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Jan 28, 2010 at 02:44 PM

Monthly TPM1 without reset for FX forward in Hedge Accounting

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Hi,

I would like a clarification on the "standard" way of resetting the valuated position of an FX forward (using Hedge Accounting position management procedure) when using TPM1 and the "mid-year valuation without reset" option.

When executing TPM1, the typical postings for an FX forward consist in:

- debiting or crediting the G/L balance sheet account representing the FX deals position

- against the OCI interim account

- then to further classify the OCI interim account to OCI and P&L

When reaching the deal maturity, balances exist consequently on following accounts:

- B/S account for FX deals position

- OCI (unrealized)

- unrealized P&L

When posting TBB1, a new B/S acount (FX flows reconciliation) is debited and credited with the incoming and outgoing flows of the FX.

When posting TPM18 subsequently, following postings are done:

--> REVERSAL OF UNREALIZED:

- OCI (unrealized) is reversed (in custo, the position management procedure mentions that 'With Reset' of classification flows must be used when realizing the deal)

- P&L (unrealized) is reversed

--> POSTING OF REALIZED

- The FX reconciliation account (the one posted with TBB1) is posted with the realized gain or loss

- against the OCI interim account

- the the OCI interim is further classified to OCI and realized P&L

At the end of the HR, the OCI (realized) is reclassified to realized P&L if needed (THM10).

As you understand, the B/S account representing the FX deals position that was initially posted with TPM1has never been reversed while the deal has been realized and the position should be closed. In fact that's the only account that remains open (has a balance) at the end. Why is it so? How is it supposed to be offset when using the 'no reset' procedure of TPM1.

In table TRLV_TRANS_POS for the deal, I see that everything has status posted except 2 records: flow types OTC001 and OTC002. These remain in status scheduled. Is the issue related to that?

By the way, we investigate the 'no reset' procedure because the 'with reset' option prevents TPM18 from working afterwards. I saw an OSS note for this but it is huge and we would like to avoid implementing it.

Thanks for advices.

Regards,

Christophe.