Position Management for Existing Impairment

If an impairment was recorded for a position, this has an effect on how the position is managed and the impairment must be taken into account in further position management.

Recorded impairments must be taken into account in the following business transactions. They do not affect any other business transactions.

  • Ratings

    A position with an existing impairment is valuated in accordance with the settings in the relevant position management procedure but is not amortized. If this valuation step is defined in the position management procedure it is suppressed when the valuation is carried out and a corresponding message is generate in the valuation log.

    A valuation is reset in the same way for a position with an existing impairment as for one without an impairment.

    This means that write-ups are possible for the security during a future valuation of the position and that balances can be generated for the security equity item that does not affect net income.

  • Business transactions that result in position inflows and outflows

    The following business transactions are grouped together as position outflows:

    • Repayment to be received

    • Repayment to pay

    • Unscheduled repayment

    • Sale

    • Nominal adjustment

    • Securities account outflow

      In the case of position outflows, an existing impairment is cleared from the position either nominally or in proportional units.

      An amortization as part of the generation of derived business transactions is suppressed if there is an existing impairment.

      These business transactions are grouped together as position inflows:

    • o Payments (assets)

    • o Payments (liabilities)

    • o Purchase

    • o Nominal adjustment

    • o Securities account inflow

      Existing impairments are not affected by position inflows. Amortization as a result of the incremental procedure is suppressed if an impairment exists.

  • Transfer postings

    The following business transactions are grouped together as transfer postings:

    • Securities account transfer

    • Valuation class transfer

    • Capital transfer

      In the case of transfer postings, an existing impairment is transferred to the target position either nominally or in proportional units, independent of the transfer posting category of the position management procedure of the target position. Therefore it is not possible to clear an existing impairment as part of a transfer posting. The rules of the transfer category defined for the target position apply to all other components.

      If an impairment exists for a source position (target position), any amortizations that are due to be carried out are suppressed for the source position (target position). If no impairment exists for a source position (target position), any amortizations that are due to be carried out are carried out for the source position (target position).

      This means that impairments may also occur for a position of the Trading category as a result of transfer postings.

  • Corporate actions

    The following applies to the effects of corporate actions on positions with an existing impairment:

    If the amortized acquisition value of a position without impairment is changed by corporate action, the amortized acquisition value including impairment must be adjusted in the same way.

    The following corporate actions are supported by the system.

    • o Stock split

    • o Capital increases from retained earnings

      Stock splits and capital increases from retained earnings are comparable inflows and have no effect on existing impairments.

    • o Capital reductions

      Capital reductions do not affect existing impairments.

    • o Stock swaps

    • o Transfer of new stock to old

      Stock swaps and transfers of new stock to old are comparable to transfer postings. An existing impairment is thus transferred in proportional units from the stock position (outflowing stock or new stock to be exchanged) to the target position (inflowing stock or old stock to be exchanged). If an impairment exists for a source position (target position), any amortizations that are due to be carried out are suppressed for the source position (target position). If no impairment exists for a source position (target position), any amortizations that are due to be carried out are carried out for the source position (target position).

    • o Issue Currency Changeover

      If the issue currency is converted, an existing impairment is converted in the same way as the other position components.

    • o Posting Subscription Rights

      When subscription rights are posted, any impairment existing for the stock is transferred to the subscription right in the same way as for the other components.

    • o Other Corporate Actions

      The procedure is the same for other corporate actions if an impairment exists as it would be for the amortized acquisition value without impairment.

  • Rights

    The following applies to the effects of exercising rights on positions with an existing impairment:

    If exercising rights change the amortized acquisition value of a position without impairment, the amortized acquisition value including impairment must be adjusted in the same way.

    The following rights are supported by the system.

    • o Exercise of warrant on stock (physical delivery)

    • o Exercise of warrant on interest (physical delivery)

    • o Exercise of subscription right

    • o Exercise of convertible bond

    • o Stock swap

      Exercising these rights is comparable to a transfer posting. An existing impairment is transferred from the source position to the target position. If an impairment exists for a convertible bond, any amortizations that are due to be carried out are suppressed when the right is exercised.

    • o Exercise of warrant on stock (cash settlement)

    • o Exercise of warrant on interest (cash settlement)

    • o Exercise of warrant on index (cash settlement)

    • o Exercise of warrant on currency (cash settlement)

      Exercising a warrant with cash settlement is dealt with in the same way as an outflow. If an impairment exists it will be cleared.

    • o Exercise of puttable bond

    • o Exercise of callable bond

      Exercising a puttable or callable bond is comparable to an outflow (the bond is returned to the issuer, the rights are in the hands of the issuer (puttable) or the owner (callable)). If an impairment exists it will be cleared. If an impairment exists any amortization due to be carried out is suppressed.

    • o Detachment of warrant bond

      The detachment of a warrant bond can be seen as a transfer posting with a source position (cum warrants) and two target positions (ex warrant). If an impairment exists for the warrant bond it is transferred completely to the ex-warrant. This means that the warrant bond does not carry any impairment after detachment. This procedure is similar to that for the amortization component which is also completely transferred to the ex-warrant. All other components are distributed across the two target positions according to the relationship of the market value of the ex-warrant/market value of the cum warrant at the time of detachment. If an impairment exists for the warrant bond, any amortization due to be carried out is suppressed.

  • Impairment Reporting

    The Transaction Manager information system is based on SAP Query and drilldown reporting. You can evaluate existing impairments in the position management reports delivered for the Transaction Manager. This is achieved using the new position component for impairments that have been carried out, which is available in position trend lists as the start, delta and end value. The value of these components flows into the position component amortized acquisition value which is also available in position trend lists as the start, delta and end value.