Forward contracts

Forward contracts are booked on the basis of confirmed orders placed on the foreign vendor. These
contracts are booked for currency fluctuations. With these contracts we can fix our liability in INR.
For example: If we have raised one PO in favour of foreign vendor (ESAB) for GBP 100,000 we will book
a forward contract for same amount (GBP 100,000) at current rate (GBP/INR). We book these contracts
if we feel the current rate is reasonable and there are chances that in near future the rate will go up. If we
feel the rate will go down in near future we will wait for opportunity to book the contract at low price.
For booking forward contracts bank is charging premium which will depend on the market conditions.
Normally bank charges 1.3% to 1.5% premium (on spot rate) for one year to book the forward contracts. In
short we our forward rate will be a combination of spot rate & premium. For example : If we will book
contract for GBP 100,000 on 1.4.2010 and spot rate (Market rate of GBP on 1.4.10) is 68.00 and premium
in 1.5% on Spot rate my forward rate will be Spot Rate 68.00 + Premium 1.02 = INR 69.02
Cancellation of Contract : At the time of expiry of contract if we will not utilize the contract, we have to pay
the difference to the bank if the forward rate is lower than the spot rate (on the date of expiry). Similarly the
bank will pay you the difference if the spot rate is lower than our forward rate. For example:
Contract Date Expiry Date Amount of GBP Forward Rate Spot Rate on Expiry Profit / (Loss)
1.4.2010 31.3.2011 100,000 69.02 66.02 (300,000)
In the above example our forward rate is INR 69.02 and if the spot rate of GBP on 31.3.11 is INR 66.02 the
bank will recover INR 300,000 from us by debiting our bank account on expiry date.
Reversal of premium: At the time of booking contract the bank charges the premium amount for the entire
tenure of the contract. If we will utilize the contract in between the bank will pay the unutilized premium.
For example: If our premium on GBP for one year is INR 1.02 and we will utilize the contract within 2 month
bank will repay us the premium for 10 months. While calculating the unutilized premium amount the bank
will take current premium rate.
any idea on this requirement please give the documents
Regards
Kari

Hi Kari,
perhaps you could you premature settlement functionality. Then the original forward contract will be cancelled and a corresponding new contract with adjusted forward rate created.
BR,
Tomislav

Similar Messages

Cancellation of forward contract

Hi,
Is there possibility of cancellation of a forward contract prior to maturity date. For example I have created a contract for 6 million on 20.03.14 with a tenure of 6 months i.e. end date is 20.09.14 and I want to cancel the contract on 20.06.14. So, how to go by?
Pl reply wat the earliest

Hi,
I would say there are 2 elements in that question:
- business-wise - a question - do you want to cancel this contract completely and the other counterparty agrees with that - I would say this is usually not an acceptable behavior, as FX Forwards are legally binding contracts for both counterparties involved.
in my view, what looks like a realistic, is that either you:
need liquidity in that currency earlier, than initially planned (like in the example you gave, on 20.06.2014 vs 20.09.2014), so you can simply settle your FWD contract using SWAP contract.
e.g. you bought 6 mio EUR against USD with a value date 20.09.2014, though you need 6 mio EUR on 20.06.2014, so you should engage in FX SWAP, where you Buy 6 mio EUR against USD on 20.06.2014 and simulaneously sell the same 6 mio EUR against USD on 20.09.2014, so on the last date 2 opposite flows will cover each other (with some possible difference due to SWAP points);
also, it might be the case, that due to whatever reason your hedging purpose disappeared, so what you do is you engage in the opposite FX Forward on 20.06.2014, meaning you sell 6 mio EUR against USD with the value date of 20.09.2014. depending on FX rate fluctuations, you might get a Profit or Loss as a result of this.
- system-wise, based on your choice, you need to capture an appropriate deal in the system.
hope this will help you.
Kind regards,
Renatas

NPV of FX Forward Contracts

Hi coleagues
We currently have forward contracts 60A and forward hedge accounting transactions (60B). With the current configuration we are able to execute NPVs for 60Bs (hedge accounting transactions) but on 60As NPVs are not generated. I would like to find out why are NPs are not generated on 60As, what configure can i change to allow NPVs to be calculated on 60As as well. Secondly From a business poiint of view is NPV calculation of forward contracts(60As) different from hedge accounting forwards transactions (60B)
Thank you in advance
Victor
Edited by: Victor Nkomo on Jul 9, 2011 10:26 AM

Hi Victor,
This is really surprising. NPV for FX forward doesn't involve huge calculation routines and hence should be very easily configurable in the system. Though, it is difficult to find the reason without having a look at the configuration, I would give you some pointers to verify.
1) Check the detailed log to find if the cashflows are even getting selected.
2) If the cashflows are not selected, check the cashflow indicator with these cashflow types in the IMG setting for Market Risk Analyzer.
3) Check if you are executing NPV calculator on the value date of the deal. If that is the case, then you have to check the include horizon flow flag in the evaluation type which you may view using CFMEVAL transaction.
Regards,
Jitesh

