Entering content frameBackground documentation One-Step Valuation Method Locate the document in its SAP Library structure

You perform write-ups/write-downs, you create/reverse provisions and display unrealized gains/losses in relation to the total amount in local currency.

Note

The one-step method is used mainly in the Money Market, Foreign Exchange, and Derivatives areas.

Example

Valuation of a forward exchange transaction: USD/DM

Transaction basic data:

Concluded: 03/01

Value date: 05/31

Purchase amount: 1,000,000 USD

Forward rate: 1.70

Trend of the selected comparison rate (current exchange rate) during the transaction term:

Date

DEM/USD rate

03/31

04/30

05/31

1.65

1.72

1.69

Valuation principle:

TR1 (write-up and write-down up to the key date value)

Procedure:

  1. You perform a key date valuation on the 03/31 and the 04/30.

Key date valuation on 03/31:

Compare the key date value in LC (1,650,000 DEM) with the forward transaction rate agreed in LC (1,700,000 DEM). This results in a non-realized loss of 50,000 DEM. The system represents a provision on the liabilities side.

Key date valuation on 04/31:

When you compare the key date value in LC (1,720,000 DEM) with the forward transaction rate agreed in LC (1,700,000 DEM), you get a non-realized profit of 20,000 DEM. You reverse the provisions on the liabilities side and enter provisions of 20,000 DEM on the assets side.

2. On 05/31, you post the transaction.

3. The realized gains and losses are calculated using the Realized gain/loss function on 05/31.

The transaction was processed using the agreed forward rate of 1.70 DEM/USD. However, the current market rate is 1.69 DEM/USD. This produces a realized loss of 10,000 DEM.

You reverse the provisions of 20,000 DEM on the assets side and post the realized loss of 10,000 DEM.

Note 

This function works independently of the one-step valuation method. It is only mentioned here to demonstrate the entire process, which a forward rate transaction passes through.

Steps involved in the one-step valuation method in Securities

  1. On the key date of the valuation you determine the book values, acquisition values and current values in position currency and local currency.
  2. Compare the amounts in local currency to determine which of the three values will become the new book value (in local currency). You make this decision on the basis of the write-up/write-down rules defined in the valuation principle.
  3. Calculate the security write-up or write-down in position currency.
  4. Multiply the security write-up or write-down by the old exchange rate (book rate) to determine the security write-up or write-down amount in local currency.
  5. Determine the write-up/write-down amount caused by changes in the exchange rate:
    1. Subtract the old book value in local currency from the new book value in local currency to calculate the total write-up/write-down amount in local currency.
    2. Subtract the security write-up/write-down in local currency from the total write-up/write-down in local currency to calculate the write-up/write-down in the foreign currency (on the basis of changes in the exchange rate).

Technical description: One-Step Valuation Method (Technical)

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