This post wraps up the customization we started in part 1 and 2.
Control of Processing of Derived Business Transactions
FCSM-TRM-TM-General Settings-Accounting-Derived Business Transactions- Control of Processing of Derived Business Transactions There are 2 options when it comes to derived business transactions, process them online or offline. Online processing means that they will be posted as the triggering update types get posted. As an example, when you post the final repayment on a foreign currency term deposit, it will also post the realized FX gain/loss. Offline means that the DBT is scheduled for posting when it is triggered but the posting has to be done manually in TPM18. One could think of a few reasons to favor one type of processing over the other. Having DBT online saves time as you don’t have to run a separate transaction (or have to worry if a scheduled job ran). However, if your Treasury department is posting the cash entries, it may confuse the issue if they see amounts they can’t reconcile. Ultimately it is a matter of preference.
Update types for Accrual/Deferral
FCSM-TRM-TM-General Settings-Accounting-Update Types-Define Update Types and Assign Usages At the end of every accounting period, we have to recognize the revenue related to our investments. SAP supports 2 methods for posting accruals: The difference procedure and the reset procedure. The difference procedure posts, as the name implies, the incremental difference from the last accrual date. The reset procedure posts a full accrual since the last cash flow and post a resetting entry the next day. We only have one update type we want to accrue so we only need one update type for the accrual and one for the associated offset flow (to post corrections triggered if the payment amount differs from the accrual calculated in a previous period or by FX differences)
Assign Update Types for Accrual/Deferral
FCSM-TRM-TM-General Settings-Accounting-Update Types-Assign Update Types for Accrual/Deferral Once more, TRM is very flexible. The accrual/deferral program is another feature that is heavily customizable. You can define different accrual configuration based on product group (OTC, securities…), Company code, Accounting Principle, Product Category/Type and Position Management Procedure. You can post accruals for different update types separately or group them. For our scenario, we will configure all OTC transactions the same so that if we re-use the update types we created for other products, the accruals will work the same.
Update Type within the Area
In a productive use scenario, you would also configure update types for transfers. Transfers allow you to change the Account Assignment Reference, Valuation Class or Portfolio of a transaction or position. Potentially, you can use this functionality to change the accounting treatment of a transaction or position that already has postings in Financial Accounting. Processing the transfer moves balances to new GL accounts as per your customization.
Define Account Assignment Reference
FCSM-TRM-TM-General Settings-Accounting-Link to Other Accounting Components-Define Account Assignment References Account Assignment references are a central component of GL account derivation. They make the link between a conceptual GL accounts called “account symbol” (a position account on the balance sheet as an example) and a specific GL account in an accounting principle/chart of account combination. For now we just need to define a name for our AAR. When implementing a productive system, it is critical to lay out what AARs are required. There is a ton of potential for re-use. On the flip side, without a proper blueprint or one that over-simplifies your requirements, you may end up missing the boat entirely and have a ton of re-work. Needless to say, upfront engagement of your accounting team is required to avoid costly delays. This is not something you want to figure out in user acceptance testing.
Define Accounting Assignment Determination
FCSM-TRM-TM-General Settings-Accounting-Link to Other Accounting Components-Define Account Assignment References Determination (OTC Transaction) This activity maps the transactions to an account assignment reference through derivation rules. This customization happens in 2 steps. First you define a template for the rule; the template defines source fields (input) and Target Fields (output). The source fields available are numerous and include Business Partner, Company Code, Portfolio, Product Category/Type, Valuation Area, Valuation Class and transaction type. For the purpose of this example, we select Product Type and Valuation Class as input parameters and Account Assignment Reference as output.
The second step is to maintain the mapping values.
Indicate Update Types as Relevant to Posting
FCSM-TRM-TM-General Settings-Accounting-Link to Other Accounting Components- Indicate Update Types as Relevant to Posting This activity flags update types as relevant for posting in Financial Accounting. TRM may force you to configure update types in the areas of position management and based on customer requirements you may not want them to post to GL. You also have update types that are used to track notional values such as the notional amounts of an interest rate swap. In these cases, you would also mark them as not relevant for posting. Requirements may also determine that an update type is relevant for posting for US GAAP but not for IFRS. With TRM, it’s possible to do that!
For the purpose of this example, we will assume the term deposit will always be traded at par so no clearing of the purchase value/position differences will be required. This means the related update types can be configured as not relevant for posting. We also set the offset flow for accruals as not relevant for posting. The issue of balance sheet account revaluation and income statement translation exceeds the scope of this article. This is something you have to coordinate with the Accounting team and the FI consultant.
Define Account Determination
FCSM-TRM-TM-General Settings-Accounting-Link to Other Accounting Components-Define Account Determination This activity covers many different customization objects and concepts. I will try to unpack them one by one.
Account symbols represent an accounting principle and chart of account agnostic GL account. That is to say, the account symbol represents a theoretical GL account. SAP has defined a number of standard account symbols. If you add new ones, it would be wise to follow the numbering convention already in place. If you look back to our accounting requirements, we need the following account symbols:
|Business Definition||Number||SAP Definition|
|Short Term Investment||1||Position|
|Interest Receivable||5.1.2||Acc. Receivable Interest|
|Interest Income||4.1.1||Interest Gain|
|Unrealized FX Gain||18.104.22.168||Increase FX|
|Unrealized FX Loss||22.214.171.124||Decrease FX|
|Realized FX Gain||126.96.36.199||Realized Gain FX|
|Realized FX Loss||188.8.131.52||Realized Loss FX|
Posting Specifications define the journal entry templates that TRM uses when interfacing an update type to Financial Accounting. It defines the document type and account symbols to debit/credit. We will need the following account symbols:
|Posting Spec||Description||Debit Symbol||Credit Symbol|
|15700||Balance Sheet Revaluation (loss)||184.108.40.206||1|
|15300||Balance Sheet Revaluation (gain)||1||220.127.116.11|
|15400||Reset FX Gain||18.104.22.168||1|
|15800||Reset FX Loss||1||22.214.171.124|
|12300||Realized FX Gain||1||126.96.36.199|
|12400||Realized FX Loss||188.8.131.52||1|
|15430||Move FX gain from unrealized to realized||184.108.40.206||220.127.116.11|
|15730||Move FX loss from unrealized to realized||18.104.22.168||22.214.171.124|
Assign Update Types to Posting Specs
In this activity, we simply assign our update types to posting specification that will carry the proper postings. There just isn’t a substitute for a strong blueprint that really flushes out the accounting requirements. Account determination is one of the areas that require the most configuration and a strong design goes a long way. We make the following assignments:
|Update Type||Posting Spec|
|AD2005||Not relevant for posting|
|DBT_M001||Not relevant for posting|
|DBT_M002||Not relevant for posting|
Assignment of GL Accounts to Account Symbol
This is the final step in account determination, it brings together our theoretical accounting customization with a specific chart of accounts. The assignment can be valuation area or even currency specific. It is possible to leave account assignment reference blank to have a default GL account assigned to a symbol, this can reduce the number of assignments you have to make greatly when a symbol is always mapped to the same account. You can also override the default account in a more specific rule. We make the following assignments:
Trying it out!
I will run through the business processes in details in a following blog post. For now, here is a sneak peak of the posting journal.