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.

proc DBT.png

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)

Update Type

UT acc.png

Assign Usage

UT Acc usages.png


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.

Area

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Update Type within the Area

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Transfers

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.

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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.

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The second step is to maintain the mapping values.

mapping aar.png


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!

relevant for posting.png

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.

relevant for posting2.png

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

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
Cash 3 Bank Clearing
Interest Receivable 5.1.2 Acc. Receivable Interest
Interest Income 4.1.1 Interest Gain
Unrealized FX Gain 4.9.4.2 Increase FX
Unrealized FX Loss 4.9.3.2 Decrease FX
Realized FX Gain 4.9.2.1 Realized Gain FX
Realized FX Loss 4.9.1.1 Realized Loss FX


Posting Specification

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
11100 Investment Increase 1 3
13900 Interest Accrual 5.1.2 4.1.1
15700 Balance Sheet Revaluation (loss) 4.9.3.2 1
15300 Balance Sheet Revaluation (gain) 1 4.9.4.2
15400 Reset FX Gain 4.9.4.2 1
15800 Reset FX Loss 1 4.9.3.2
11200 Investment Decrease 3 1
11210 Interest Receipt 3 5.1.2
12300 Realized FX Gain 1 4.9.2.1
12400 Realized FX Loss 4.9.1.1 1
15430 Move FX gain from unrealized to realized 4.9.4.2 4.9.2.1
15730 Move FX loss from unrealized to realized 4.9.1.1 4.9.3.2


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
MM1101- 11100
MM1111+ 11200
MM1121+ 11200
MM1201 11210
NV202 15300
NV203 15700
NV252 15400
NV253 15800
DBT_N006 12300
DBT_N008 12400
AD2004 13900
AD2005 Not relevant for posting
DBT_M001 Not relevant for posting
DBT_M002 Not relevant for posting
DBT_M005 15430
DBT_M006 15730


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:

Symbol GL Account
1 11210100
3 +++++++5
5.1.2 11310200
4.1.1 73110100
4.9.4.2 73310501
4.9.3.2 73310502
4.9.2.1 73310601
4.9.1.1 73310602


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.

posting journal.png

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