You use this function to calculate the gains or losses that result from the difference between the foreign currency/local currency exchange rate used for posting (book value), and the price agreed upon conclusion of the contract.
Forward exchange transactions are usually pending transactions, in other words, transactions that still need to be fulfilled.
Gains and losses are only realized when the other partner has fulfilled its contractual obligation.
You have to conclude and post the relevant transactions before you can determine the related realized gains and losses.
In the Application area you can choose from the following fields:
· Foreign Exchange
· Money Market
This enables you to value different contract types in a single valuation run.
The system only supports one-step valuation procedures for OTC transactions. You can specify in Customizing whether the money market transaction itself ("security" component) should be valued in addition to the foreign exchange component.
If you select the Hedge Accounting field and only one of the other checkboxes (Money Market or Derivatives), the system sets the other field automatically. This prevents swaps and money market transactions that are part of a hedging relationship from being valued separately. Another consequence is that distribution flows are generated in addition to the realization flows. The system takes into account whether the derivative being valued is part of a hedging relationship in accordance with FAS 133 / IAS39. To calculate distribution flows, it uses the rules defined in hedge management for the corresponding hedging relationships.
The total of all distribution flows corresponds exactly to the total of all realization flows.
This field only affects realization for the following products:
· Forward exchange transactions
· Interest rate swaps
· Cross-currency interest rate swaps
· OTC options
For more information see the Hedge Management chapter in the General Functions section for the Transaction Manager.
To determine realized gains and losses:
1. Choose Accounting ® Operative Valuation Area ® Valuation ® Realized Gain/Loss.
The Treasury: Realized Gains/Losses screen appears.
2. Enter your selection criteria in the following entry fields:
- Company Code
- Product Type
- Transaction Type
- Due Date
- Active Status
3. You can simulate the valuation of realized gains/losses by selecting Test Run. The simulation run produces a valuation list but does not make any changes or postings to the database (no document number).
4. If you select the Post immediately indicator, the flows that are generated by the valuation are posted immediately. If not, you have to post these flows later using the corresponding posting functions.
5. If you want to include derivative instruments in the valuation, set the Derivatives indicator. At present, this is supported for valuation of OTC options.
6. ChooseProgram ® Execute.
7. The system displays a list of the realized gains/losses.