disbursements

Loans: Release

Release

The release reports have been replaced by the release workflow:Step-by-step release procedure according to the multiple control principle for the main functions affecting master data and flow data.

Release objects :1. Flow data: Business operations*, capital transfers, reversals, disbursements 2. Central master data: Loan master data, business partners, objects*(3 release objects: Enter charges individually, enter charges as business operation, unscheduled repayment)

Generic workflow functions:- Define maximum time period for work items: Pick up task, processing, throughput- Create attachments- Forward- ResubmissionUser-specific adjustments to the workflow, for example:- Throughput times- Set up agent control to direct the work items to the correct agents (users) - find user on the basis

of the release object, company code, release level, and product type (also refer to the documentation in the SAP Library under BC-Basis -> SAP Business Workflow).


5.108

SAP AG 1999

Financial Transactions in the Medium and Long Term: Unit Summary (1)


Overview of evaluation options

Transaction management process:- Buying / selling- Posting incoming revenues

Master data: Classes, securities accounts, position indicators

Position management process:Valuation


5.109

SAP AG 1999

Financial Transactions in the Medium and Long Term: Unit Summary (2)

Loans Management

Overview of loan forms

Transaction management process:- Create contract- Process disbursement received- Integration with CM and FI

Position management process:- Post payments as due- Make payments due

Closing operations / special cases


5.110Data used in the Unit: Financial Transactions in the Medium and Long Term

Explanation of the symbols in the exercises and solutions

Exercises

Solutions

Unit objectives

Business scenario

Tips & tricks

Warning and caution


Data used in the exercises

Data Data in the training system

Data in the IDES system

Company codes TR00 to TR20 1000

ID numbers 555700 to 555720716463519000270144113495113501

1002

1000

Securities accounts DEUBA ACC1DEUBA ACC2

1000

Issuer DEUBA

WEST LB

1000

Depository bank DEUBA 1000

Counterparty DEUBA 1000

Lender DEUBA 1000


5.111Financial Transactions in the medium and long term Exercises

Unit: Financial Transactions in the Medium and Long Term

Concluding securities transactions.Integrating transaction management into Cash Management

Due to changes in the level of interest rates on the capital market, you want to reduce your stock portfolio. You place an order with your house bank to sell 3000 units of Telekom stocks. The bank later notifies you that the sale has been executed at 92 UNI (value date: 2 days later).

1-1 Check the position on your two securities accounts (DEUBA ACC1 and DEUBA ACC2). To do this, call up the position overview and enter the following selection criteria in the report:

- Company code: TRxx- Key date: Current date- Key date reference: Position value date

Choose the object list as the output type.

Make a note of the number of units and the securities account of the Telekom stock.

_____________ _____________________ _______________Securities account ID number No. units

1-2 Make a part-sale of 3,000 units of your Telekom stocks.

1-2-1 To do this, create an order. Your partner is the DEUBA.


1-2-2 Execute this at 92 UNI.1-2-3 Settle the transaction.1-2-4 Post the transaction.

As you do this, check the impact on the cash flow and on Cash Management for each activity category!

You can only display the cash flow after you have executed the order/contract.



Creating class master data

You invest the money you receive from the sale of your stocks in bonds. A bond issued by the West LB offers you very favorable conditions. To represent the purchase of this new security, you must first enter the class master data.

2-1 Create the Westdeutsche Landesbank bond as a class. Enter the following transaction data:

ID number: 213 2XX Nominal value: 1000 Nominal trading unit: 1000 Issue currency: UNI Term: 10/21/98 – 10/20/2008

Issue rate: 100 Maturity Annual interest payment: 5.25% Exchange: Frankfurt/Main

Look at the cash flow.

2-2 Securities purchaseFor your securities account DEUBA ACC1, purchase this bond for a nominal value of 200,000 UNI (value date: 2 days later).

2-2-1 To do this, create an order2-2-2 Execute it at 105 %. 2-2-3 Then settle it using the collective processing function.


2-2-4 Post the transaction.

Ignore the warning when you create the order.Let the position indicator be created automatically when you execute the order.

For each activity category, look at both the cash flow and the effects on the bank or clearing bank accounts in Cash Management (cash position).



Defining organizational elements: Portfolios and securities accounts

As a result of favorable conditions at our house bank, we open another securities account.

3-1 Your company opens a new securities account at the Deutsche Bank. This securities account serves as clearing account no. 4445677 for processing the payments resulting from securities transactions.

Create the securities account in the system:

Securities account: DEUBA Acc4 Securities account no.: 22224446 Securities account name: DEUBA Securities Account 4

Depository bank: DEUBA House bank: DB House bank account: GIRUN

Portfolio 1

3-2 Create the position indicator for the new bond for your new securities account. Valuation class: SEC FA Account assignment reference: 42000000

3-3 Conclude a securities transaction (bond) for your new securities account.



Creating a loan contract

We want to finance various long-term investments by taking out a loan with our house bank.

4 Create a loan granted by our house bank DEUBA.

Contract data:

Loan purpose: choose one of the alternatives Maturity: 10 years Repayment: in installments Commitment capital: 50,000 UNI Disbursement rate: 100 % Interest calculation method: 360E/360

Nominal interest:

Exact payment form: (PE): every six months, at the end of the period (HN)(Payment form: at end of period; frequency: 06)

4 % fixed

Repayment:

Exact payment form: (PE): every six months, at the end of the period Immediate repayment settlement You want the system to calculate the repayment instalment.

Execute the calculation for these values.

Administration charge: 250 UNI to be paid annually at the end of each year


Check your condition entries by looking at the cash flow.

Once you have entered all the condition data, let the system calculate the effective interest rate.Have the effective interest rate calculated according to PAngV.

Save your loan and make a note of the loan number.



Posting the disbursement amount

Our house bank has credited the loan amount to our current account. We want to post the expected incoming payment.

5-1 Enter the disbursement you are going to receive. The bank charges 100 UNI for processing the disbursement (one-time fee). This charge will be withheld from the disbursement amount.

Post the disbursement, and check the disbursement log.

5-2 What changes can you see in the cash flow after posting the disbursement?

5-3 Check how the loan data is integrated in Cash Management. To do this, call up the liquidity forecast in Cash Management. Use the grouping GESAMT "Total display".



Posting interest and repayment amounts as due

We want to make the interest payments and repayments on the due date agreed with the lender. To do this, we must post the amounts as due in the system.

6-1 Call up the Post Planned Records function. Restrict the selection to your loan contract in your company code. In the Upto and including due date field, enter the date up to which the planned records should be posted as due.

Check the posting log.

6-2 What changes can you see in the cash flow after the next interest payment and repayment items have been posted as due?


5.112 Financial Transactions in the Medium and Long Term Solutions


Entering a transaction

Integration with Cash Management

1-1 To check the positions:

Accounting Treasury Treasury Management Securities Information system Position/Position Trend Position Overview

Select the “Object list” output type

1-2 Solution for entering your transaction

1-2-1 To create an order:

Accounting Treasury Treasury Management Securities Trading Transaction Create


Create the transaction as an order.

Cash flow: Only exists after the order has been executed.

Cash Management:


Field name or data type Value

Grouping GESAMT (Total display)

Display as of one day before value date

Display in UNI

Select the delta display

You see: No change when you create an order.

1-2-2 To execute an order/contract:

Accounting Treasury Treasury Management Securities Trading Transaction Execute



Position value date Today plus 2 days

Payment date Today plus 2 days

Cash flow:

You see the amounts for the outflow and the price gains/losses as planned records (P).

