Use

The security valuation determines gains and losses as a result of price changes.

Integration

Valuation of the paper is supported for the following product categories:

Features

Calculating the write-up / write-down amount in the security in valuation currency

a. Determine the book value, the purchase value and the market value or net present value of the position on the valuation key date.

b. Compare the values and select the new book value in position currency based on the write-up / write-down rules defined in the position management procedure.

c. The write-up / write-down amount is first calculated in position currency:

d. New book value of the position in position currency - Old book value of the position in position currency = Write-up/write-down amount in position currency

e. Conversion of the write-up / write-down amount with the book exchange rate in valuation currency.

Whereby:

Market values and NPVs

For securities the security prices are taken from the security price table [transaction FW17, in the area menu under Corporate Finance Management ® Basic Functions ® Market Data Management ® Manual Market Data Entry ® Securities and Indexes ® Enter Security Prices ]. The market values are determined based on this data using nominal or unit information.

If the Enable Special Write-Ups/Write-Downs for Securities indicator was set in Customizing for the security valuation procedure, the system searches first of all for a matching entry in the price table for special valuations. If an entry is found, a special security valuation will be carried out. If the system does not find an entry in this table it searches for an entry in the securities price table and carries out a regular security valuation.

See also:

Special Security Valuation

For loans, money market transactions, forex transactions and derivatives (except for forward bonds) the fair value is a present value that has either been calculated in market risk management or entered manually in the NPV table [in the area menu under Basic Functions → Market Data Management → Manual Market Data Entry ® Enter Net Present Values ].

If the prices or present values are not available in the required currency, they are translated using the most recent market exchange rates available in the system.

In the case of forward bonds, the market value for a bond purchase is set to "bond market value – spot open + margin accruals", while the market value for a bond sale is "spot open – bond market value + margin accruals".

Book exchange rate

Depending on whether or not a foreign currency valuation was already carried out for the position, the book exchange rate used is either the old book exchange rate (the last valuation) or the new book exchange rate resulting from the preceding foreign currency valuation.

See also: Two-Step Valuation

If one of the two book values is 0, or the book values have opposing +/- signs, the book exchange rate is set to 1. For forward bonds, the book exchange rate is set to the opening bond spot price for the contract.

A flow is generated for the write-up or write-down amount.

If the +/- sign has changed compared to the totals of previous flows, a clearing flow is generated if the Clear Gains/Losses indicator is set in the definition of the security valuation procedure in Customizing under Transaction Manager → General Settings → Accounting → Parallel Valuation Areas → Settings for Position Management → Key Date Valuation → Define Security Valuation Procedure. If the result of the valuation is that the position has to be written down, for example, and write-up flows already exist, the system would generate one flow to clear the write-ups, and one flow for the remaining write-down amount. The same applies if a write-up offsets former write-downs.

This valuation step can generate reset flows.

See also: Valuation of Capitalized Costs