In Customizing for SAP Treasury and Risk Management under  Transaction Manager Foreign Exchange Transaction Management , make the following settings:

1. Under Define Product Types, you first create a new product type for non-deliverable forwards with the product category 600 Foreign Exchange.

   In the Settlement field, choose Non-Deliverable Forward.

2. Under Define Transaction Types, create a transaction type for this product type. In the transaction type, assign a number range for the transactions. In the Processing Category field, assign one of the following processing categories:

   • Processing category 121 with the activity chain: Order - Contract - Settlement - Fixing Settlement

   • Processing category 120 with the activity chain Order-Contract-Fixing

   Set the Automatic Posting Release indicator and/or Automatic Settlement for Counterconfirmation indicator if you want to. You can also assign a limit group and a status profile.

3. In the activity Assign Flow Types to Transaction Type, you need to create flow types for purchase, sale, and cash settlement, and assign these flow types to transaction rates.

   Example

   • 1000 Purchase (flow type 10 Principal Increase)

   • 1031 Cash settlement (flow type 31 Cash Settlement)

   • 2000 Sale (flow type 10 Principal Increase)

   • 0010 Charges (flow type 90 Other Flow/Condition) [optional]

4. In the activity Define Update Types and Assign Usages, you also need to define update types that correspond to the transaction flow types already defined in the activity Define Flow Types. This reason for this is that, in the Transaction Manager, postings to Financial Accounting as well as position management use update types.

   Example

   • FX1000+ Purchase Foreign Exchange

   • FX2000– Sale Foreign Exchange

   • FX1031+ Cash Settlement

   • FX1031– Cash Settlement

   • FX0010+ Charge Foreign Exchange Transaction [optional]

   • FX0010+ Charge Foreign Exchange Transaction [optional]

   Furthermore, update types are also required for open/close flows.

   Example

   • OTC001 Open OTC Transaction

   • OTC002 Close OTC Transaction

   You assign the update types to the Transaction Management application.

5. In the activity Assign Flow Types to Update Types, you assign corresponding update types to the transaction flow types.

6. In the activity Assign Update Types for Position Update, you assign per product type and transaction type an update type for the open flow and an update type for the close flow.

7. Under  Transaction Manager General Settings Transaction Management Currencies Define Non-Deliverable Currencies , you specify which currencies are non-deliverable. When transactions are entered for non-deliverable forwards (NDFs), the system checks in this activity which currency among those used is the non-deliverable currency and proposes the other currency as the settlement currency. You can change the settlement currency proposed. However, settlement has to use one of the currencies involved. Settlement is not possible in a third currency.

    Note

   Exception: If the non-deliverable currency is the local currency, the system proposes it as the settlement currency.

   End of the note.

8. Correspondence

   • You can use the Correspondence Framework [available with the business function TRM, Correspondence Framework (FIN_TRM_CORR_FW)].

   • If you do not use the new correspondence framework, the existing correspondence function is available. See also: Correspondence

   Make the necessary settings in Customizing.

1. In the activity Set the Effects of the Update Types on the Position Components, you define the value Indirect Position Change for the purchase, sale, and cash settlement update types of the NDF and the value No Position Changes for the open/close update types.

   Example

   FX1000+ Purchase Foreign Exchange – 1006 Indirect Position Change

   FX1031+ Cash Settlement – 1006 Indirect Position Change

   FX1031- Cash Settlement – 1006 Indirect Position Change

   FX2000- Sale Foreign Exchange – 1006 Indirect Position Change

   OTC001 Open OTC Transaction – 1000 No Position Change

   OTC002 Close OTC Transaction – 1000 No Position Change

2. In the activity Key Date Valuation, you can create a special valuation procedure for NDFs.

3. Define a position management procedure for Non-Deliverable Forwards and assign to it the procedure that you have defined above. Then assign the position management procedure to the NDF positions.

    Note

   You can also assign an existing position management procedure to NDF positions.

   End of the note.

4. Make the settings for the derived business transactions.

   For example, you need a separate update type for posting an exchange rate gain/loss equivalent to the amount of the cash settlement at the end of the forward transaction (such as DBT_B013 Forward Exchange Transaction Gain (Standard) and DBT_B014 Forward Exchange Transaction Loss (Standard)), which you assign on the Rate Gains/Losses tab page in the activity Assign Update Types for Derived Business Transactions.

    Note

   If you use NDFs in hedging relationships, the settings that you need to make for their valuation and for the derived business transactions are more complex than those described here.

   End of the note.

5. Connection to Other Accounting Components

   Independently of the valuation area, you use account determination to specify the accounts to which the posting-relevant update types are posted in Financial Accounting. For this, you need to set up account determination for the update types used in transaction management as well as for the posting-relevant update types of the derived business transactions.

   In the context of an NDF, the posting-relevant update types are those for cash settlements, additional flows, and exchange rate gains/losses.

   Example

   • FX1031+ Cash Settlement – 1006 Indirect Position Change

   • FX1031- Cash Settlement – 1006 Indirect Position Change

   • Additional Flows

   • DBT_B013 Forward Exchange Transaction Gain (Standard)

   • DBT_B014 Forward Exchange Transaction Loss (Standard)