Cash Management: see above.

You see the stock sale:

Summarization: DeutscheAccount: DBGIROLevel: Securities

1-2-3 To settle the transaction:

Back office Transaction Settle

Cash flow:

Sales amount as actual record (I);Price gains/losses still shown as a planned record (P).


No change of level

1-2-4 To post the transaction:

Accounting


Transaction Post


You see:

Summarization: Bank account historyAccounts: DBZWIUNILevel: Int. post



Creating class master data

2-1 Create class

Accounting Treasury Treasury Management Securities Master data Class


ID number 2132xx

Product type 04I

To call up the details for the conditions, double-click one of the entry fields in the conditions section.

Cash flow:


When you create class data, the system simulates calculating the cash flow automatically using a hypothetical value of 100,000 UNI.

2-2 Solution for entering your transaction

2-2-1 To create an order:

Accounting Treasury Treasury Management Securities Trading Transaction Create

Ignore the warning message “Securities account position indicator not yet created” by pressing ‘enter’.

Cash flow: only exists in trading after the order has been executed.

2-2-2 To execute the order/contract

Accounting Treasury Treasury Management Securities Trading Transaction Execute


Price 105

Position value date Today plus 2 days


Calculation date: Today plus 1 day

Payment date Today plus 2 days

Cash flow:

(You see the amounts for the inflow and the price gains/losses as planned records (P)).


You see the bond purchase:

Summarization: DeutscheAccount: DBGIROLevel: Securities

2-2-3 To settle the transaction:

Back office Transaction Settle

Cash flow:

You see: Purchase amount as actual record (I);Price gains/losses still shown as a planned record (P).


No change of level

2-2-4 To post the transaction:

AccountingTransaction Post


You see:

Summarization: Bank account historyAccounts: DBZWIUNILevel: Int. post



Defining organizational elements: Portfolios and securities accounts

3-1 To create a securities account:

Accounting Treasury Treasury Management Securities Master data Securities account Create

3-2 To create a position indicator:

Master data Position indicator Securities account position indicator Create

3-3 Security purchase

See previous solutions



Creating a loan contract

4 To create a contract:

AccountingTreasury Loans Transaction Management General Loan Contract Create


Company code TRXX

Loan number Assigned by the system

Product type 33B


Partner DEUBA

Basic data: Data

Conditions:



Percent 4

PE HN

- Set the IS indicator to active in order to have the repayments settled immediately.

- To add the administration charge, choose the button Insert additional items.



5-1 To disburse a loan contract:

Loans Transaction Management General Loan Contract Disburse

Entries: DataButton: Incidental costs; data entry (withheld!)

Post

5-2 To look at the changes in the cash flow:

Loans Portfolio Contract Display

(Alternative: Loans -> Transaction Management -> General Loan -> Contract -> Display)

Button: Cash flow

The disbursement and the processing charges appear as actual records in the cash flow of the transaction.

5-3 To see how the loans area is integrated with Cash Management:

Treasury Cash Management Information System Reports on Cash Management Liquidity Analyses Liquidity Forecast (or Cash Position)

Entries:


Grouping: GESAMT "Total display" (or BANKEN "Bank account history")Display currency: UNI

Note: Choose "Level B5 - Int. posts" (other interim postings).Group/Account: DBZWIBU

When you disburse the contract, the disbursement amount appears in Cash Management.



6-1 To post planned records automatically:

Loans Accounting Execute Posting: Mass Processing Post Planned Records

Entries:

Company codeContract number"Upto and including due date"Posting date

6-2 Changes in the cash flow:

The cash flow now includes the posted interest and repayment flows as actual records.


6

SAP AG 1999


Contents:

Derivative Instruments


(C) SAP AG AC030 1

6.2

SAP AG 1999

Market Risk Management and Managing Risk Positions: Unit Objectives


Describe the main functions of Market Risk Management

Use the MRM functions for analyzing interest and currency risks

(C) SAP AG AC030 2

6.3

SAP AG 1999



Liquidity Management in theShort and Medium Term

Introduction


Market Risk Management and ManagingMarket Risk Management and ManagingRisk PositionsRisk Positions

(C) SAP AG AC030 3

6.4

SAP AG 1999

Market Risk Management and Managing Risk Positions: Business Scenario


Risks arise from your operational transactions as well as from your financial transactions. They are the result of changes to the market parameters, for example, from interest and exchange rates.The Market Risk Management function enables you to analyze interest and currency risks and identify suitable hedge transactions in order to hedge against open items.

You can use mark-to-market valuation to determine the fair market prices of your transactions. You can also simulate potential changes in value to your positions which can result from changes to market data.

(C) SAP AG AC030 4

6.5

SAP AG 1999

Market Risk Management and Managing Risk Positions: Analysis and Simulation

In addition to using actual market data for valuation, you would like to analyze the effects that possible changes to the market might have.Using scenarios you depict the most varied trends ("best case" or "worst case" scenarios) and integrate these into your evaluations.

You use fictitious transactions to identify suitable instruments to hedge your positions before the transaction is actually concluded.

(C) SAP AG AC030 5

6.6

SAP AG 1999

Risk

Otherrisks

Liquidity riskCredit riskMarket risk

Exchange raterisk

Interest raterisk

Volatilityrisk ...

Risk Categories

Market risks are a small subset of the various risk categories an enterprise has to contend with. Market risk can be broken down further based on the various sources of risk: interest rate risk, exchange

rate risk, price risk and index risk, spread risk, and basic risk. Credit risks include creditor risk and country risk. Other risks covers all internal risks, such as organizational risk or legal risk.

(C) SAP AG AC030 6

6.7

SAP AG 1999

Risk Controlling in Treasury

Risk Controlling

Limitchecking

Specification of measuring

methods

Monitoringof

risk policy

Setting upthe reporting

system

To make the company’s

risk positions transparentAim:

Risk Controlling in Treasury is part of a risk management system that covers all areas of a company. It involves measuring, controlling, and monitoring the relevant risk categories. Setting up the reporting system and creating a link to feed data to management, are key factors when it comes to making the risk positions your company has entered more transparent.

(C) SAP AG AC030 7

6.8

SAP AG 1999


1. Establish a Target-Method Hierarchy

Define your revenue and risk targets Formulate investment and risk guidelines for your company Translate these into operational specifications

2. Establish a Process Structure

Identify the processes Create a model of the process flows in your company Break this down into individual activities and assign

these to jobs Use this information to create an authorization and

release concept

Management is responsible for defining the framework within which treasury transactions are executed. There are three main task areas here:

Specifying the basic business principles, including: Trading strategies for the respective instruments The markets on which trading is allowed Transaction volume, organization (contract components), and documentation.

Risk limitation, including: Procedures for measuring and controlling risk Value of the permitted risk positions according to instruments or organizational units Reaction to extreme market trends or exceeded limits Internal reporting system

Organization, including: The areas of responsibility and functions of individual employees Division into function areas Human resources and technical equipment.

(C) SAP AG AC030 8

6.9

SAP AG 1999

Investment and Risk Guidelines

Internal External

Revenuetargets

Risktargets

Investmentregulations

Riskregulations

LimitsRelevant

product typesHedging

strategiesReporting

system

Investment and risk guidelines

In the financial services area, there are countless statutory norms and controlling bodies that monitor entered risks to protect the investor.

