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Proof of Concept

Proof of Concept
Execution Guide

Corporate Finance Management


August 2005

Proof of Concept

Table of Contents
1.

Business Scenarios.................................................................................

1.1.

Scenario No: 1 Money Market Transaction...............................................

1.1.1.

Fixed-Term Deposit: Trading.....................................................................

1.1.2.

Fixed-Term Deposit: Back Office...............................................................

1.1.3.

Fixed-Term Deposit: Accounting................................................................

1.1.4.

Money Market: Position List......................................................................

1.2.

Scenario No: 2 Management Reports....................................................

1.2.1.

Management Reports: Journal of Financial Transactions.............................

1.2.2.

Management Reports: Cash Flows...........................................................

1.2.3.

Management Reports: Payment Schedule.................................................

1.3.

Scenario No: 3 Hedging Foreign Currency Inflow....................................

1.3.1.

Forward Transaction..............................................................................

1.3.1.1. Forward Transaction: Trading..................................................................


1.3.1.2. Forward Transaction: Execute Order........................................................
1.3.1.3. Forward Transaction: Back Office............................................................
1.3.1.4. Forward Transaction: Accounting.............................................................
1.3.2.

OTC Currency Option.............................................................................

1.3.2.1. OTC Currency Option: Trading................................................................


1.3.2.2. OTC Currency Option: Back Office...........................................................
1.3.2.3. OTC Currency Option: Accounting...........................................................
1.4.

Scenario No: 4 Forward Rate Agreement (FRA)......................................

1.4.1.

Forward Rate Agreement: Trading...........................................................

1.4.2.

Forward Rate Agreement: Execute Order.................................................

1.4.3.

Forward Rate Agreement: Back Office......................................................

1.4.4.

Interest Rate Adjustment Schedule.........................................................

1.4.5.

Manual Interest Rate Adjustment............................................................

1.4.6.

Forward Rate Agreement: Accounting......................................................

1.5.

Scenario No: 5 Interest Rate Swap (IRS)..............................................

1.5.1.

Interest Rate Swap: Trading...................................................................

1.5.2.

Interest Rate Swap: Back Office..............................................................

1.5.3.

Interest Rate Adjustment Schedule.........................................................

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Proof of Concept

1.5.4.

Manual Interest Rate Adjustment............................................................

1.5.5.

Interest Rate Swap: Accounting..............................................................

1.6.

Scenario No: 6 Cross-Currency Swap (CCS)..........................................

1.6.1.

Cross-Currency Swap: Trading................................................................

1.6.2.

Cross-Currency Swap: Back Office..........................................................

1.6.3.

Cross-Currency Swap: Accounting...........................................................

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Proof of Concept

1. Business Scenarios
1.1. Scenario No: 1 Money Market Transaction
ABC puts up Rs. 10 Cr. with HDFC Bank in Fixed-Term Deposit for 2 months.

1.1.1.

Fixed-Term Deposit: Trading

Use
The Parameters for creation of Fixed-Term Deposit are defined here.
Procedure
Access the activity using the following navigation options:

Transaction Code
SAP EASY Access

TM01
Corporate Finance ManagementTransaction Manager
Money Market Trading Fixed-Term Deposit Create

Field Name

Values

Company Code

TS

Product Type

51A (Fixed-Term Deposit)

Transaction Type

100 (Fixed-term deposit-Investment)

Partner

HDFC

Amount

100000000

Start Date

06.09.2005

End Date

++2

Percentage Rate

6.0

Int. Calc. Method

360/360

Frequency

At end of term

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Proof of Concept

Go to Administration tab.

Field Name

Values

Account Assignment Reference

MFDINR

Portfolio

MM

Save. Fixed-term deposit 4 created in company code TS.

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Proof of Concept

1.1.2.

Fixed-Term Deposit: Back Office

Use
Use Back Office functions to settle the Fixed-Term Deposit.
Procedure
Access the activity using the following navigation options:

Transaction Code
SAP EASY Access

TM06
Corporate Finance ManagementTransaction Manager
Money Market Back Office Fixed-Term Deposit Settle

Field Name

Values

Company Code

TS

Transaction

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Proof of Concept

1.1.3.

