9. Annexure A - Accounting Entries and Advices

This section contains details of the suggested accounting entries that can be set up, for the Derivatives module of Oracle FLEXCUBE. The details of the suggested Accounting Entries and Advices are listed event-wise.

This chapter contains the following sections:

• Section 9.1, "DV Events"
• Section 9.2, "Amount Tags"
• Section 9.3, "Accounting Roles"
• Section 9.4, "Event-wise Accounting Entries and Advices"

9.1 DV Events

The following is an exhaustive list of events that can take place during the lifecycle of a Derivatives contract.

	Event Code		Event Description
	DAMN		Contract Amendment
	DASG		Contract Assignment
	DASS		Contract Assumption
	DBOK		Contract Booking
	DIAC		Contract Interest Accrual
	DIAM		Contract Inception Amortization
	DILQ		Contract Interest Liquidation
	DINT		Contract Initiation
	DPLQ		Contract Principal Liquidation
	DRVL		Contract Revaluation
	DRVN		Contract Rate Revision
	DRVS		Contract Reversal
	DTAM		Contract Termination Amortization
	DTRB		Booking of Termination Date
	DTER		Contract Termination
	DRRL		Contract Revaluation Reversal

9.2 Amount Tags

The amount tags listed below are hard-coded in Oracle FLEXCUBE.

	Amount Tag		Description
	CUR_INRVL_PAY		Current In Leg Payable
	CUR_INRVL_REC		Current In Leg Receivable
	CUR_NETRVL_EXP		Current Net Revaluation Expense
	CUR_NETRVL_INC		Current Net Revaluation Income
	CUR_OUTRVL_PAY		Current Out Leg Payable
	CUR_OUTRVL_REC		Current Out Leg Receivable
	INCP_EXP_AMORT		Inception Expense Amortization Amount
	INCP_GAIN		Inception Gain
	INCP_GAIN_DEF		Inception Gain Deferred
	INCP_INC_AMORT		Inception Income Amortization Amount
	INCP_LOSS		Inception Loss
	INCP_LOSS_DEF		Inception Loss Deferred
	INLEG_PRN		In Leg Principal
	INLEG_PRN_CONT		In Leg Contingent Principal Amount
	INLEG_PRN_DECR		In Leg Principal Decrement
	INLEG_PRN_INCR		In Leg Principal Increment
	INLEG_PRN_LIQD		In Leg Principal Liquidation
	NET_INT_EXP		Net Interest Expense
	NET_SET_INC		Net Interest Income
	NET_SET_EXP		Net Interest Expense
	NET_INT_INC		Net Interest Income
	OUTLEG_PRN		Out Leg Principal
	OUTLEG_PRN_CONT		Out Leg Contingent Principal Amount
	OUTLEG_PRN_DECR		Out Leg Principal Decrement
	OUTLEG_PRN_INCR		Out Leg Principal Increment
	OUTLEG_PRN_LIQD		Out Leg Principal Liquidation
	PRV_INRVL_PAY		Previous In Leg Revaluation Payable
	PRV_INRVL_REC		Previous In Leg Revaluation Receivable
	PRV_NETRVL_EXP		Previous Net Revaluation Expense
	PRV_NETRVL_INC		Previous Net Revaluation Income
	PRV_OUTRVL_PAY		Previous Out Leg Revaluation Payable
	PRV_OUTRVL_REC		Previous Out Leg Revaluation Receivable
	TRMN_EXP_AMORT		Termination Expense Amortization Amount
	TRMN_GAIN		Termination Gain
	TRMN_GAIN_DEF		Termination Gain Deferred
	TRMN_INC_AMORT		Termination Income Amortization Amount
	TRMN_LOSS		Termination Loss
	TRMN_LOSS_DEF		Termination Loss Deferred
	Component_LIQD_CY		Current year Unrealized accrual amount for a component
	Component_LIQD_PY		Previous year Unrealized accrual amount for a component
	NET_INT_INCC		Net interest Income on Cash basis
	NET_INT_INCA		Net interest Income on Accrual basis
	NET_INT_EXPC		Net interest expense on Cash Basis
	NET_INT_EXPA		Net interest expense on Accrual Basis
	Component_IAC/EAC_N­PRF		_NPRF tag would be created for each com­ponent. This tag would represent accruals for net profit deals.	For example, DV_IN_INT_IAC_NPRF
	Component_IAC/EAC_NLSS		Accruals for Net loss deals
	Component_DLIQ_PY		Previous year Unrealized outstanding
	Component_DLIQ_CY		Current year Unrealized outstanding

In addition to these you can define amount tags as per your requirement for the ICCF and tax components that are attached to the product.

