In part 1, we configured the settings for transaction management. Part 2 deals with the Financial Accounting integration.
FCSM-TRM-TM-General Settings-Accounting-Settings for Position Management-Define and Assign Valuation Classes There are 2 concepts to configure in this activity: General Valuation Class and Valuation class. SAP’s recommendation is to define the GVCs as the securities classification such as “Held to maturity” and “Available for sale”. In the real world, you will likely end up with accounting requirements over and above what this approach can deal with. It is critical to understand your customer’s accounting requirements up front and to have a strategy for GVC/VC definition. General Valuation Class can be used as a generic accounting treatment definition independent of the accounting principle. Valuation class is a specific implementation of that treatment in the context of an accounting principle (valuation area in TRM lingo).
General valuation class
Assign GVC to Specific VC
Assign GVC to Group
FCSM-TRM-TM-General Settings-Accounting-Settings for Position Management-Assign General Valuation Classes to Groups Not all general valuation classes will make sense for every product type. For these situations, you create groups of GVCs and assign these groups to product types as appropriate. On transaction creation, only the GVCs in the group will be available for selection.
Create GVC Group
Set the Effects of the Update Types on the Position Components
FCSM-TRM-TM-General Settings-Accounting-Settings for Position Management- Set the Effects of the Update Types on the Position Components This activity maps the various update type to an effect on the position components. Without going in the details of position management, TRM tracks various position components such as purchase value and costs. As update types are triggered, they can have an impact on these position components. That impact is defined as a position change category. You can define different rules for different valuation areas. For example, in US GAAP, a fee paid may have to be amortized over the life of the transaction but local GAAP requires that fee to be expensed in the current period. You would use different position change categories for each valuation area to meet that requirement. In our example, the configuration is straightforward. Any increase in the investment is recorded in the purchase value and decreases result in a position outflow. The interest is not relevant for position management.
Foreign Currency Valuation Procedure
FCSM-TRM-TM-General Settings-Accounting-Settings for Position Management-Key Date Valuation-Define Foreign Currency Valuation Procedure One of our requirements is to post revaluation of the position in our short term investment account. In order to do that, we define and FX valuation procedure that will recalculate the book value of our investment as the exchange rates fluctuate.
Position Management Procedure
FCSM-TRM-TM-General Settings-Accounting-Settings for Position Management-Define Position Management Procedure As the name seem to indicate. This activity defines the procedures to manage the positions. In this activity you set the steps that must be performed. The steps impact the key date valuation and derived business transactions. Without going in details of how flexible TRM really is when it comes to managing positions, you can have procedures that will split the price differences from the FX differences. Procedures that will amortize the issuance costs based on straight line or effective interest rate methods. If you find a consultant that really knows what they are doing and thinks outside the box, you can do a lot with the tools in that toolbox without using enhancements. There are multiple BADIs available to enhance position management when the standard functionality is just not enough.
Assign Position Management Procedure
FCSM-TRM-TM-General Settings-Accounting-Settings for Position Management-Assign Position Management Procedure If you can get your head around it, this activity is where a lot of the complexity of TRM finally pays off. The flexibility TRM has in assigning position management procedures based on so many different criteria means you could possibly manage the same instrument differently based on: the company (accounting code), the accounting principle (Valuation Area), the valuation class, the product category/type, the transaction type, the portfolio or the securities account group or almost any combination thereof. With great power comes great responsibility and if great care is not taken, you will end up with a hot mess! In our case we just assign our Valuation Area/valuation class/product type combination to our newly created PMP
Update Types for Key date valuation
FCSM-TRM-TM-General Settings-Accounting-Key Date Valuation-Update Types-Define Update Types and Assign Usage Every accounting period end, our position management procedure calls for an FX revaluation. This will result in accounting entries driven from update types. Obviously since exchange rates can either go up or down, we will need different update types for gains and losses. We also selected “Clear Exchange Rate Gain/Loss Handling” in our valuation step so we need update types for that as well if we ever go from a gain to a loss position or vice versa.
Assign Update Types for Valuation
FCSM-TRM-TM-General Settings-Accounting-Key Date Valuation-Update Types-Assign Update Types for Valuation This step assigns update types that will be created in the key date valuation transaction (TPM1) for each position based on their position management procedure. If you explore this configuration you will realize the extent of what is possible in TRM. In our case, because our PMP only does a FX revaluation, we only have a few update types to maintain in the “Foreign currency valuation” tab.
Update Types for Derived Business Transactions
FCSM-TRM-TM-General Settings-Accounting-Derived Business Transactions-Update Types-Define Update Types and Assign Usage Derived business transactions are triggered by operative business transactions. In our example, we hold a foreign currency investment for a period of time. Because FX rates might fluctuate from the start to the end date, we need to record a realized FX gain/loss. That entry is a derived business transaction. Other examples include the premium/discount when buying or issuing a security. Amortization of issuance fees also gets closed out by a derived business transaction on maturity. The product category, position management procedure and the position components themselves directly determine what DBTs will be triggered. For our scenario we need realized FX gains and losses and Update Types triggered by the position outflow (purchase value differences and FX Rate differences)
Assign Update Types for Derived Business Transactions
FCSM-TRM-TM-General Settings-Accounting-Derived Business Transactions-Update Types-Assign Update Types for Derived Business Transactions Just as for key date valuation, the position management procedure is the central object from which this customization is based. There are a lot of options in these screens and it speaks volume to how much you can really do without any enhancements. Our configuration is once again just scratching the surface (and not making much of a dent!).