Fixed-Term Deposit: Accounting

Use
Use Accounting functions to post entries to the General Ledger.
Procedure
Access the activity using the following navigation options:

Transaction Code
SAP EASY Access

TBB1
Corporate Finance ManagementTransaction Manager
Money Market Accounting Posting Execute

Field Name

Values

Application

Money Market

Company Code

TS

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Proof of Concept

1.1.4. Money Market: Position List


Use
The position list provides a unified view of the position of a group of financial
transactions on a particular key date.
Procedure
Access the activity using the following navigation options:

Transaction Code
SAP EASY Access

TMR1
Corporate Finance ManagementTransaction Manager
Money Market Information System Position
Operative Valuation Area Position
Or
Corporate Finance ManagementTransaction Manager
Information System Reports Position Operative
Valuation Area Money Market

Field Name

Values

Company Code

TS

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Proof of Concept

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Proof of Concept

1.2. Scenario No: 2 Management Reports


CFM supports generation of various reports that can assist the management in taking
informed decisions. Some of the important reports are Journal, Cash Flow reports,
Payment Schedule.
Note
For Management Reports scenario, only five Fixed-Term Deposit transactions have
been considered. This can be extended to incorporate other Money Market
transactions or transactions in the area of Foreign Exchange/ Derivatives / Securities.

1.2.1.

Management Reports: Journal of Financial Transactions

Use
This journal contains key data, sorted according to date or activity category, such as
business partner, term, or status.
Procedure
Access the activity using the following navigation options:

Transaction Code
SAP EASY Access

TJ01
Corporate Finance ManagementTransaction Manager
Information System Reports Transaction Transaction
Overview CFM Journal

Field Name

Values

Company Code

TS

Application

Foreign Exchange/Money Market/


Derivatives/ Securities

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Proof of Concept

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Proof of Concept

1.2.2. Management Reports: Cash Flows


Use
The Cash flow report contains the Flows in chronological order.
Procedure
Access the activity using the following navigation options:
Transaction Code
SAP EASY Access

TJ12
Corporate Finance ManagementTransaction Manager
Information System Reports Transaction Flows
CFM Cash Flows

Field Name

Values

Company Code

TS

Application

Foreign Exchange/Money Market/


Derivatives/ Securities

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Proof of Concept

1.2.3.

Management Reports: Payment Schedule

Use
The Payment Schedule shows details of payments in chronological order.
Procedure
Access the activity using the following navigation options:
Transaction Code
SAP EASY Access

TJ04
Corporate Finance ManagementTransaction Manager
Information System Reports Liquidity CFM Payment
Schedule

Field Name

Values

Company Code

TS

Product Group

Security/ OTC/ Listed Derivatives

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Proof of Concept

1.3. Scenario No: 3 Hedging Foreign Currency Inflow


On account of an export, ABC expects 1000 USD inflow three months hence. To
hedge against exchange rate risks, it can lock into a specific USD-INR exchange rate
by
1. Entering into a forward contract to sell 1000 USD
2. Buying a put option

1.3.1. Forward Transaction


1.3.1.1. Forward Transaction: Trading
Use
The Parameters for creation of Forward Transaction are defined here.
Procedure
Access the activity using the following navigation options:

Transaction Code
SAP EASY Access

TX01
Corporate Finance ManagementTransaction Manager
Foreign ExchangeTradingSpot/Forward Transactions
Create

Field Name

Values

Company Code

TS

Product Type

60A (Foreign exchange)

Transaction Type

102 (Forward Transaction)

Partner

HSBC

Activity

Order

Purchase Currency

INR

Sale Currency

USD

Sale Amount

1000

Rate

45

Value Date

++3

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Proof of Concept

Go to Administration tab.

Field Name

Values

Account Assignment Reference

FFWUSD

Portfolio

FX

Go to Other Flows tab.


Here, enter details about foreign transaction charge.

Field Name

Values

Flow Type

0010 (Foreign Transaction Charge)

Direction

- (Outflow)

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Proof of Concept

Payment Amount

90

Currency

INR

Payment Date

0 (Today)

Save. Forex transaction 10 saved in company code TS.

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Proof of Concept

1.3.1.2.