Forward Contracts Rollover and Cash Settlement

Hi,
We have done a forward contract USD - INR at 50.00 and then done the rollover at new rate 52.00. In the rollover transaction which was done at the rate 52.00, we also need to do the cash settlement of the original booking transaction as the original transaction is logically cancelled and the new transaction is booked.
The cash settlement is done at say 49.00. In this case the cash settlement amount should be (50.00 - 49.00) where as the system is calcuating the cash settlement amount as (52.00 - 49.00)
Should I use the cash settlement functionality of the booking transaction. Please suggest.
An help in this regard will be sincerely appreciated.
Warm regards,
Akhil Poddar

Hi,
You are going for cash settlement, it means you are now cancelling the old transaction. The system is giving 52-49 because you have rollove the transaction it means you have exceed the maturity time of the contract, it means now your exchange rate changed to 52 from 50, the differenc is captured here and when you have passed cash settlemented with 49, system compare it with 52 a new rate.when you see the GL after passing all the entries you will find the result is 50-49 only.
If you want one to one relation, pass cash settlement and create new transaction,
Regards
Narinder Pal Verma
+91-9818882409

How to delete cash settlement in forward contract?

I am facing an in treasury module for forward contracts, earlier I had filled data in cash settlement tab in tx02, not release or posted, now I donu2019t want to do cash settlement but I am able to delete data in cash settlement tab in tx02 but it gives some error while saving , basically its not allowing me to delete all data in cash settlement tab and save.
Any pointers on how to resolve this problem will be appreciated.

Hi
If you want to de activate the cash settlement process for this product type then below is the menu path to de activate the.
In IMG -- TRTM -- Transaction Manager -- Foreign Exchange -- Transaction Management -- Define Product types.
Here specify the type of settlement as physical.
Regards,
Karunakar

Forward Contract Configuration

Hi All,
One of my client had implemented the treasury module.Now they are dealing with money markets and securities. Now they are trying to implement the topic called FORWARD CONTRACT. As we are new to this process, Please let me know the configuration steps to be followed. and also let me know the entry level Tcodes which needs to be used.
We have the requirement to pass the entries at each and every level.
Start of the contract - Amount which we are going to get back at the end of the term of contract
Deferred Premium - Premium payable to bank for entering contract & shown as asset under deferred premium account
Amortisation Premium - Amortisation of premium
Valuation - Valuation of contract
Reversal of Premium - Reversal of premium amount next day
Reversal of valuation - Reversal of contract next day
Reversal of org entry at closure - Reversal entry for forward contract at the time of closure
Reversal of premium - Reversal of premium paid at the time of inception of contract
Reversal of Re-valuation - Reversal of re-valuation amount
Reversal of recvbl entry - Closing entry for realisation amount at the time of maturity / settlement whichever earlier
Let me know the tcodes to used and what sort of entries the system will pass.
Regards,
Venakt

What kind of forward contract is it? FX or other?
Since you mentioned premium, it may be option; if yes, then what kind: FX/other?
What we know is: you will get some money at maturity and you are paying some premium at contract (which needs to be amortized periodically) and contract needs to be valuated periodically (which suggests it may be a derivative); but the nature of the contract/treasury instrument is not clear.
Thanks

Forward Contract user manual

Dear All,
Can anyone confirm where i can get the user manuls for forex forward contract. since i am not familiar with these transactions i need some user manuls through which i can do the configuration for the forward contract.
early reply helps lot.
Regards
Pramod

Hi Pramod,
check here:
http://help.sap.com/erp2005_ehp_04/helpdata/EN/b1/21e6dc857411d387ca080009b423f4/frameset.htm
Also see documentation in customizing.
BR, Tomislav

Forward contract related

Hi,
This is with reference to the following thread:
Forward Contract
How will the LC details, bills details retained in the forward contract and how will the exports of material be handled?

Couldn't get any answers so closing thread.