(C) SAP AG AC030 9

6.10

SAP AG 1999


Mortgageloans


Policy loans Other

loans

Fixed-termdeposits

Deposits atnotice

CommercialPaper

Product types


Stocks Subscription

rights Investment

certificates Bonds Convertible

bonds Warrant bonds Warrants

Forexspotdeals

Forwardexchange deals

Forexswaps

Caps / Floors FRAs Swaps

- Interest rate- Interest rate curr.

OTC options- Currency- Interest rate- Security- Swaption

Futures

Hedginginstruments

Investment/Borrowinginstruments

In the short-term area, money market transactions and forex transactions allow you to bridge liquidity deficits or surpluses. In the medium to long-term area, investments and borrowings are additionally represented by securities transactions and loan transactions.

Derivative financial instruments, on the other hand, help you hedge against interest rate and currency risks.

(C) SAP AG AC030 10

6.11

SAP AG 1999

Hedging

HedgingHedging

Hedgingstrategy

Hedgingrate

Hedgingobject

Overall position

Portfolio position

Single position

Macro hedge

Portfolio hedge

Micro hedge

Full hedge 100%

Partial hedge x%

* Release not yet specified

Hedging is a way of counteracting risk. It involves setting up an offsetting position, which develops in the opposite way to the underlying position.

Risk objects are either cash flows resulting from an operating business or from Treasury transactions/positions such as loans, securities, or money market transactions.

Exchange rates, interest rates and volatilities are all sources of risk. You can match risk and hedged items and hence determine hedged and non-hedged items using the

Market Risk Management component. Hedge transactions are usually forward transactions (symmetrical instruments) or options (asymmetrical

instruments) as well as combinations of these.

(C) SAP AG AC030 11

6.12

SAP AG 1999

Risk Process in Treasury

Minimum balancesMinimumyields/MaximumfundingratesDefinition oflimitsHedgingrates

Portfolio generation using real and fictitious transactions with reference to thetarget valuesValuation on the

basis of market data (actual data) and scenario data (planning data)

Determination of control indicators

Selection ofconcrete investment and borrowing transactions or hedging alternatives

Trading

Liquidity statusCashpositionLiquidityforecast

Portfolio positionPosition analysis

ExposureCash mgmtfor forexexposureGap analysis forinterest exposure

Market dataDatafeed

Targets Informationprocurement

Assessment of possible solutions

ProcessingMonitoringDecision

ProcessingAccountingReporting

Risk Monitoring and Control

Revenue/Risk

targets

(C) SAP AG AC030 12

6.13

SAP AG 1999

Market Risk Management: Functions

Comprehensive risk valuation and control

Procuring information

Interest and currency exposure

Mark-to-market, effective rate, effective interest rate

Sensitivities, cash flow analyses

Value at risk

Evaluating alternative solutions

Simulations

What-if analyses

Crash scenarios

Transforming risks using Treasury Management

(C) SAP AG AC030 13

6.14

SAP AG 1999

Integration of Scenarios and Fictitious Transactions

Methods

Cash flowsMarket data Calculation

MarketdatabaseMarket

database

ScenariodatabaseScenariodatabase

ActualpositionActual

position

Fictitioustransactions

Fictitioustransactions

Key figures(IRR, NPV, Option

premium, exposure,...)

Key figures(IRR, NPV, Option

premium, exposure,...)

Evaluation

(graphic, list,...)

Buffer

Portfolio determination

through selection

IRR = Internal Rate of Return (effective interest rate) NPV = Net Present Value

(C) SAP AG AC030 14

6.15

SAP AG 1999

Interest

Underlying trans.:

Operational cash flows fromCash ManagementMoney Market, Loans, Securities

Hedging transactions:

Forward Rate Agreement

Swap (series of FRAs)

Interest rate options

- Floor (series of options)- Cap (series of options)(other forex and derivativetransactions)

Instruments in Currency and Interest Management

Currency

Underlying trans.:

Operational cash flows fromCash Management

Hedging transactions:

Forward exchange transaction

Currency option- put- call

(other TR transactions)

TRTR--CMCM TRTR--CMCM

TRTR--TMTM TRTR--TMTM

TRTR--TMTM

Operational cash flows are drawn from Cash Management by means of special groupings. Financial transactions are selected directly from Treasury Management. There are numerous selection

criteria available which help you to choose precisely the transactions you want.

(C) SAP AG AC030 15

6.16

SAP AG 1999

Financial Instruments and Influencing Factors

Moneymarketintrst

Capitalmarketintrst

Int.ratevolat.

Exch.rates

Exch.ratevolat.

Instruments

Forward exchangetransactions Currency options(European, American,Barrier, Digital)Bonds, LoansMoney market trans.

Forward Rate AgreementsInterest Rate GuaranteesInt.rate, int.rate curr.swaps(incl.structures such as roller-coaster, LIBOR-in-arrears ...)

SwaptionsCaps, Floors

Bond optionsFutures, Optionson futures

Source: Sal. Oppenheim jr. & Cie.

In the SAP System, money and capital market instruments are not explicitly separated. The interest value that acts as the price-determining factor for an instrument depends on the reference interest rates or yield curves defined in the evaluation type.

You can use hedging instruments which react to the same risk factors to hedge underlying transactions.

(C) SAP AG AC030 16

6.17

SAP AG 1999

Market Risk Management and Managing Risk Positions: Mark-to-Market Valuation

Mark-to-Market Valuation

In addition to valuing your transactions for accounting purposes in accordance with the statutory accounting requirements, you now wish to value your transactions with their market value. To determine market values, you calculate the net present value of all the cash flows generated from the transactions. The mark-to-market methodology provides the basis for all analysis reports in Market Risk Management.

(C) SAP AG AC030 17

6.18

SAP AG 1999


Mark-to-market valuation is available for all Treasury transactions and for:

any points in time

any horizons

various scenarios

You can also display:

the calculation base

a detailed log to check the individual calculation steps

the interest rate sensitivities

Marking to market means valuing a position at the price which can currently be achieved on the market: “What price will I achieve if I close out the position?”

For long positions this means determining the disposal price that could be achieved. For short positions it means determining the repurchase value. You can use the NPV method to determine and compare the market prices of various instruments. You also have the option of including simulated money market and forex transactions in the valuations

and analyzing their effect on the market value of the positions.

(C) SAP AG AC030 18

6.19

SAP AG 1999

Mark-To-Market Valuation: Procedure


Deterministic instruments Option-related instruments

Fixed cash flows

Discounting tovaluation dates withthe relevant yieldcurve:- Bid / Ask- Rating

Variable cash flows

1. Determination of forwardrates from the relevantyield curve2.Calculation of futurecash flows3. Discounting

Uncertain cash flows

Option price formulas- Black & Scholes- Binomial- Garman/Kolhagen

Standard bonds

Fixed-rate loans

Money market

Floating rate notesVariable-rate loans

Caps / FloorsFX optionsSwaptions

(C) SAP AG AC030 19

6.20

SAP AG 1999

Example: Valuation of Swaps

Fixed interestcash flow

Interest cash flows basedon swap rate and forward rates

Variable interest cash flow(from forward rates)

Cash flow

NPV

Zero bonddiscounting factors

You can trace the individual processing steps involved in the NPV calculation in the details log of the mark-to-market valuation. With interest rate swaps, the first step the system undertakes is to separate the fixed cash flows from the variable cash flows. The variable cash flows are then assigned values from the forward rates with the help of the yield curve used. This determines the timing of the cash flows (payment dates based on the transaction) as well as the payment amounts of all the cash flows.

