Commercial Paper (SAP Library

Commercial Paper

Use

Commercial Papers are transactions with no interest payments during the term. Instead, both partners agree on a repayment amount that the debtor repays to the investor at the end of the contract.

A company needs 1 million DEM for 3 months. The amount is discounted with a fixed yield. The company gets the discounted amount - for example, 980,000 DEM - from an investor. At the end of the term, the company repays the 1 million DEM.

Activities

Enter a nominal amount and the yield that you want to achieve. Via discounting, the system determines the payment amount that the investor must pay to the debtor at the start of the term. Alternatively, you can determine the interest calculation based on a given rate. In the cash flow, the principal increase to the amount of the nominal amount is disclosed (linked with the discounting amount) at the start of the term and the repayment of the nominal value is disclosed at the end of the term.

As a second variant, the discounted principal increase can be represented at the start of the term and the repayment of the NPV and the interest flow can be represented at the end of the term. Settings must be made for this in Customizing when defining the transaction type.

Prerequisites

Prior to using money market management, you must maintain master data. You must

Create your Business partners, assign the corresponding roles to them and maintain the transaction authorizations.

Set up Standing Instructions (correspondence, payment details) and release the business partner.

You must also make the following settings in Customizing:

Definition of the Product type (if you do not want to use the standard product types, you can define these individually). Based on the product types, financial transactions are created and managed, and positions are managed. Example of a product type in the Money market area: Commercial Paper.
Definition of the Transaction type. The financial transaction type determines the types of transactions with a certain product type and controls the transaction and position management process. Example: Investment or borrowing of Commercial Papers.

Definition of the Condition type. This setting determines the structure characteristics that are displayed when you create transactions. Example: Nominal interest rate.
Definition of the Flow type. Flow types describe the different changes in the payment flows. Example: Nominal amount increase.

Refer to the relevant unit in the IMG.

You can then define money market transactions in the system.

Features

You will find detailed information in the units entitled Edit Commercial Paper and Create Commercial Paper.

A further function is the NPV calculator which you can use to determine the payment amount.