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Former Member
Jul 31, 2016 at 12:38 PM

Amortization of Swap/Premium Amount for FX - Forward Transaction

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Hi Experts,

We are implementing FX Financial instrument for one of our Cline and they want accounting for Swap / Premium amount. Client perform Cash settlement of FX contract at maturity. So there is no actually exchange of Buying and selling currency amount only the gain/loss amount is exchanged at the time of maturity.

Example

Selling Currency – USD – Amount – 1000, Spot Rate USD/INR :- 50 INR, Forward Rate after 3 months – 53 INR Start Date: - 01.01.16, Value Date: - 31.03.16

Buying Currency – INR – Amount: - 53000 at Maturity , Leading currency - USD , Following Currency - INR., Translation ratio 1USD:1INR

Then we have Swap/premium 3INR – (Forward rate – Spot rate) = 3INR

Month End Valuation Accounting

Date: - 31.01.16 (Spot rate of 01.01.16 + 1 INR Premium = 50+1=51) -

Swap/Premium calculation method = (Swap/Premium amount * No of days for which we are valuating transaction from start date) / no of days of transaction.

Spot Rate: - 52 INR (Gain 2000)

Income Receivable – Dr. - 2000

Gain – Cr – 1000

Premium – Cr – 1000

Reset Above account on 01.02.16

Date: - 28.02.16 (Spot rate of 01.01.16 + 2INR premium = 50+2 = 52 INR)

Spot Rate: - 49 Loss = 52 -49 = 3 INR

Exchange Loss – Dr. – 3000

Premium- Cr - 2000

Liability- Cr – 1000

Month end Valuations are reset on next day.

Value Date Accounting

Date: - 31.03.16

Spot rate 54 (Gain = 54-50 = 4 INR

Realized Gain

Bank – Dr - 4000

Gain- Cr – 1000

Premium- Cr- 1000

In case of Realized Loss

Loss – Dr.

Liability – Cr.


Can we map above accounting practice in Standard TRM module. I have used PMP 3500 , step 4 and procedure 1000 in my previous project. Please suggest how can we achieve the above accounting in SAP.


BR,

Rohit