Issue Currency Changeover (SAP Library

Issue Currency Changeover

Use

In the context of the EMU, it is assumed that almost all securities issued in one of the member currencies will be converted to the euro on a particular key date determined by the issuer by the end of the year 2001.

The issue currency changeover is represented as a special corporate action in the SAP System.

Integration

Since the Treasury Securities Management module manages all flows and documents both in local currency and issue currency, you are only permitted to change the issue currency of a security if all flows and documents in the system relating to the security are converted at the same time.

The Financial Accounting module uses the issue currency of the Securities subledger as the transaction currency. Since the transaction currency of FI documents is not going to be converted, the general ledger documents must be corrected by a currency swap. To do this, take the relevant amounts of the old transaction currency off the books and post them again in the new currency.

The individual security positions are subject to different consistency requirements, which must also be satisfied after the flows have been changed over.

You have to ensure, for example, that there are no write-ups/write-downs in the foreign currency for securities in the local currency.

To resolve any rounding errors, you may have to generate adjustment records.

Features

Change over the issue currency of a security as follows:

Adjust the FI documents by means of a currency swap
Convert all the relevant master data, flows, and documents
Reconcile the documents/flows in the subledger

Activities

To change over the currency of a security, you must define a corporate action from the Issue currency changeover category.

This becomes a reference for all the flows generated.

Choose Back office ® Position management ® Corporate action and create an issue currency conversion.

Enter the following data:

Key date of the changeover
ID number of the security you want to convert
Old issue currency
New issue currency
Set the Convert conditions? indicator if you want to convert all the conditions in the old issue currency to the new issue currency.
Rate type for translating the currency amounts

Activate the corporate action.

Post the corporate action

The following prerequisites must be satisfied:

You have to perform a period-end closing for all the positions of the security you want to change over on the key date of the changeover.
There must be no actual closed records with a position date later than the key date.
If a fixed rate has been defined between the old issue currency and the local currency at the changeover rate (this is always the case when you change over to the euro), you must perform foreign currency valuation at the changeover rate before you post the issue currency changeover. You do this by choosing: Back office ® Position management ® EMU additional functions ® Execute forex valuation.

If you have fulfilled all the requirements, choose Securities ® Accounting ® Corporate action ® Post.

Enter the following data:

Posting date of the FI documents
Document date of the FI documents
Assignment text of the FI documents

You post the issue currency conversion for all company codes.

By choosing Securities ® Back office ® Position management ® EMU additional functions, you can Generate issue currency changeovers. This function enables you to create the issue currency changeover for several classes (e.g. all the securities of an issuer) at the same time.

The following activities take place when the issue currency has been changed over:

The FI documents are adjusted

The system first determines the positions for all the relevant company codes/securities accounts on the key date of the changeover. It then takes the book value in the old issue currency off the books and posts it again in the new issue currency. It does this for each securities account (for 6b positions and valuation category 10 per position item). The example below demonstrates which flows are generated for each securities account position.

The issue currency (ICURR) of a security is changed over to the EURO on 1/1/2000 from FRF. The local currency (LCURR) of the company code is already EURO. The fixed exchange rate for the relevant rate type is 1 EURO = 6 FRF. In one securities account there are 1000 units with the following:

	Issue currency (ICURR)	Local currency (LCURR)
Acquisition value	630,000 FRF	100,000 EURO
Book value	534,000 FRF	89,000 EURO

The book value is calculated as follows:

	Before the changeover		After the changeover
	ICURR	LCURR	ICURR	LCURR
Acquisition value	630,000 FRF	100,000 EUR	105,000 EUR	100,000 EUR
Sec. val.	-96,000 FRF	-10,000 EUR	-16,000 EUR	-10,000 EUR
Forex val.		-1,000 EUR		-1,000 EUR
Book value	534,000 FRF	89,000 EUR	89,000 EUR	89,000 EUR

The system generates the following flows for a currency swap:

	Flow category	Debit/credit indicator	Amount in ICURR	Amount in LCURR
Take acq. Value off books	XKM	C	534,000 FRF	89,000 EUR
Post acq. Value	XKM	D	89,000 EUR	89,000 EUR

The database tables are changed over

The securities management module draws a formal distinction between the issue currency and the position currency of a security. Since you always manage your positions in the issue currency, you have to change over the position currency together with the issue currency.

You usually enter condition items in a separate currency, in other words, the condition currency. If you set the Convert conditions? indicator when you defined the issue currency changeover, all the conditions in the old issue currency are converted to the new issue currency.

In principle, ALL the records in the system will be converted, regardless of the issue currency changeover key date.

The documents/flows are reconciled in the subledger

‘New’ local currency securities are reconciled.

If a foreign currency security becomes a local currency security when the position currency is changed over to the local currency, the following have to be checked for consistency:

The acquisition value must be the same in both the issue currency and the local currency.
The write-ups/write-downs in the security must be identical in the issue currency and the local currency.
The book value must be the same in the issue currency and the local currency.
There must be no write-ups/write-downs in the foreign currency.

Since the local currency as the document currency is the legal currency in FI, the amounts in the issue currency are adjusted to match those in the local currency. This is done as follows:

The differences in the acquisition value are transferred to the valuation in the security.
The foreign currency valuation is transferred to the security valuation.
The difference of the valuation in the security is posted to a euro-adjustment account.

After the changeover of the position currency to the euro, the book value of a security item is calculated as follows (see previous example):

	ICURR	LCURR
Acquisition value	105,000 EUR	100,000 EUR
Sec. val.	-16,000 EUR	-10,000 EUR
Forex val.	0 EUR	-1,000 EUR
Book value	89,000 EUR	89,000 EUR

First step: The acquisition values are adjusted

First of all, the system adjusts the acquisition value in the ICURR to match that of the LCURR. It does this by transferring the difference in the acquisition values (in the example, 5,000 EUR) to the security valuation.

	Flow category	Debit/credit indicator	Amount in ICURR	Amount in LCURR
Transl. acq. val.	XC	C	5,000 EUR	0 EUR

The book value then looks as follows:

	ICURR	LCURR
Acquisition value	100,000 EUR	100,000 EUR
Sec. val.	-11,000 EUR	-10,000 EUR
Forex val.	0 EUR	-1,000 EUR
Book value	89,000 EUR	89,000 EUR

Second step: The valuation in the foreign currency is translated

In the next step, the valuation in the foreign currency is transferred to the valuation in the security.

There are no write-ups/write-downs for local currency securities in the foreign currency!

Since the securities position management function does not recognize this type of translation, two flows are written.

	Flow category	Debit/credit indicator	Amount in ICURR	Amount in LCURR
Take forex val. off books	XD0E	D	0 EUR	1,000 EUR
Post sec. valuation	XA1E	C	0 EUR	1,000 EUR

	ICURR	LCURR
Acquisition value	100,000 EUR	100,000 EUR
Sec. val.	-11,000 EUR	-11,000 EUR
Forex val.	0 EUR	0 EUR
Book value	89,000 EUR	89,000 EUR