These cash flows are discounted to the horizon using the zero bond discounting factors. The negative and positive NPVs of the individual payments are then displayed separately. The NPV of

the interest rate swap is equivalent to the difference between these negative and positive cash flows. The NPV displays the market value of the interest rate swap at the horizon date on the basis of the

market data read on the “evaluation per” date.

(C) SAP AG AC030 20

6.21

SAP AG 1999

Mark-to-Market Valuation - Calculation Base

Yield curvesPercent

Days

9.0

8.1

7.2

6.3

5.4

4.5

3.6

2.7

1.8

0.9

0.0

0.0 304.3 608.7 913.0 1217.3 1521.7 1826.0 2130.3 2434.7 2739.0 3043.3 3347.7 3652.0

All the market data used for the valuation is listed in the calculation base. Yield curves can be represented graphically.

You can display the calculation base from within any MRM report. This allows you to check the market data used for the valuation and, in the case of interest rates, display

the data in graphic form.

(C) SAP AG AC030 21

6.22

SAP AG 1999

Mark-to-Market Valuation - Details Log

Valuation parameters

Basic data of the transaction

04/18 04/17/YY 000360 000360 4.5600000 10,000,000.00 456,000.00 EUR

NPV calculation: positive cash flows

Date04/20/YY04/19/YY04/18/YY04/18/YY

Amount456,000.00456,000.00456,000.00456,000.00

Interp.int.rate3.32751373.78450824.33263014.8125205

Disc.factor0.9674420920.9278544900.8794129040.826289916

NPV441,153.59423,101.65401,012.28376,788.20

Curr.EUREUREUREUR

NPV calculation: negative cash flows

Date04/18/YY10/18/YY04/19/YY10/18/YY04/18/YY10/18/YY

Amount279,348.04-256,757.22-214,868.94-301,167.89-320,116.89-351,022.53

Interp.int.rate4.23263013.95800553.68450824.47328774.71252054.9431507

Disc.factor0.8819715310.9065540230.9296593940.8560674160.8294982080.801302453

NPV246,377.02-232,764.29-199,754.93-257,820.02-265,536.39-281,275.21-

Curr.EUREUREUREUREUREUR

NPV incoming side:NPV Curr. Rate NPV in displ.curr.

1,992,802.36 EUR 1.00000 1,992,802.36

NPV outgoing side:

2,266,087.67- EUR 1.00000 2,266,087.67-

273,285.31- EUR 1.00000 273,285.31-

NPV Curr. Rate NPV in displ.curr.

NPV Curr. Rate NPV in displ.curr.

In the details log you can monitor the calculations for individual transactions. Each step of the calculation process is logged and displayed for that specific instrument.

(C) SAP AG AC030 22

6.23

SAP AG 1999

Exercise: Mark-to-Market

(C) SAP AG AC030 23

6.24

SAP AG 1999

Storing OTCNPVs

Mark-to-market

2

4

6

8

10

1M

2Y

4Y

6Y

8Y

10Y

EUR USD GBP

TRTR--MRMMRM

Storage Valuation

TRTR--TMTM FIFI

Money marketForex

Derivatives

NPVs

Financial accounting

In the tools area, you can store NPVs 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 the derivative financial instruments within Treasury Management. Note that at present only the valuation of options with product category 760 is supported.

In the key date valuation, the system translates the NPVs in display currency into the premium currency and forms write-ups/write-downs or provisions on the basis of the corresponding local currency amount.

(C) SAP AG AC030 24

6.25

SAP AG 1999

Managing Currency Risks

Risks arise from your operative transactions in foreign currency, which are the result of changes in the exchange rates. You use Market Risk Management to identify your open currency positions and conclude transactions in order to hedge against these.

You use a currency option as a hedge instrument and control the effect of the option on the exposure.

Market Risk Management and Managing Risk Positions: Currency Risks

(C) SAP AG AC030 25

6.26

SAP AG 1999

Exposure Analysis

Exposure analysis is used to measure open risk positions.

To establish the currency risk, operational information from Cash Management (about underlying transactions) is compared with Treasury information (about hedging transactions). The system measures the value directly affected by currency changes (the reaction value).

To establish the interest rate risk, the system represents the interest rate sensitivity of the operational cash flows and the various Treasury transactions (security, loan, money market, forex, and derivative transactions). The interest rate exposure is measured either in basis points or in terms of the value affected by interest rate changes.

(C) SAP AG AC030 26

6.27

SAP AG 1999

Integration of a Company’s Cash Flows

PurchasingA/P

account-ing

Purchaseorder

Delivery

Invoice

Out-payment

Bankstatement

Cash Management

Liquidityforecast

Liquidityforecast

Cash positionCash position

Delivery date and payment terms

Updatedpayment history

Payment at agreed due date

value date

A/Raccount-

ingSales

Invoice

In-payment

Bankstatement

Salesorder

Delivery

Market Risk Managemente.g. currency exposure,

VaR

MRM

CM

For an industrial enterprise, cash flows from operational business are the underlying transactions for risk control. In MRM, the necessary integration is achieved by accessing the liquidity information in Cash Management. The operational cash flows are available for: analysis/simulation (with underlying transactions/forex) the currency exposure the interest rate exposure the cash flow global evaluation the value-at-risk evaluations

(C) SAP AG AC030 27

6.28

SAP AG 1999

Currency Exposure

Term from to

Underlying transaction

Hedging transaction

Open position

TRTR--MRMMRM Currency

exposure

TRTR--CMCM TRTR--TMTM

MM

SDFI

Term view

Single transaction view

Transaction Transaction TransactionDocument Document Document

The exposures of all selected currencies are displayed. The division into term intervals is determined when the currency selection is made. The currency exposure is displayed separately per currency and also by term interval, if required. The

underlying transactions are the operational transactions transferred from Cash Management. The “From” date determines the start, the “To” date the end of the period from which the Cash Management data is taken. These underlying transactions are compared with all Treasury transactions available in the corresponding currencies (hedging transactions). The open position is calculated by adding together the underlying transactions and the hedging transactions (which usually have an inverse value).

In order to precisely compare the operational transactions with the financial transactions, you can discount the payments from Cash Management to the horizon.

From the total exposure view per currency, you can branch into the term view (details based on the term intervals previously defined) or the single transaction view. If cash flows from various financial transactions fall in the same term interval, they are displayed separately in the single transaction view.

From the underlying transactions you can branch to Cash Management via the respective term interval in order to execute an individual analysis of the operational cash flows.

From the hedging transactions you can branch directly into Treasury Management’s single transaction display.

(C) SAP AG AC030 28

6.29

SAP AG 1999

Option Exposure

Slope of premium curve with changing spot rate

Spot rate1.02 1.04 1.06 1.08 1.10 1.12 1.14 1.16 1.18

0.02

0.04

0.06

0.08

0.10

Premium

What is option exposure and how is it determined? Exposure: The foreign currency volume that is directly affected by a change in the exchange rate. The graph above shows that there is no linear relationship between the price development of the

instrument underlying an option (here the spot exchange rate) and the value of the option (expressed in terms of the premium to be paid). Note that only the option value which is actually affected by a change in the underlying exchange rate counts as exposure. The relationship between the option price and the underlying price is determined with the help of the delta factor:

Delta: Factor expressing the degree to which the option price reacts to a change in the exchange rate ==> Sensitivity factor (delta) multiplied by volume = exposure of option

(C) SAP AG AC030 29

6.30

SAP AG 1999

Currency Option

• The buyer has the right (the seller is obliged) to buy (deliver)or sell (take delivery of) an option:

- on a certain date (European option) or within a certain period (American option)

- for a certain foreign currency amount (underlying)- at a certain price (strike price)

• For this right, the buyer pays the seller an option premium• The seller of the option then has the obligation to deliver

(or take delivery of) the currency amount

• Calls: Buyer has the right to buy (seller must deliver)• Puts: Buyer has the right to sell (seller must buy)• Cash settlement or physical settlement (delivery / take delivery)

Example of a call: With a USD/UNI call, strike price 1.80, the buyer has the right to purchase a certain USD amount from the seller at the strike price. The buyer will only exercise this right if the market price lies above the strike price on the exercise date or within the exercise period. If this is the case, the buyer can use the option to acquire the foreign currency amount at a lower price than that offered on the market.

