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Prerequisites

The costs are valued via key date valuation only if you have decided to hold the costs exclusively, (that is, the indicator 'Costs inc.' has not been set). You do this in the Securities area Customizing under Accounting in Operative Valuation Area ® Valuation ® Define Treatment of Capitalized Costs in Operative Valuation Area.

Also, if you have decided not to hold the costs inclusively, you can use the indicator Prop. costs to choose between two methods of calculating the cost valuation amount in the case of proportional write-up/write-down of costs.

Features

When executing the function Rate/price valuation, you use an indicator to decide whether the capitalized costs of the positions to be valued are to be written down in full or proportionately.

The following section describes how to valuate costs depending on the valuation method you choose:

Writing down the costs pro rata

Method I

If, in the Securities area Customizing under Accounting in Operative Valuation Area ® Valuation ® Define Treatment of Capitalized Costs in Operative Valuation Area, you have not set the indicator Prop. costs, then the book value of the capitalized costs is written up/written down according to the write-up/write-down in the security:

Valuation amount of the costs in PC = (security write-up or write-down in PC / old book value in PC) * old book value of the costs in PC

Valuation amount of the costs in LC = (security write-up or write-down in PC / old book value in PC) * old book value of the costs in LC

Total valuation amount of the costs in LC = (security write-up or write-down in LC / old book value in LC) * old book value of the costs in LC

Foreign exchange valuation amount in LC = total valuation amount of the costs in LC - security valuation amount of the costs in LC

Key:

PC = Position currency

LC = Local currency

Method II

If, in the Securities area Customizing under Accounting in Operative Valuation Area ® Valuation ® Define Treatment of Capitalized Costs in Operative Valuation Area, you have set the indicator Prop. costs, then the book value of the capitalized costs is written up/written down in such a way that the ratio of the new book value of the costs to the acquisition value of the costs is the same as the ratio of the new book value of the security to the acquisition value of the security.

New book value of the costs in PC = (new book value of the security in PC / acquisition value of the security in PC) * acquisition value of the costs in PC

Valuation amount of the costs in PC = new book value of the costs in PC - old book value of the costs in PC

Security valuation amount of the costs in LC = valuation amount of the costs in PC * old foreign exchange book value

New book value of the costs in LC = (new book value of the security in LC / acquisition value of the security in LC) * costs in LC

Total valuation amount of the costs in LC = new book value of the costs in LC - old book value of the costs in LC

Foreign exchange valuation amount in LC = total valuation amount of the costs in LC - security valuation amount of the costs in LC

Key:

PC = Position currency

LC = Local currency

Writing down the costs fully

During rate/price valuation, if you set the indicator Fully write-down capit. charges, this does not mean that the costs are written down fully in every case, but rather that one of the following occurs:

In this case, the costs are written down in their full amount.
    1. To determine the This graphic is explained in the accompanying text for forex valuation and to calculate the costs of the foreign exchange amount:

      2. This graphic is explained in the accompanying text = total write-down in local currency / old book value in local currency

    2. Foreign exchange valuation amount of the costs = l * costs in local currency

Example

Proportional write-up/write-down of the costs - method I versus method II

  1. At T0 a security is purchased. Its position currency is the same as the local currency.

    2. Acquisition value = 100

    Costs = 10

  2. At T1 the first valuation is carried out.

    3. Current market value of the security = 90

    Write-down = 10

    1. According to method I this means the following as far as the costs are concerned:

      2. Valuation amount of the costs = -10 / 100 * 10 = -1 (= write-down in amount of 1)

    2. According to method II:

    New book value of the costs = 90 / 100 * 10 = 9

    Valuation amount of the costs = 9 -10 = -1 (= write-down in amount of 1)

  3. At T2 more of the security is purchased.

    4. Acquisition value = 90

    Costs = 5

    This means for the whole security position:

    Acquisition value = 190

    Current book value = 180

    Costs = 15

    Book value of the costs = 14

  4. At T3 a valuation is carried out.

    5. Current market value of the security = 190

    Write-up = 10

    1. According to method I this means the following as far as the costs are concerned:

      2. Valuation amount of the costs = 10 / 180 * 14 = 0.78 (= write-down in amount of 0.78)

    2. According to method II:

New book value of the costs = 190 / 190 * 15 = 15

Valuation amount of the costs = 15 -14 = 1 (= write-up in amount of 1)

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