Forward contract post Fair Value

Dear Expert,
I try to find the solution about how to post Forward contract at Fair value (monthly) but I cannot. So I need more help, if someone know about this please inform back to me.
Waiting for help.
Thanks so much ^^

Hi,
By default it would have picked up exchange rate type M only. Check the position management procedure assigned for you contract in TPM26 and in config check for the step used for valuation for this position management procedure. Under key date valuation for this step, check the exchange rate type used. You might as well want to change it to ENDP.
Regards,
Ravi

Forward Contract Rate

Dear All,
We have a scenario where the USD rate is fixed with a customer for a specific period and/or target sales volume.
For ex - USD @ 33.44 for 3 months or USD 15M
Therefore, every transaction from now on for this customer should use a 'Forward Contract Rate' of 33.44 for 3 months / Sales volume of USD 15M (whichever case is first)
How to implement this ?
Cheers,
Gautam

You would need to apply a formatted search to the Document's exchange rate field. You would likely need four user-defined fields on the Business Partner master data which hold the forward rate, the volume (i.e. 15M), start and end effective dates. Your FMS query would need to get the sum total of all sales for the effective date range and apply logic to determine the correct rate to use (i.e. the forward rate or the standard exchange rate stored in Business One).
-Frank Sposato

Using SRM for carrier and freight forwarder contract management

Hi,
Does it make sense to use SRM to manage contracts from carriers and freight forwarder? Has anybody done that? The documentation I read makes me think SRM is oriented towards manufacturers.
Do you recommend any other solution for this situation?
Any comments are highly appreciated.
Thanks in advance.

Hi Prakash,
SRM does provide the facility of contract management with the help of Purchase Contracts and Global Outline Agreements but it is used as part of the sourcing for materials and services. The materials or services have contracts against some given target value against which PO is released. The contract is based on a material number ( eithe material or a service) which will be used as a source of supply during the creation of the Shopping Cart. It might not really fit in the scenario of carrier and freight forwarders but still can be customized for this kind of use.
The contract management functionalities in the R/3 space can also be looked on for this purpose.
Reg
Sachin

Forex Option Forward Contract

Hi Gurus,
I am currently working on one of the Treasury implementation projects and need an assistance in the scenario mentioned below...
SCENARIO :
The company has entered into Forex Forward transaction and would like to with draw the foreign exchange partially during the period of contract (for eg. 01.11.2008 to 31.12.2008) for any payments and at the end of a certain period would also like to know what is the amount still available to be with drawn. The company would like to go for rollover at the end of the contract for any amount which is still not with drawn.
Questions:
1. How do i give the Value date From and To date in the contract creation.
2. How can i do the partial waith drawal.
3. How do i see the Forex position on a certain date during the contract.
Thank you
Kasi.

Hi Kasi,
In the scenario mentioned, the option is to go for premature settelment and then roll over for the un utilised balance.
In case of premature settlement you can with draw the amount partially and every time this transaction is created a separate netting transaction is generated.
For the balance unutilised amount can be rolled over for a future period and with drawn accordingly.
U can add any forex charges for premature settlement going in to the individual transaction.
Reply back if you have any further queries regarding this.
raj

Remaining amount in forward contract

Dear Experts,
How to identify the remaining amount in the original contract after making premature settlement?
For example:
We have USD 10000 in original contract. We have done a premature settlement for USD 2000. The system should display the remaining amount while making subsequent premature settlement. How this can be achieved? This seems to be very basic requirement but the system does not seem to have any option in this regard.
Thanks,
Vinod P

Dear Manish,
Thanks for your reply!
Here our requirement is, everytime we need to check for the remaining balance in the original contract in TX06. But can this be achieved by creation of a field in the original contract - structure tab?
I understand that the remaining balance in the contract is calculated in the background and stored somewhere in the table, may be I am wrong. Hence, the system throws an error message when making a premature settlement for excess amount than what is available in the original contract.
Further the requirement is, when we rollover the original contract on expiry date. The remaining balance in the original contract has to be settled at a particular rate. Hence, making a field available in the original contract and making a cash settlement for that remaining amount should be made possible. Is this scenario possible?
Thanks,
Vinod

Spot/Forward contract

We recently closed a company code and opened it up under differernt settings in SAP. I have a cotract that was created under the old company code and had some settlement posted to it. The users created a new contract under the new company code for the remaining balance to be posted. I need to know a process to close/mark for deletion the original contract under the old company code, as we do not want anyone to accidentally post anything with that old contract. Does anyone have a process for this?

Good Afternoon, Kenny
Try programm RFTR_MIGRATION_EXCLUDE_OTC (se38, sa38). It changes status of your deal (vtbfha-sactive) from current status to 6 Old transaction. But i don't know about repercussion.
You have to check if it works for you.

TX11 - Forex Forward Contract Roll Over - Screen Enhancement

Dear Colleagues,
In TX11 - when we create Roll-over,
I want to update 3 fields : (from tx03 - administration tab)
1. Assignment (VTGFHA-ZUOND)
2. Internal Ref (VTGFHA-REFER)
3. Characteristics (VTGFHA-MERKM)
and additionally, I need to make the above 3 referred fiels available on the screen in TX11 transaction.
I am using SAP ECC 5.0.
Kindly do provide me the guidelines for the same.
Thanks & Regards
M N Gurram

Gurram,
After rolling over, you can go into the transaction using FTR_EDIT - Change and then update these fields.
Kalyan

Forward contracts

Similar Messages

Maybe you are looking for