Forward Transaction: Execute Order

Use
The Parameters for executing an order are defined here.
Procedure
Access the activity using the following navigation options:

Transaction Code
SAP EASY Access

TX78
Corporate Finance ManagementTransaction Manager
Foreign Exchange Trading Order Execute

Field Name

Values

Company Code

TS

Transaction

10

Save.

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Proof of Concept

1.3.1.3.

Forward Transaction: Back Office

Use
Use Back Office functions to settle the Forward Transaction.
Procedure
Access the activity using the following navigation options:

Transaction Code
SAP EASY Access

TX-5
Corporate Finance ManagementTransaction Manager
Foreign Exchange Back Office Spot/Forward Transactions
Settle

Field Name

Values

Company Code

TS

Transaction

10

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Proof of Concept

1.3.1.4.

Forward Transaction: Accounting

Use
Use Accounting functions to post entries to the General Ledger.
Procedure
Access the activity using the following navigation options:

Transaction Code
SAP EASY Access

TBB1
Corporate Finance ManagementTransaction Manager
Foreign Exchange Accounting Posting Execute

Field Name

Values

Application

Foreign Exchange

Company Code

TS

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Proof of Concept

1.3.2. OTC Currency Option

1.3.2.1.

OTC Currency Option: Trading

Use
The Parameters for creation of OTC Currency Option are defined here.
Procedure
Access the activity using the following navigation options:

Transaction Code
SAP EASY Access

TI40
Corporate Finance ManagementTransaction Manager
Foreign ExchangeTrading Standard Option Create

Field Name

Values

Company Code

TS

Product Type

76A (OTC Currency Option)

Transaction Type

100 (Purchase)

Partner

HSBC

Activity

Order

Exercise period

In 3 months minus 2 days

Exercise

European

Settlement

Physical Exercise

Currency Pair

USD/INR

Underlying Currency

USD 1000

OTC Option Type

Put

Strike Price

45

Value Date

In 3 months

Premium

INR 90

Premium Payment Date

In 2 days

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Proof of Concept

Go to Administration tab.

Field Name

Values

Account Assignment Reference

DOPUSD

Portfolio

DER

Save. Option 11 saved.

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Proof of Concept

1.3.2.2.

OTC Currency Option: Back Office

Use
Use Back Office functions to settle the Option Transaction.
Procedure
Access the activity using the following navigation options:

Transaction Code
SAP EASY Access

TI75
Corporate Finance ManagementTransaction Manager
Foreign Exchange Back Office Standard Option Settle

Field Name

Values

Company Code

TS

Transaction

11

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Proof of Concept

1.3.2.3.

OTC Currency Option: Accounting

Use
Use Accounting functions to post entries to the General Ledger. Only the flow
generated as a result of the option premium is posted.
Procedure
Access the activity using the following navigation options:

Transaction Code
SAP EASY Access

TBB1
Corporate Finance ManagementTransaction Manager
Foreign Exchange Accounting Posting Execute

Field Name

Values

Application

Foreign Exchange

Company Code

TS

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Proof of Concept

1.4. Scenario No: 4 Forward Rate Agreement (FRA)


ABC intends to borrow Rs. One Cr. next year, for a tenure of one year. It expects
interest rates to rise. It wants to fix the borrowing rate on the funds to be borrowed
next year. Hence, it enters into Forward Rate Agreement (FRA).

1.4.1.

Forward Rate Agreement: Trading

Use
The Parameters for creation of FRA are defined here.
Procedure
Access the activity using the following navigation options:

Transaction Code
SAP EASY Access

TO01
Corporate Finance ManagementTransaction Manager
Derivatives TradingOTC Interest Rate InstrumentCreate

Field Name

Values

Company Code

TS

Product Type

63A (FRA)

Transaction Type

100 (Purchase)

Partner

HSBC

Activity

Order

Start of Lead Time

In 2 days

Start of Hedge Period

1 year after start of lead time

End of Hedge Period

2 years after start of lead time

Base Amount

10000000 INR

Interest Rate

5.5

Reference Interest Rate

SBI PLR

Interest Calculation Method

Act/360

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Proof of Concept

Go to Administration tab.

