Interest Swap renewal

Net Payments
Rudolf Bryša, SAP Globalization Services
5th October 2020

PUBLIC
Agenda

▪ Activation and Implementation

▪ Net Payments
▪ Settlement Currency

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Activation and Implementation
Implementation

▪ Prerequisite for Interest Rate Swaps

– See SAP Note 2971185 - Risk-Free Rates for Interest Rate Swaps: Collective Note

▪ Net Payments
– available from release S/4 1809,
– see SAP Note 2970552 - Net Payments as derived flows
▪ Settlement Currency
– enabling Net Payments for Cross-Currency Interest Rate Swaps
– available from release S/4 2020,
– see SAP Note 2976242 - Settlement Currency for Cross-Currency Interest Rate Swaps: Collective Note

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New Business Function FIN_TRM_IR and activation per Product Type
Prerequisite For Interest Rate Swaps

Activation per Product Type in on Premise releases

Preview: This setting will be

obsolete in future S4HANA
releases
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Net payments and postings
Net Payments and postings

Interest rate swaps in SAP TRM offered only netting of the payments in F111

In real:

▪ Interest rate swaps are settled via net payments

▪ Cross currency interest rate swaps are settled in one currency, including fixing of the foreign
exchange rate.

▪ In some countries the taxes are calculated based on the net payments (revenues).

Requirement: Enable net payment and posting in Transaction manager including:

• Foreign Exchange rate fixing for cross currency swaps,

• tax calculation in Localization

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Net Payments: Deal Creation
Usual Entry of Interest Rate swaps

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Net flow as derived flow

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Net flow as derived flow
Zoom in

• The net flow is generated as derived flow

• In Customizing the users can set which original flows trigger calculation of the net flows.

• Posting and payment relevancy for both original and derived update types can be set
accordingly

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Net Payments: Customizing
Net flow as derived flow
Customizing

New Field Grouping Term

▪ Allows grouping and netting of original flows with different directions and flow types

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Net flow as derived flow
Customizing of Calculation procedures in S4HANA Cloud as an example

Netting of interests only (Calc. procedure NTINT)

▪ Only the interest flows with flow type 1205 are aggregated/net into a derived flow with flow type 1250

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Net flow as derived flow
Customizing of Calculation procedures in S4HANA Cloud as an example

Separate netting of interests and nominal changes (NTALL)

▪ The nominal changes and repayments are aggregated/net into a derived flow with flow type 1107
▪ The interest flows with flow type 1205 are aggregated/net into a derived flow with flow type 1250

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Net flow as derived flow
Customizing in S4HANA Cloud as an example

One net payment/posting of all flows together (NTTOT)

▪ All transaction flows including nominal changes, repayments, interests are aggregated/net into a derived flow
with flow type 1107
▪ The 1107 is kind of cash settlement flow.
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Net flow as derived flow
Customizing

▪ In the cloud the original flows aren’t posting relevant (all the flow types ending with 5)
▪ In the OP the original flows can be accounted depending on the business requirement
– For example accounting nominals payables/receivables to internal clearing, netting internal clearing to
bank clearing

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Net Payments: Accrual/Deferral
Netting of Accrual/Deferral

Grouping the accrual of the original flows

▪ Allows grouping and netting of original flows with different directions and flow types

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Netting of Accrual/Deferral
Customizing

Extension of the Grouping Term

▪ Allowing grouping and netting of original flows with different directions and update types

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Net Payments for Cross Currency Swaps:
Settlement currency
Cross Currency Interest Swaps
Netting of flows in different leg currencies

Cross currency swaps have two leg currencies, one for outgoing and one for incoming interest
▪ In order to allow netting the flows in different currencies it is necessary to translate and fix the amounts in
one joint currency

▪ Settlement currency as the currency for the net payments

– The cash flow is entered and calculated in the position currency = leg currency firstly
– The resulting cash flows is translated to the payment currency = settlement currency
– The net payments are created in settlement currency

▪ Foreign exchange rate fixing as a vehicle for fixing of foreign exchange rates between the leg currency and
settlement currency
– Similar to other types of rate/price fixings, like interest rate adjustment or commodity price adjustment

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Settlement currency
Customizing

▪ Condition type is defined and assigned to transaction type

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Settlement currency
Definition of the Fixing Reference

▪ App Define Fixing reference under Correspondence in Fiori Launchpad (role

TREASURY_SPECIALIST_BOE)

▪ Transaction Define Fixing References (FTR_FIX_DEF) in SAP Menu

▪ Note: The leading/following currency prescribes the direction of the foreign exchange rate.
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Foreign Exchange Rate Fixing
Deal Entry

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Foreign Exchange Rate Fixing
Entry of fixing data

Settlement Currency

Leg currency Fixing Reference

Fixing Relative to Due Date/Period End With working day shift

-> Fixing of the USD/EUR foreign exchange rate on the due date with foreign exchange data from
minus 2 business days

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Foreign Exchange Rate Fixing
FX Adjustment Tab

▪ New Tab Fx.Rate. Adj. with the fixing dates, e.g.

▪ 4.8.2020 is a Tuesday minus 2 business days ->

Friday 31.7.

▪ Note: During deal creation it is necessary to

trigger at least once the cash flow calculation in
order to see the generated fixing dates

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Foreign Exchange Rate Fixing
Cash flow

Amount in Settlement currency (payment currency) Amount in leg currency (Position currency)

Fixing Date
Date of the FX Rate
FX Fixing State
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 Foreign Exchange Rate Fixing
Creation of the fixing

▪ Manual Fixing in TI10 / App Create

Adjustment

Currencies, quotation and factors

are given

Enter the FX Rate

The FX Rate supports more than 30 digits, before or after the
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Foreign Exchange Rate Fixing
Cash flow after fixing

Payment Amount is recalculated with the entered foreign exchange rates

Registration status is changed to fixed

Flows are flagged for posting

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 Foreign Exchange Rate Fixing
Fixing lifecycle

▪ Manual Fixing is supported

▪ Whole fixing lifecycle, including changing and reversal is supported

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TBB1
Only netting is posted

Posting log

Messages:

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Net Payments for Cross currency Swaps:
Accrual/Deferral
Cross currency Swaps
Accrual of the Netted amount

Grouping the accrual

of the original flows
▪ Grouping and netting
of original flows with
different directions and
update types
▪ Grouping in payment
currency allows
grouping of accruals
with same settlement
currency

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Cross currency Swaps
Accrual of the Netted amount - Zoom

Grouping the accrual of the original flows

▪ Prorated amount in position currency is translated to payment currency and grouped with other accruals
in the same payment currency

▪ Note: The “Complete” Accrual of all repayments corresponds to FX Valuation of the swapped nominals
– Without effect on the book value

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Cross currency Swaps
Accrual of the Netted amount - Zoom

Extension of the Grouping Term

▪ New Indicator “Group in Payment Currency”

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Thank you.