Example of a put: With a USD/UNI put, strike price 1.80, the buyer acquires the right to sell a certain USD amount to the seller at the strike price. The buyer will only exercise this right if the market price lies below the strike price on the exercise date or within the exercise period. If this is the case, the buyer can use the option to sell the foreign currency amount at a higher price than that offered on the market.

Background: The buyer of a call is looking for protection against rising prices, the buyer of a put for protection against falling prices. The seller reckons with the opposite price development and wants to improve his or her position by collecting the option premium.

There are two categories of barrier options - knock-in options and knock-out options. With knock-in options, the option right only comes into effect when the market price falls below (Down & In) or rises above (Up & In) the barrier. With knock-out options the option right expires as soon as the market price falls below (Down & Out) or rises above (Up & Out) the barrier.

(C) SAP AG AC030 30

6.31

SAP AG 1999

Create OTC Currency Option

++2USD UNIUSD 5,000,000.00

European Physical exercise

100076A100

1

UNI 300,000.00

09/29/YYYY

1.82 Invers

Contract data

Cross-rate calculator Option price calculatorCompany code IDES AG TransactionProduct type OTC curr. option Activity ContractTransactn type Purchase...Option

Exercise period Exercise Settlmnt.Currency pairUnderlying curr. Call Put Strike Value date

PremiumPnt quoted Perc.quoted

PointsPayment date Curr. Amnt

Contract date ......

When you create a currency option, you record the intention to buy or sell a currency option. On the initial screen, you enter the transaction type (purchase/sale) for the product type currency option and the business partner.

On the subsequent screen, you enter the term, the exercise and purchase premium for the option, in addition to the transaction data for the underlying spot or forward transaction.

You have the option of branching to the entry screens for the general transaction data. You can use the tabs to navigate between the various screens (structure, administration, other flows, payment details, cash flow, memos, status).

To calculate the option premium, you can branch to the option price calculator.

(C) SAP AG AC030 31

6.32

SAP AG 1999

Currency Option: Option Price Calculator

Curr.pair

Premium Calculation for Standard Options

Sensitivities

Market data

SpotSwapForward

1.04950 / 1.057500.00692 / 0.007431.05642 / 1.06493

Int. 1st currencyInt. 2nd currencyVolatility

2.8563 / 2.90525.5618 / 5.68689.8500 / 9.8500

Premiums

Put 1Put 2Put 3

1.04000/

0.01076 / 0.01361/

Strike European

/0.01116 / 0.01407

/

American

Call 1Call 2Call 3

1.04000/

0.02960 / 0.03512/

/0.02967 / 0.03516

/

Implied volat.Market data Swap/Forward Premiums List

EUR USD From To Days

Value date Value date

While entering the option data, traders can use the direct link to the option price calculator to calculate the accounting par value of the option premium. The option price calculator also supplies information about the major sensitivities of the respective option. You can enter the option premium either as a percentage of the underlying transaction (in points) or as a fixed amount. The premium is calculated on the basis of the spot price, the strike price, the term, the risk-free interest rates in both currencies, the option category, and the volatility of the exchange rate.

Click the Market data pushbutton to load the current market data: Spot rates, swap rates (are always calculated using the yield curves), interest rates for currency 1 and 2, and exchange rate volatility.

You can enter alternative strike prices (for up to 3 put options and 3 call options) for the underlying forex transaction.

You can calculate premiums for European and American standard options as well as European currency barrier options (exotic options).

When you position your cursor on a premium and select the Sensitivities pushbutton, the system calculates and displays the option sensitivities (greeks). You can also display a list of the ratios for all the calculated options.

If you specify an option premium, you can use the option price calculator to calculate the other way and determine the underlying volatility (implied volatility).

(C) SAP AG AC030 32

6.33

SAP AG 1999

Exercise: Currency Exposure

(C) SAP AG AC030 33

6.34

SAP AG 1999

Managing Interest Rate Risks

You conclude money market, securities, or loans transactions to manage your liquidity. The market value of these transactions like the market value of the operative cash flows is subject to changes in the market interest rates. To protect yourself from value losses, you analyze the interest rate risks and use hedge transactions that are suitable for reducing your interest exposure.

Market Risk Management and Managing Risk Positions: Interest Rate Risks

(C) SAP AG AC030 34

6.35

SAP AG 1999

Interest Rate Exposure

Term

from to

Underlying

transaction

MnyMrkt/Sec./

Loans

Forex/

Derivatives

Open

position

TRTR--MRMMRM Interest rate

exposure

TRTR--CMCM TRTR--TMTMSDFI

Transaction Transaction Transaction

Drill-down

Term view

Singletransaction view

Document Document Document

MM

The interest rate exposure is divided into three columns: Operational transactions (underlying transactions) from Cash Management Money market transactions, security transactions, and loan transactions, which are typically

undertaken for liquidity reasons. Hedging transactions from the foreign exchange and derivatives areas.

As with the currency exposure, when you are in the overview screen, you can branch to the term view (details based on the term intervals previously defined) or the single transaction view. If cash flows from various financial transactions fall in the same term interval, they are displayed separately in the single transaction view.

From the underlying transactions, you can branch to Cash Management via the respective term interval in order to execute an individual analysis of the operational cash flows.

From the hedging transactions you can branch directly into Treasury Management’s single transaction display.

(C) SAP AG AC030 35

6.36

S A P A G 1999

In te res t R a te E xp o su re - D eterm in e B as is P o in t V a lu e

S tep 1 :N et p resen t va lu e ca lcu la tio n o f fu tu re cas h flo w s w ith cu rren t yie ld cu rves

S tep 3 :R eca lcu la tio n o f n e t p rese n t va lu e

C ash flo w

D iscounting w ith i

D iscounting w ith i + 1 B P

B P V

N P V

T im e

12

34

S tep 2 :S h ift o f c u rren t yie ld cu rves b y 1 b as is p o in t

S tep 4 :C alcu la tio n o f n e t p re sen t va lu e d iffe ren ce(= B as is p o in t va lu e )

Yield curves euro

2

4.5

Term in months

Inte

rest

rate

in

perc

enta

ge

EuroEuro + 1BP

2

In the interest exposure report, you can choose to display either the value of x basis points or the volume. When the basis point value (BPV) is calculated, the NPVs of the individual cash flows in the future are calculated and added together on the basis of their currency- and term-specific interest rates. In a second step, the interest rates are increased or reduced by one (or a multiple of one) basis point (0.01%). The NPVs are then calculated again. The BPV is the difference between these two NPVs. It represents the value losses or increases the analyzed financial instruments show when the interest rates are increased or reduced by one (or a multiple of one) basis point.

The volume display is another way of displaying the interest rate exposure: The exposure is displayed as a quotient of the NPV difference and the number of basis points by which the curve was shifted.