Field Name

Values

Account Assignment Reference

DFRA

Portfolio

DER

Save. Financial transaction saved under number 13.

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Proof of Concept

1.4.2.

Forward Rate Agreement: Execute Order

Use
The Parameters for executing an order are defined here.
Procedure
Access the activity using the following navigation options:

Transaction Code
SAP EASY Access

TI78
Corporate Finance ManagementTransaction Manager
Derivatives Trading Listed Transaction Execute

Field Name

Values

Company Code

TS

Transaction

13

Save.

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Proof of Concept

1.4.3.

Forward Rate Agreement: Back Office

Use
Use Back Office functions to settle the FRA Transaction.
Procedure
Access the activity using the following navigation options:

Transaction Code
SAP EASY Access

TO04
Corporate Finance ManagementTransaction Manager
Derivatives Back Office OTC Interest Rate Instrument
Settle

Field Name

Values

Company Code

TS

Transaction

13

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Proof of Concept

1.4.4. Interest Rate Adjustment Schedule


Use
The Parameters to view the Interest Rate Adjustment Schedule are defined here.
Procedure
Access the activity using the following navigation options:

Transaction Code
SAP EASY Access

TJ07
Corporate Finance ManagementTransaction Manager
Derivatives Information System Transaction Deadline
Monitoring Derivatives: Interest Rate Adjustment Schedule

Field Name

Values

Company Code

TS

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Proof of Concept

1.4.5.

Manual Interest Rate Adjustment

Use
The Parameters for Manual Interest Rate Adjustment are defined here.
Procedure
Access the activity using the following navigation options:

Transaction Code
SAP EASY Access

TI10
Corporate Finance ManagementTransaction Manager
Derivatives Back Office Variable Interest Calculation
Interest Rate Adjustment Create

Field Name

Values

Company Code

TS

Transaction

13

Interest Rate

6.0

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Proof of Concept

1.4.6.

Forward Rate Agreement: Accounting

Use
Use Accounting functions to post entries to the General Ledger. Only the interest
generated as a result of the interest rate adjustment is posted.
Procedure
Access the activity using the following navigation options:

Transaction Code
SAP EASY Access

TBB1
Corporate Finance ManagementTransaction Manager
Derivatives Accounting Posting Execute

Field Name

Values

Application

Derivatives

Company Code

TS

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Proof of Concept

1.5.Scenario No: 5 Interest Rate Swap (IRS)


ABC has borrowed Rs. One Cr. for five years at annual fixed rate of 5.5% It expects
interest rates to fall. It agrees an Interest Rate Swap (IRS) with a bank. It receives
an annual fixed rate of 6% and pays a variable rate of SBI PLR.

Interest expense of 5.5% and SBI PLR

Interest revenue from Swap of 6%

Equals an interest expense of SBI PLR 0.5%

1.5.1.

Interest Rate Swap: Trading

Use
The Parameters for creation of IRS are defined here.
Procedure
Access the activity using the following navigation options:

Transaction Code
SAP EASY Access

TO01
Corporate Finance ManagementTransaction Manager
Derivatives TradingOTC Interest Rate InstrumentCreate

Field Name

Values

Company Code

TS

Product Type

62A (IRS)

Transaction Type

301 (Recipient)

Partner

HSBC

Activity

Contract

Contract Date

Todays Date

Start of Term

Todays Date + 2 days

End of Term

Start of Term Date + 5 years

Outgoing Interest
Nominal Amount

10000000 INR

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Proof of Concept

Effective From

Start of Term Date

1st Due Date

++12

Freq. Month

12

Variable Interest

SBI PLR

Interest Calculation Method

Act/360

Incoming Interest
Nominal Amount

10000000

Effective From

Start of Term Date

1st Due Date

++12

Freq. Month

12

Fixed Interest Rate

Interest Calculation Method

360/360

Click on Button: Detail view: Interest

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Proof of Concept

Field Name

Values

Update Rule

Unadjusted

Days +/-

1-

Due Date: Working Day

Next working day modified

Calendar1

IN

Go to Administration tab.

Field Name

Values

Account Assignment Reference

DIRS

Portfolio

DER

Save. Financial transaction saved under number 15.