* The ‘component’ is the ICCF component that you have created.

Note

NET_INT_INCC, NET_INT_INCA, NET_INT_EXPC, NET_INT_EXPA Amount tags used in case of FRA and NET_INT_EXP, NET_INT_INC Amount Tags used in case of IRS/CCS.

9.3 Accounting Roles

The following list contains the Accounting Roles that are applicable to the Derivative contracts that you can process at your bank.

	Accounting Role		Description
	BROK_PAID		Brokerage Paid
	BROK_PAYABLE		Brokerage Payable
	CONT_ASSET		Contingent Asset
	CONT_ASSET_OFS		Contingent Asset Offset
	CONT_FAIR_VAL		Contract Fair Value Account
	CONT_LIAB		Contingent Liability
	CONT_LIAB_OFS		Contingent Liability Offset
	DV_IN_INT_INC		DV_IN_INT - Income
	DV_IN_INT_REC		DV_IN_INT - Receivable
	DV_IN_INT_RIA		DV_IN_INT - Received in Advance
	DV_OUT_INT_EXP		DV_OUT_INT - Expense
	DV_OUT_INT_PAY		DV_OUT_INT - Payable
	DV_OUT_INT_PIA		DV_OUT_INT - Paid in Advance
	INCP_EXP		Inception Expense
	INCP_GAIN_DEF		Inception Gain Deferral Account
	INCP_INC		Inception Income
	INCP_LOSS_DEF		Inception Loss Deferral Account
	INLEG_ASSET		In Leg Asset
	INLEG_RVL_EXP		In Leg Revaluation Expense
	INLEG_RVL_INC		In Leg Revaluation Income
	NET_RVL_EXP		Net Revaluation Expense
	NET_RVL_INC		Net Revaluation Income
	NET_SET_BRIDGE		Net Settlement Bridge
	OUTLEG_LIAB		Out Leg Liability
	OUTLEG_RVL_EXP		Out Leg Revaluation Expense
	OUTLEG_RVL_INC		Out Leg Revaluation Income
	TRMN_EXP		Termination Expense
	TRMN_INC		Termination Income
	TRMN_GAIN_DEF		Termination Gain Deferral Account
	TRMN_LOSS_DEF		Termination Loss Deferral Account
	Component_REC		Receivable
	Component_PAY		Payable
	Component_INC		Realized Income
	Component_EXP		Realized Expense
	Component_INC_UNRLZ		Unrealized Income
	Component_EXP_UN­RLZ		Unrealized Expense
	TRMN_INC_UNRLZ		Unrealized termination income
	TRMN_EXP_UNRLZ		Unrealized termination expense
	NET_INT_INC		Net interest income
	NET_INT_EXP		Net interest expense
	NET_INT_RIA		Netted interest Received in advance
	NET_INT_PIA		Netted interest paid in advance
	NET_INT_INC_UNRLZ		Unrealized Net interest Income
	NET_INT_EXP_UNRLZ		Unrealized Net interest Expense

9.4 Event-wise Accounting Entries and Advices

This section contains the following topics:

• Section 9.4.1, "Accounting Entries and Advices"
• Section 9.4.2, "DBOK: Contract Booking"
• Section 9.4.3, "DINT: Contract Initiation"
• Section 9.4.4, "DILQ: Contract Interest Liquidation"
• Section 9.4.5, "DPLQ: Contract Principal Liquidation"
• Section 9.4.6, "DRVL: Contract Revaluation"
• Section 9.4.7, "DIAM: Contract Inception Amortization"
• Section 9.4.8, "DTER: Contract Termination"
• Section 9.4.9, "DAMN: Contract Amendment"
• Section 9.4.10, "DIAC: Contract Interest Accrual"
• Section 9.4.11, "DTAM: Contract Termination Amortization"
• Section 9.4.12, "DRRL: Contract Revaluation Reversal"

9.4.1 Accounting Entries and Advices

In this section we will discuss the suggested accounting entries and advices that should be generated for each event in the life cycle of Derivative contracts.

Note

Some of the Amount Tags linked to the Accounting Roles are user defined.