On the selection screen (display type of the exposure), you can choose between these procedures.

(C) SAP AG AC030 36

6.37

SAP AG 1999

Forward Rate Agreement

• Agreement between two parties (a buyer and a seller)- upon a certain interest rate (FRA rate)- for a deposit or a loan- for a period in the future

• Aim: To fix an interest rate today for a period in the future

• Term: 3-24 months• Quotation: 3:9; 6:12; 12:24; (future period: total term)• Reference interest rate e.g. 3-month LIBOR, 6-month LIBOR• Interest rate comparison (fixed rate against reference interest rate)after waiting period and calculation of settlement amount due

• Interest netting in the form of cash settlement, no exchange of nominalamounts

Background: The buyer of a FRA anticipates higher interest rates for the reference period, while the seller anticipates lower interest rates

Example: FRA 3:9; nominal amount 10 m UNI FRA rate 5% (=> in 3 months for 6 months) Reference interest rate 6 months LIBOR Interest rate comparison in 3 months, hedging period 6 months

6-month LIBOR in 3 months = 6% => Settlement payment to buyer= Interest rate difference x nominal amount x days in hedging period 360 x discounting factor If the LIBOR rate were below the FRA rate, the buyer would have to make the settlement payment.

(C) SAP AG AC030 37

6.38

SAP AG 1999

Create FRA

Structure ...... ... ... ... ...

10/07/YYYY++8++11

10,000,000.00 UNI5.0LIB_3_UNIact/3602-

10/05/YYYY

63A200

11000Company code IDES AG Transaction

Product type FRA Activity ContractTransactn type Sale

...Term

Start of termStart of hedge periodEnd of hedge period Inclusive No. interest days

Interest structureExercise amountInterest rateRef. int. rateInt. rate methodFixing

Business calendar ...Contract data

Contract date ...

Forward Rate Agreements are financial instruments with which buyers and sellers specify a fixed interest rate today for a future period. Both parties of the contract are free to choose the amounts, currencies, and terms; the interest rate reflects the forward yield curve.

A fictitious money market transaction underlies the FRA whose capital amount is used simply as a calculation amount. An "8 against 11" FRA has a contract period of 3 months starting in 8 months. At this time, the contract is also settled and paid out. The buyer of a FRA is looking for protection against rising interest rates, whereas the seller wants to protect against sinking interest rates. You enter FRAs in the system according to the trading conventions represented.

(C) SAP AG AC030 38

6.39

SAP AG 1999

Swaps

• A swap is an exchange of cash flows over a fixed period of time

• You define the cash flows when you conclude the swap,but their absolute value may depend on events in the future(e.g. interest payments at variable interest rates which are dependent on future reference interest rates)

• Depending on the type of cash flows to be exchanged,swaps can either be:

- interest rate swaps- currency swaps (cross-currency interest rate swaps)

Possible variants for interest payment swaps:PAYER: Outgoing interest payments fixed, incoming variableRECEIVER: Incoming interest payments fixed, outgoing variableBASIS: Variable against variable interest paymentsFIX TO FIX: Fixed against fixed interest payments

In the case of an interest rate swap, each counterparty agrees to exchange cash flows in one currency during a certain period for a specified capital amount, without exchanging the said capital amount. Possible variations:- Payer- Receiver- Basis

A currency swap has the following characteristics:- Mutual exchange of funds at an agreed exchange rate in different currencies.- Exchange of interest payments on the basis of the agreed total capital and the agreed interest rate.- The original amount of the swap is reversed at maturity at the original exchange rate.Possible variations:- Payer - Receiver- Basis - Fix to fix

Swaps offer comparative cost advantages; two partners use their different positions (credit standing) in different financial market segments to achieve cost advantages that they would not benefit from individually.

(C) SAP AG AC030 39

6.40

SAP AG 1999

Enter: Interest Rate Swap

...

...

62A300

11000

10/15/YYYY10/15/YYYY

10M10/15/YYYY++124.6

360/360

UNI

12

10M10/15/YYYY++6

Lib_6_UNIact/360

6

10/13/YYYY

Int. Int. rate adj. Int. Int. rate adj.

Company code IDES AG TransactionProduct type Int.rate swap (IRS) Activity Contract Transact type Payer

Term Business calendarStart Calendar 1 End Inclusive Calendar 2

Outgoing interest Incoming interestNominal amnt Nominal amntEffective from Effective from1st due date Freq.mth 1st due date Freq. mthFixed rate Fixed rateVariable int. Variable int.Int. calc. meth. Int. calc. meth.

Contract dataContract date

You enter the transaction data for the partner, the contract data, the term, and the actual trading object data (such as amount, currency, interest structure).

You can also branch to the other entry screens to enter more detailed information. Condition overview screens allow you to display the incoming and outgoing side and the condition

details for each transaction. You can also change the nominal amounts and specify the interest rate adjustment methods.

On the Conditions in Detail: Interest rate adjustment screen, you can specify the frequency in which you want the variable interest rate to be recalculated and the date on which the value of the underlying reference interest rate should be determined. An interest rate adjustment can take place, for example, at the start of the period, regularly, or on individual dates.

To start the interest rate adjustment automatically, choose Back office -> Interest rate adjustment -> Automatic.

By choosing Extras, you can go to the net present value calculator for swaps.

(C) SAP AG AC030 40

6.41

SAP AG 1999

Manual / Automatic Interest Rate Adjustment

Treasury:Treasury: Due Date ProcessingDue Date Processing

Automaticinterest rate adjustment

Determine Reference Interest RateDetermine Reference Interest Rate

Manualinterest rate adjustment

Planned fixing date MM/DD/YY

Reference Int. rate Act.fix.dte RtFxTmeLIB_3_UNI

Copy Cancel

Treasury: Due Date Processing

Transactn Status ProdTyp TType Text

400000 0002 63A 200 Int. rate adjust. on ...

The amount of the interest payments that can result from the derivative interest rate instruments is usually determined by a variable index (reference interest rate). Examples of these are the reference interest rates Libor_6_months, Libor_12_months. Today, for example, these may be worth 4.75 and 5.23 percent, but their future values are not yet known. A vanilla swap with variable and fixed interest rates is an example of a derivative financial instrument: Libor_6 against 5.5%, 20 year term with interest payments every 6 months.

Within the Derivatives application, you can generate flows for the fixed-interest side and the variable-interest side of the contract when you create a swap. The payment amounts of the fixed-interest side can be calculated using financial mathematical rules as soon as you create the swap. The future amounts of the variable interest rates are unknown, since the future percentage value of a reference interest rate is unknown when the transaction is created. As a result, the activity "Interest rate adjustment" is necessary, since it changes a planned record (a record whose payment amount is unknown) into an actual record (payment amount is known). This activity takes place when the interest rate is fixed.

Interest rate adjustment is usually set up to take place in a daily batch process. This function determines which planned records must be converted to actual records on these days (using the fixing date entered at record level). It then calculates the interest rate values for each reference interest rate, calculates the amounts, and writes the actual record to the database. Once the interest rate has been adjusted, the corresponding planned record no longer appears in the transaction. The interest rate adjustment function therefore fixes the interest rate of the planned record and generates a planned record.

(C) SAP AG AC030 41

6.42

SAP AG 1999

Exercise: Interest Rate Exposure

(C) SAP AG AC030 42

6.43

SAP AG 1999

Analysis / Simulation - Key Figures

The aim of analysis/simulation is to simulate the impact of hedge transactions in various market data scenarios.

