Valuation (SAP Library - Derivatives)

Valuation

Use

After you transfer the data to FI, you have to carry out Position management tasks. This includes, in particular, valuing the transactions for accounting purposes that you have concluded in a currency that is not your local currency.

Prerequisites

Using general valuation rules, which you can set up in Customizing, you can display country-specific valuation rules in Treasury. You specify the valuation rules according to the company code, product type and transaction type. For more information on this, see the section on Valuation in the Implementation Guide (IMG).

Define the One-Step Valuation Principles and classes for key date valuation, "unrealized gains and losses":

Unrealized losses: No write down or write down to the key date value.
Unrealized gains: No write up or write up to the acquisition value or write up to the key date value.

Define the Valuation Flows and assign these to the product type/transaction type combination.

Specify how the exchange rate is determined for the key date valuation and for "realized gains and losses".

Features

Valuation includes foreign currency valuation, valuation of OTC options and forward exchange transactions. You can use the Key Date Valuation report to prepare the closing operations (for example, to prepare the balance sheet) and the Realized Gain/Loss report to document the gains and losses from transactions on the corresponding income statement accounts.

To carry out differentiated valuation, you have access to the classification according to rate types (e.g. valuation rate, spot rate, bid rate, ask rate or closing rate) in the central rate tables.

Note For a special function in forex trading, see Split Valuations of Spots and Swaps

Example Example: Foreign currency valuation for a forward exchange transaction

Forex transaction: USD/EUR

Contract date: 03/01/YY

Value date: 00/31/YY

USD purchase amount: 1,000,000 USD

EUR sale amount: 1,620,000 EUR

Spot rate: 1.59

Forward rate: 1.62

1. Valuation: on 03/31/YY

2. Valuation: on 04/30/YY

Final valuation: on 05/31/YY

Date Forward rate: EUR Unrealized Realized

03/01/YY 1.62 1,620,000

03/31/YY 1.59 1,590,000 - 30,000

04/30/YY 1.63 1,630,000 + 40,000

05/31/YY 1.60 1,600,000 - 30,000

Valuation on 03/31/YY:

An unrealized loss of 30,000 EUR is calculated from the difference between the forward rate upon conclusion and the forward rate on the key date based on a purchase volume of 1 million USD. This creates a provision of the same amount on the liabilities side.

Valuation on 04/30/YY:

An unrealized gain of 40,000 EUR is calculated from the difference between the forward rate upon conclusion and the forward rate on the key date based on a 7purchase volume of 1 million USD. This gain is not disclosed according to our assumptions. As a result, no posting is made for this. However, the provision for the unrealized loss from the previous key date valuation is cleared.

Valuation on 05/31/YY:

An realized loss of 30,000 EUR is calculated from the difference between the forward rate upon conclusion and the forward rate on the key date based on a purchase volume of 1 million USD.

A common valuation principle is used in this example, that allows for one-step valuation and the use of the strict lowest value principle. The exchange rate determination in this example is geared towards the middle rate. In addition, according to the calculation regulations upon which this example is based, we are assuming that unrealized gains are not disclosed.

For more information, see Valuation Principles and Valuation Classes, Two-Step Valuation Methods and Reversing a Valuation.