Bonds 
Bonds
Purpose
This scenario describes how bonds are processed in the SAP System, and how the corresponding bond positions are managed.
Prerequisites
The necessary master data for the business partners, securities accounts and classes, as well as the required market data (indexes, reference interest rates and securities prices) is created.
See also: Securities Master Data Scenario.
Process Flow
Transaction Processing
In the course of processing, a transaction (purchase or sale of a security) progresses through various activity categories. Which of the following progressions applies, depends on the Customizing settings made for the transaction type:
The following explains the various processing steps using the progression Order ® Contract ® Settlement as an example.
When you create an order, you are reproducing either a sales order or a purchase order in the system. You determine which security in which securities account is to be purchased or sold, and also specify the number of units and the conditions. The bank account is proposed by the system based on the Standing Instructions for the counterparty.
You can use the Other flows function to enter the charges, brokerage, commissions and so on associated with the purchase or sale of the security, directly on creating the order.
With the Transaction ® Execute function, you effectively move the transaction from the activity category Order to the activity category Contract. You use this function once the required securities are ordered (for example, after the bank has called back). You have the option of changing any of the initial order details if necessary.
When you come to settle the contract, the system pulls up all the details on the financial transaction from the contract so that you can check the information and make any changes that might be necessary. Once again, you have the option of activating correspondence or of displaying the anticipated cash flow.
Depending on the Customizing setting, the transaction is either released automatically when the contract is settled, or manually, using the release function.
Once the transaction has been released, you can proceed to post it. A posting log is generated, and you can use this to see what the corresponding financial accounting document looks like.
Position Management
The following functions are provided to help you manage your bond positions:
This function lets you transfer positions at the book value from one securities account within the company code to another. A prerequisite for this is that the position indicator in the target securities account is maintained. The flows required for the transfer are generated by the system, which also updates the position in the respective securities account. The result of the transfer is displayed in a posting log.
Incoming payments (interest, dividend or repayment flows) can be posted either automatically or manually.
You can use automatic posting to process flows which occur regularly, where the timing and the amount of the flow is known in advance. Typically, automatic posting is used for interest, dividend, and repayment flows, that is, flows generated from conditions.
You can use the incoming payments function to manually process due flows for interest, dividends and repayments. In contrast to automatic processing, here you have the advantage of being able to process the flows individually. This is useful in a case where – after comparison with the bank statements - you want to manually change automatically generated tax flows, for example.
The Corporate Actions function lets you represent changes to the capital structure stemming from the issuer. For example, a predefined corporate action allows you to represent the capital change Issue Currency Changeover.
You can also implement user-defined actions.
Within the closing operations area, you can choose the following processes:
You use period-end closing to post rate gains or losses and correction records up to a certain key date. Correction records are used to value positions belonging to the same class, but located in different securities accounts, in the same way.
You can initially execute period-end closing in a simulation run. This generates a list of all securities flows included in the period-end closing operation. Period-end closing is a prerequisite for other closing work, such as key date valuation.
You use key date valuation to value your positions, and can also run the valuation as a foreign currency valuation. By means of general valuation rules set in Customizing, you can represent country-specific valuation specifications on the one hand, and on the other, run a differentiated valuation by classifying rate types (e.g. valuation rate, spot rate, bid rate, ask rate, closing rate).
The amortization function allows you to value a position using linear or exponential amortization from the book rate to the repayment rate precisely to-the-day, on any key date. The corresponding amortization flows are automatically generated by the system based on the difference determined.
With the help of the interest accrual/deferral function you can assign revenues and expenses to the respective fiscal years based on periods. Once the year-end closing work is complete, you reverse the accruals/deferrals again.
The balance sheet transfer function allows you to move securities positions between account assignment levels. This can be linked to a transfer posting between the corresponding balance sheet accounts in Financial Accounting, something which is necessary when a security from your current assets is to be added to your fixed assets, for example.
The G/L account in which the position is managed in Financial Accounting is assigned by means of the account assignment reference. The balance sheet transfer changes the account assignment reference in the position indicator. You can execute the balance sheet transfer per company code or per securities account.
With this function you can block sales for entire securities accounts or certain classes within a securities account. When you select individual classes you can block either the entire item or just parts of the item. You can set a time limit for the block so that the position is automatically released once the time limit is exceeded. In addition to entering a blocking reason, you can use a memo to enter further information for the activity. You can manually unblock blocked items or securities accounts at any time.
Result
You have set up and managed securities positions. You can now proceed to evaluate the positions in the information system.
Within the context of position measure planning, you decide whether you want to set up further securities positions or dismantle existing positions. Your decision will largely depend on the changes in the external market conditions, since these have a direct impact on your company's liquidity situation.