The following key figures are available for analysis/simulation:

Evaluation of Treasury transactions in the interest area

NPV calculation

Effective interest rate calculation

Total return

Evaluation of the Treasury transactions in the forex area

NVP calculation

Evaluation of the underlying transactions and Treasury transactions in the forex area

NPV calculation

Effective rate calculation

(C) SAP AG AC030 43

6.44

SAP AG 1999

Analysis / Simulation - Evaluations

The analysis/simulation function enables you to branch directly to:

Interest area:

Single transaction NPVs with transaction display

Representation of the differences (comparison with the current NPV)

Interest rate exposure (basis point value)

Cash flow display

Currency area:

Single transaction NPVs with transaction display

Representation of the differences (comparison with the current NPV)

Currency exposure (excluding/including fictitious transactions)

Cash flow display

Cash Management

(C) SAP AG AC030 44

6.45

S A P A G 1 9 9 9

A n a l y s i s / S i m u l a t i o n - S t r u c t u r e

R e a lt r a n s a c t i o n s

R e a lt r a n s a c t i o n s +

F i c t i t i o u s 1

R e a lt r a n s a c t i o n s +

F i c t i t i o u s 2C u r r e n t m a r k e t d a t aS c e n a r i o 1S c e n a r i o 2S c e n a r i o 3

E n t r y o f f i c t i t i o u s t r a n s a c t i o n s A l l o c a t i o n t o t h e c o l u m n s r e a l + f i c t i t i o u s 1 / 2

N a v i g a t i o n

H e a d e r d a t a

O r g a n i z a t i o n a l u n i t s f o r f i n a n c i a l t r a n s a c t i o n s O p e r a t i o n a l c a s h f l o w s w i t h s u m m a r i z a t i o n d a t a

T RT R -- T MT M

T RT R -- C MC M

O u t p u t m a t r i xf o r k e y f i g u r e s

N P V

E f f e c t i v e i n t e r e s t r a t e( i n t e r e s t r a t e a n a l y s i s )

T o t a l r e t u r n( i n t e r e s t r a t e a n a l y s i s )

E f f e c t i v e r a t e( f o r e x a n a l y s i s )

S c e n a r i o d a t a

The analysis/simulation structure comprises various sections. The output matrix for key figures is located centrally. The vertical axis of the matrix contains the various market data environments (current market data and scenarios). The horizontal axis displays the operational cash flows (only applies to forex analysis with underlying transactions), the selected financial transactions, and the fictitious transactions.

The header section displays information about the organizational elements (financial transactions) or the operational cash flows (only forex analysis with underlying transactions), together with the grouping, amount, direction, and summarization date. The selected review period, the current calculation day, and the current NPV are also displayed.

The lower section contains the input fields for the fictitious transactions. You can enter them using the fast entry option, or by means of the input screens in Treasury Management (only applies for interest rate risk analysis).

There are various navigation tools located above the header section. These allow you to branch into various standard reports in order to continue your analysis of the selected positions.

You can interactively call up new scenarios in the evaluations (or replace old scenarios), and move the horizon for alternative calculations.

(C) SAP AG AC030 45

6.46

SAP AG 1999

Exercise: Analysis and Simulation

(C) SAP AG AC030 46

6.47

SAP AG 1999

Integrated Market Risk Management

ResultsData inflow

Mark-to-marketvaluation

Mark-to-marketvaluation

Key ratios/values

Key ratios/values

Fictitious cash managementupdate

Fictitious cash managementupdate

ExposureHedging rate

ExposureHedging rate

Actual / Scenariomarket data

Actual / Scenariomarket data

Actual transactionsActual transactions

Cash ManagementCash Management

Control panel

Integrates all incoming data and resulting data relevant

for risk

(C) SAP AG AC030 47

6.48

SAP AG 1999

Market Risk Management and Managing Risk Positions: Unit Summary

This unit has given you an overview of the procedures and methods used in Market Risk Management and introduced you to the main evaluation methods:

Mark-to-market valuation to calculate fair market prices for your financial transactions

Forex and interest exposure reports to identify open positions in the currency and interest areas and to monitor the effects of hedge transactions

Planning and simulation options to anticipate potential market developments and determine possible hedging alternatives

(C) SAP AG AC030 48

6.49

SAP AG 1999



Bank data

Businesspartner

Market data

DownloadMarket Risk Management:• Interest/currency

exposure• Sensitivities• Mark-to-market • Risk analysis/Simulation• Value at Risk

Cash Management:• Electronic banking• Liquidity status• Integrated operationalsystems

• Control functions

Transaction Management:• Management of financial transactions and positions

• Transfer to Financial Accounting

• Flexible reporting andportfolio analysis

• Datafeed interface

DD CC DD CC

100 100 100 100

TM TM

SecuritiesSecuritiesDerivativesDerivatives

Money market Money market ForexForexLoansLoans

Logistics

The objective of the SAP Treasury module is to ensure efficient liquidity, portfolio, and risk management.

SAP Treasury is subdivided into the following three areas:

Cash Management (CM) offers tools for efficient liquidity analysis.

Transaction Management (TM) supports the management of financial transactions and positions.

Market Risk Management (MRM) provides methods and procedures for assessing risk positions.

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6.50 Market Risk Management and Managing Risk Positions

Exercises

Unit: Market Risk Management and Managing

Risk Positions

Mark-to-market valuation

Fair market valuation of financial instruments

In addition to valuing your transactions for accounting purposes to comply with the statutory accounting requirements, you now wish to value your transactions at their market value. The system determines the market values by calculating the net present values of all the cash flows generated from the transactions. The mark-to-market methodology provides the basis for all analysis reports in Market Risk Management.

1-1 Run a mark-to-market valuation for the transactions in your company code.

1-2 Look at the calculation bases and display the yield curves in graphical form.

1-3 Branch to the detail log, and navigate to one of the fixed-term deposits you have created to look at the valuation steps.

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Risk Positions

Managing currency risks using currency options

Using Market Risk Management to analyze exchange rate risks

You have operative transactions in foreign currency, which are exposed to the risk of changing exchange rates. You use Market Risk Management to identify your open currency positions and conclude appropriate hedge transactions.

2-1 Call up the currency exposure for the transactions in your company code (select securities, loans, foreign exchange, money market, and derivatives) and the operative payment flows from Cash Management. Use the grouping "MRM".

Choose a display period from today up to a year from today, with monthly intervals. Discount the cash flows from Cash Management.

Save your settings as a variant.

2-2 Branch to the term view and the view showing the individual transactions. You can drill down to the display in Cash Management (underlying transactions) or Treasury Management (hedge transactions).

2-3 Discuss the effect of the cash management groupings. How should you organize the groupings?

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Risk Positions

Managing currency risks using currency options

Identifying suitable hedge transactions, entering transactions and monitoring risk

You enter a currency option to hedge against currency risks you have identified, and check the effect of the option on the exposure.

3-1 Enter a currency option that changes the currency exposure for the interval you have selected:

Conclude the option as a contract with the Deutsche Bank to hedge one of the open items from the last exercise.

(Note: The exercise date of the option must fall within the time interval for the open position.)

3-2 Use the variant you have defined to look at the new currency exposure, and discuss the effect of the currency option. (in the exposure view, select the grouping "MRM").

When the exposure is calculated, what amount is taken into account for the option?