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Proof of Concept

1.5.2.

Interest Rate Swap: Back Office

Use
Use Back Office functions to settle the IRS Transaction.
Procedure
Access the activity using the following navigation options:

Transaction Code
SAP EASY Access

TO04
Corporate Finance ManagementTransaction Manager
Derivatives Back Office OTC Interest Rate Instrument
Settle

Field Name

Values

Company Code

TS

Transaction

15

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Proof of Concept

1.5.3. Interest Rate Adjustment Schedule


Use
The Parameters to view the Interest Rate Adjustment Schedule are defined here.
Procedure
Access the activity using the following navigation options:

Transaction Code
SAP EASY Access

TJ07
Corporate Finance ManagementTransaction Manager
Derivatives Information System Transaction Deadline
Monitoring Derivatives: Interest Rate Adjustment Schedule

Field Name

Values

Company Code

TS

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Proof of Concept

1.5.4. Manual Interest Rate Adjustment


Use
The Parameters for Manual Interest Rate Adjustment are defined here.
Procedure
Access the activity using the following navigation options:

Transaction Code
SAP EASY Access

TI10
Corporate Finance ManagementTransaction Manager
Derivatives Back Office Variable Interest Calculation
Interest Rate Adjustment Create

Field Name

Values

Company Code

TS

Transaction

15

Interest Rate

5.0

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Proof of Concept

1.5.5.

Interest Rate Swap: Accounting

Use
Use Accounting functions to post entries to the General Ledger.
Procedure
Access the activity using the following navigation options:

Transaction Code
SAP EASY Access

TBB1
Corporate Finance ManagementTransaction Manager
Derivatives Accounting Posting Execute

Field Name

Values

Application

Derivatives

Company Code

TS

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Proof of Concept

1.6. Scenario No: 6 Cross-Currency Swap (CCS)


ABC has entered into a long term export contract with OEM customer. To secure its
future foreign-currency cash inflows, it wishes to conclude a cross currency swap. On
account of the export, it will receive USD 1Mn p.a. for next five years. It wants to
swap the dollar inflows to receive rupee inflows at a specific USD-INR exchange rate
for the next five years.

1.6.1.

Cross-Currency Swap: Trading

Use
The Parameters for creation of CCS are defined here.
Procedure
Access the activity using the following navigation options:

Transaction Code
SAP EASY Access

TO01
Corporate Finance ManagementTransaction Manager
Derivatives TradingOTC Interest Rate InstrumentCreate

Field Name

Values

Company Code

TS

Product Type

62B (CCS)

Transaction Type

304 (Fix to Fix)

Partner

HSBC

Activity

Contract

Contract Date

Todays Date

Start of Term

Todays Date + 2 days

End of Term

Start of Term Date + 5 years

Outgoing Interest
Nominal Amount

1000000 USD

Effective From

Start of Term Date

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Proof of Concept

1st Due Date

++12

Freq. Month

12

Fix. Rate

100

Interest Calculation Method

Not Specified

Incoming Interest
Nominal Amount

45000000

Effective From

Start of Term Date

1st Due Date

++12

Freq. Month

12

Fixed Interest Rate

100

Interest Calculation Method

Not Specified

Go to Administration tab.

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Proof of Concept

Field Name

Values

Account Assignment Reference

DCCSUSD

Portfolio

DER

Save. Financial transaction saved under number 16.

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Proof of Concept

1.6.2.

Cross-Currency Swap: Back Office

Use
Use Back Office functions to settle the CCS Transaction.
Procedure
Access the activity using the following navigation options:

Transaction Code
SAP EASY Access

TO04
Corporate Finance ManagementTransaction Manager
Derivatives Back Office OTC Interest Rate Instrument
Settle

Field Name

Values

Company Code

TS

Transaction

16

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Proof of Concept

1.6.3.

Cross-Currency Swap: Accounting

Use
Use Accounting functions to post entries to the General Ledger.
Procedure
Access the activity using the following navigation options:

Transaction Code
SAP EASY Access

TBB1
Corporate Finance ManagementTransaction Manager
Derivatives Accounting Posting Execute

Field Name

Values

Application

Derivatives

Company Code

TS

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Proof of Concept

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