Function documentationFAS157 Compliance Locate this document in the navigation structure

 

FAS 157 reports is compliance reporting of fair values of financial instruments, The report displays the fair values of financial instruments in three levels and the system has the ability to classify the instruments in the following levels.

Level 1: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. A quoted price in an active market provides the most reliable evidence of fair value and shall be used to measure fair value whenever available.

Level 2: Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or liability. Level 2 inputs include the following:

  • Quoted prices for similar assets or liabilities in active markets.

  • Quoted prices for identical or similar assets or liabilities in markets that are not active, that is, markets in which there are few transactions for the asset or liability, the prices are not current, or price quotations vary substantially either over time or among market makers (for example, some brokered markets), or in which little information is released publicly (for example, a principal-to-principal market).

  • Inputs other than quoted prices that are observable for the asset or liability (for example, interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates).

  • Inputs that are derived principally from or corroborated by observable market data by correlation or other means (market-corroborated inputs).

Level 3: Level 3 inputs are unobservable inputs for the asset or liability. Unobservable inputs shall be used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date. However, the fair value measurement objective remains the same, that is, an exit price from the perspective of a market participant that holds the asset or owes the liability. Therefore, unobservable inputs shall reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk).

Prerequisites

You need to make the required settings in Customizing for the Transaction Manager to classify financial instruments in levels:

  • Assign Product categories and product types to required level in Customization through following path:   Treasury and Risk Management   Transaction Manager   General Settings   Information System   FAS157   FAS157 : Classify Product Category and Product Types into Levels  

    • Choose the New Entries pushbutton.

    • Choose the Valid From date.

    • Choose the Product Category.

    • Choose the Product Type.

    • Choose the Level.

    • Save your changes.

    Note Note

    If you select the Suppress check box for any combination of product category and product type, then that particular entry is not considered and is not processed.

    End of the note.

  • Assign the level of product category and assign the update types to the level 3 category through the following path:   Treasury and Risk Management   Transaction Manager   General Settings   Information System   FAS157   FAS157 : Assignment of Update Types to Level 3 Category  

    • Choose the New Entries pushbutton.

    • Choose the Update Type.

    • Choose the Level 3 Category.

    • Save your changes.

    Note Note

    If you select the Suppress check box for any combination of update type and level 3 category, then that particular entry is not considered and is not processed.

    End of the note.

You can also assign individual Security, OTC deals and Loans to the required level in the SAP Area menu by following this path   Treasury and Risk management   Transaction manager   Information system   Reports   Regulatory reporting   FAS157   and selecting the relevant object:

  • Classify Securities by Level

  • Classify Loans by Level

  • Classify OTC Deals by Level

Activities

To produce the FAS157 report:

  1. Maintain all the relevant customizing as above.

  2. Open in the SAP area menu  Accounting   Financial Supply Chain Management   Treasury and Risk Management   Transaction Manager   Securities   Trading   Create Financial Transaction   (FTR_CREATE)

  3. Create a deal for securities / non security product types. Create Financial Transaction can also be accessed through other navigation paths, for example, Derivatives, Commodities.

  4. Open   Treasury and Risk Management   Transaction Manager   Securities   Trading   Edit Financial Transaction   (FTR_EDIT) and settle the deal.

  5. Open   Treasury and Risk Management   Transaction Manager   Information System   Reports   Regulatory Reporting   FAS 157   FAS 157 Compliance Overview   (FTI_FAS157_OVERVIEW).

  6. Enter the selection screen parameters according to the customer needs and execute.