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6.51


Risk Positions

Managing interest rate risks using derivatives

Analyzing interest rate exposure

Creating a hedge transaction

After assessing your currency risks, you now want to analyze your interest rate risks. Interest rate risks arise from operative payment flows from Cash Management, as well as from transactions in the money market, securities and loans areas. These are listed alongside hedge transactions from the foreign exchange and derivatives areas.

4-1 Look at the interest rate exposure for the operative payment flows (Cash Management tab, Grouping "MRM") and financial transactions in your company code.

Define a variant for the time period for which you want to display the interest exposure (for example, from today to today + 2 years). Set the Display type for exposure indicator to display the exposure in terms of basis point value. Choose monthly time intervals.

Save your settings as a variant.

4-2 Enter an interest rate swap that changes the interest exposure for the term you have selected.

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4-3 Select the variant you have already defined and include the interest rate swap. To isolate the effects of your swap, restrict your selection to derivatives and enter your transaction number in the selection screen.

4-4 Discuss the effect on your interest exposure and interpret the values displayed.

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Risk Positions

Analysis and simulation

Analyzing your positions using scenarios and fictitious transactions

Analysis report (Example: Foreign exchange)

In addition to using actual market data for valuation, you would like to analyze the effects of possible market changes (scenarios). You use fictitious transactions to identify suitable instruments to hedge your positions before concluding actual transactions.

5-1 Check the USD cash flows in your company code (TRXX) with the grouping "MRM" for the next two months. To begin with, do not include any financial transactions in the analysis. The summarization date simulates the flow of all operative cash flows on this date (simplified assumption in order to plan hedge transactions for this date).

5-2 Analyze your positions using the "High" and "Low" scenarios (these each represent high or low interest rate levels and exchange rates).

5-3 Discuss the differences in the net present values.

5-4 Enter a forward rate transaction and an option as fictitious transactions and check the effects on the net present values and the effective rate.

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6.52 Market Risk Management and Managing Risk Positions Solutions


Risk Positions

1-1 To run a mark-to-market valuation for the transactions in your company code:

Accounting Treasury Market Risk Information System Mark-to-Market Mark-to-Market Position Evaluation

Entries: Data; Suggestion:

- Display currency: UNI- Evaluation type: 0001- Evaluation per = today- Horizon = today

Note: Market Risk Management always displays the market value for stocks.

1-2 To display the calculation basis:

From the report, you can display the market data that has been used by choosing Calculation basis (button). To view the yield curves in graphical form, press the graphics symbol. You can then choose (select) a yield curve, or select all the yield curves using the symbols below the yield curve list. Press the graphics symbol again to see the graphical display.

1-3 To display the detail log:

Choose Detailed log (button) to display the individual calculation steps. Using the product type and transaction number as a basis, navigate to one of the fixed-term deposit transactions you have created. If the horizon for the mark-to-market valuation is after the first position flow (investment/borrowing), the system displays and discounts the cash flows for repayments and interest. The overall net present value for the transaction is calculated by totaling the net present values for the individual cash flows.

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If the horizon is before the first position flow (but after the contract date of the transaction), this position flow is also included in the valuation.

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Risk Positions

2-1 To look at the currency exposure:

Accounting Treasury Market Risk Information System Exposure Currency Exposure


- Evaluation type: 0001

- Evaluation per = today

- Horizon = today

- Date from = today

- Date to = today + 1 year

- On the Cash Management tab, enter "MRM" in the Grouping field, and set the Discount underlyings indicator.

- On the Output controller tab, choose monthly time intervals.

Save your settings as a variant (Save icon).

2-2 To navigate in the exposure display:

You can branch to the term view, or the view showing the individual transactions using the corresponding buttons. If you double-click an individual item in the Underlying or Hedge transaction columns, the system branches to Cash Management or the detail transaction view.

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2-3 Structure of Cash Management groupings:

The Cash Management groupings you use should be structured as follows:

- They should not contain Treasury levels (Treasury transactions can be selected directly in MRM).

- They should cover the levels/groups that you want to set against Treasury transactions.

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Risk Positions

3-1 To purchase a currency option:

Accounting Treasury Treasury Management Foreign Exchange Trading Standard Option Create

Entries: Data

Note: Support for working out the option price:

Button: Option price calculatorEvaluation type: 0001 (Standard evaluation)Entries: Data (enter directly, or use market data button)Button: Premiums

3-2 To look at the changed currency exposure:

Accounting Treasury Market Risk Information System Exposure Call up currency exposure using a variant

Goto Variants Get

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The system displays the hedge transaction next to the corresponding position. Even if a position has been fully hedged (nominally), the system still shows an open position if the delta of the option < 1. The option value considered for exposure calculation is delta-weighted (nominal value x delta factor).

(You can see this when you view the option transaction. Choose Extras Option Price Calculator Button: Sensitivities.)

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Risk Positions

4-1 To look at the interest rate exposure:

Accounting Treasury Market Risk Information System Exposure Interest Exposure




- Horizon = today

- Yield curve shift: 1 basis point

- Date from = today

- Date to = today +2 years

- On the Cash Management tab, enter the grouping "MRM"

- On the Valuation parameters tab, set the Display type for exposure indicator to display the exposure in terms of basis point value.

- On the Output controller tab, choose monthly time intervals.

Save your settings as a variant (Save icon).

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4-2 To create an interest rate swap:

Accounting Treasury Treasury Management Derivatives Trading OTC Interest Rate Instrument Create

Entries: Data; Example: Receiver swap


Contract date Today

Term start Today + 2 days

Term end +++5

Outgoing interest

Nominal amount 5,000,000.00 UNI

Effective from Today + 2 days

1st due date ++6

Freq. month 6

Var. interest LIB_6_UNI

Int. calc. method Act/360

Incoming interest

Nominal amount 5,000,000.00

Effective from Today + 2 days

1st due date ++12

Freq. month 12

Fix. rate 5

Int. calc. method 360/360

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4-3 To look at your interest rate exposure:

Accounting ... Exposure Interest Exposure

Variants Get

4-4 In the basis point value display, the values in the interest exposure show the difference in the net present values of the cash flows for the respective periods (in other words, a net present value gain or loss), which would result from a change of 0.01% (equivalent of one basis point) in the interest rate level. If the open position is very small, this means that a high proportion of the interest rate risk has been hedged.

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Risk Positions

5-1 To analyze/simulate positions for USD cash flows:

Accounting

Market Risk

Analysis/Simulation

With Underlyings

Currency Risk



- Transaction currency: USD

- Base currency: UNI


- Horizon = today

- Date from = today

- Date to = today +2 months

- On the Cash Management tab, enter the grouping "MRM"

Start the report

5-2 To incorporate scenarios:Enter "high" and "low" scenarios on the report screen, and choose Calculate.

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5-3 Changes to the net present values:

In the case of outgoing payments, a lower net present value is an advantage (in other words, a lower dollar amount would have to be entered today to meet your payment commitments on the summarization date). By contrast, a higher net present value is an advantage in the case of an incoming payment.

5-4 To enter fictitious transactions:

Forward transaction: Enter 60A/102, amount, inflow (+) or outflow (-), strike (= rate of the forward transaction) and due date, choose Calculate.

Option: (Select “Fk2” to display the option transaction next to the forward transaction), enter 76A/100, amount, purchase call = inflow (+) or purchase put = outflow (-), strike and due date. You can enter the premium manually or let it be calculated automatically by choosing Calculate.

As a rule, an option allows you to participate in a positive market trend, whereas a forward transaction only serves as a hedging instrument, since both parties are under an obligation. The advantage of the forward transaction is that it is a cheaper alternative if the market trend is negative.

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