You can generate amortizations and accruals adjustments, split by revenue and expense, for all money market products. These adjustments include amounts for settling derivatives, such as FRAs and options.
Amortization and accruals adjustments are calculated for each batch period, rather than as an accumulating amount for multiple periods. Reversal entries are not required.
There are two types of accruals supported by Treasury.
Straight Line Accruals: This type relies on a constant accrual amount and is used to calculate accruals for all deals except discounted security deals.
Effective Interest Accruals: This type relies on a constant accrual rate and is used to calculate accruals for discounted security deals only. Effective interest amortizes the discount on a discounted security deal over the life of the deal so that a constant rate of interest is used. Effective interest accruals are necessary to properly account for discounted securities, especially when a deal is resold. If the discounted security deal is not held until maturity, the proper accounting entries are generated unless the effective interest accruals method is used.
The accrual methods calculate the accounting period discount by multiplying the Yield to the Maturity rate at the time of purchase, and by multiplying that to the beginning accounting period cost basis.
Accruals are the first mandatory step in the accounting process. If your company set the Accounting - Perform Deal Revaluations company parameter to Yes, then you must perform revaluations before you can perform accruals. See: Revaluations.
You cannot perform accruals on individual deals. Instead, you must perform accruals in batches. For each batch that you accrue, you must:
Define the start and end dates for the batch, unless the batch is already defined.
Create the period adjustments for the accrual.
Authorize the accrual for the batch.
You can adjust the accruals for a batch up until the point when you transfer your daily journals to General Ledger. For more information, see: Transferring Journals to General Ledger. You must authorize your accruals adjustments before you proceed to the next step in the accounting process, Daily Journals. See: Daily Journals.
Use the Accruals window to create a period adjustment for your accounting batch.
If you set your Accounting - Perform Deal Revaluations company parameter to Yes, you must revalue and authorize the revaluation for the batch before you can start the accruals process. For more information, see: Revaluations.
If you set your Accounting - Perform Hedge Effectiveness Testing company parameter to Yes, you must perform retrospective hedge effectiveness testing and authorize the results for the batch before you can start the accruals process. For more information, see: Retrospective Hedge Effectiveness Testing
Navigate to the Accruals window.
Choose a Company.
Choose an existing Batch ID or, if this is a new batch, adjust the Period From and To dates.
If you perform revaluations as part of your company accounting process, an authorized batch already exists for the period that you want to create a period adjustment.
If this is the first time you create a batch, the Period From and Period To fields are automatically populated. The Period From date is the date of the earliest deal for the company. The Period To date is the current system date.
If you have not performed revaluations but previously created an accounting batch, then the Period From date is automatically populated based on the Period To date of the previous accounting batch. The Period To date is automatically populated based on the accounting calendar for the company. You can set the Period To date to any date that is equal to or earlier than the current system date.
If this is a new batch, Treasury automatically populates a Batch ID.
To create the period adjustments for the batch, choose the Calculate button. The accrual and amortization details for the financial transactions in the specified period appear. You can view and delete these period adjustments, but you cannot change them. For more information, see: Viewing Period Adjustments and Deleting Period Adjustments.
Use the Accruals window to authorize the accruals for your batch. You must authorize your accruals before you can proceed to generating daily journals. See: Daily Journals.
You can delete period adjustments for a batch until you transfer the daily journals for the batch to General Ledger.
In the Accruals window, select the company and batch that you want.
Choose the Authorize button.
If you want to un-authorize accruals, choose an authorized batch and choose the Un-authorize button.
Note: You can only un-authorize accruals that have been authorized but have not had daily journals generated.
Use the Accruals window to delete a period adjustment. You cannot delete a batch that has been authorized or that has been transferred to General Ledger.
In the Accruals window, select the company and batch that you want.
Choose the Delete Details button.
Use the Accruals window to view your adjustments for a previous batch period.
In the Accruals window, select the company and the batch that you want. The period adjustments for the batch appear.
Choose the Summary button to view a summary of the adjustments.