9.4.2 DBOK: Contract Booking

Accounting Entries

	Accounting Role		Amount Tag		Dr./Cr. Indicator
	BROK_PAID		BROKAMT		DEBIT
	BROK_PAYABLE		BROKAMT		CREDIT
	CONT_FAIR_VAL		INCP_GAIN		DEBIT
	INCP_INC		INCP_GAIN		CREDIT
	CONT_FAIR_VAL		INCP_GAIN_DEF		DEBIT
	INCP_GAIN_DEF		INCP_GAIN_DEF		CREDIT
	CONT_FAIR_VAL		INCP_LOSS		CREDIT
	INCP_EXP		INCP_LOSS		DEBIT
	CONT_FAIR_VAL		INCP_LOSS_­DEF		CREDIT
	INCP_LOSS_DEF		INCP_LOSS_­DEF		DEBIT
	CONT_ASSET		INLEG_PRN		DEBIT
	CONT_AS­SET_OFS		INLEG_PRN		CREDIT
	CONT_LIAB		OUTLEG_PRN		CREDIT
	CONT_LIAB_OFS		OUTLEG_PRN		DEBIT

 

Advices

	Advice Name		Description
	DV_­FRA_CONF		FRA Contract Confirma­tion

 

9.4.3 DINT: Contract Initiation

Accounting Entries

	Accounting Role		Amount Tag		Dr./Cr. Indicator
	CONT_ASSET		INLEG_PRN		CREDIT
	CONT_AS­SET_OFS		INLEG_PRN		DEBIT
	INLEG_ASSET		INLEG_PRN		DEBIT
	CUSTOMER		INLEG_PRN		CREDIT
	Accounting Role		Amount Tag		Dr./Cr. Indicator
	CONT_LIAB		OUT­LEG_PRN		DEBIT
	CONT_LIAB_OFS		OUT­LEG_PRN		CREDIT
	OUTLEG_LIAB		OUT­LEG_PRN		CREDIT
	CUSTOMER		OUT­LEG_PRN		DEBIT

Advices

Nil

9.4.4 DILQ: Contract Interest Liquidation

Accounting Entries

	Accounting Role		Amount Tag		Dr./Cr. Indicator
	CUSTOMER		DV_IN_INT_ILIQ		DEBIT
	DV_IN_INT_INC		DV_IN_INT_ILIQ		CREDIT
	CUSTOMER		DV_OUT_INT_ELIQ		CREDIT
	DV_OUT_INT_EXP		DV_OUT_INT_ELIQ		DEBIT

You will need to maintain the following accounting entry set-up when an arrears contract is liquidated with previous year adjustment option.

	In/ Out leg		Dr./Cr. Indicator		Accounting Role		Amount Tag
	In		Debit		Customer		Component_RLIQ
		Credit		Component_REC		Component_RLIQ
	Out		Debit		Component_PAY		Component_RLIQ
		Credit		Customer		Component_RLIQ
	In		Debit		Component_INC_UNRLZ		Compo­nent_RLIQ_PY
		Credit		Component_INC		Compo­nent_RLIQ_PY
		Debit		Component_INC_UNRLZ		Compo­nent_RLIQ_CY
		Credit		Component_INC		Compo­nent_RLIQ_CY
	Out		Debit		Component_EXP		Compo­nent_RLIQ_PY
		Credit		Component_EXP_UN­RLZ		Compo­nent_RLIQ_PY
		Debit		Component_EXP		Compo­nent_RLIQ_PY
		Credit		Component_EXP_UN­RLZ		Compo­nent_RLIQ_PY

Advices

Nil

Accounting Entry Setup (Settlement on Cash basis - Advance and Arrears)

	DR/CR			Accounting Role			Amount Tag
	DR		CUSTOMER		Customer		DV_IN_INT_ILIQ		Interest amount (Inleg)
	CR		DV_IN_INT _INC		In leg Income GL		DV_IN_INT_ILIQ		Interest Amount (Inleg)
	DR		DV_OUT_INT_EXP		Out leg Expense GL		DV_OUT_INT_ELIQ		Interest amount (Outleg)
	CR		CUSTOMER		Customer		DV_OUT_INT_ELIQ		Interest amount (Outleg)
	DR		CUSTOMER		Customer		NET_INT_INC		Net Income
	CR		DV_IN_INT _INC		Net Income		NET_INT_INC
	DR		DV_OUT_INT_EXP		Net Expense		NET_INT_EXP		Net Expense
	CR		CUSTOMER		Customer		NET_INT_EXP

For example,

Assume the following parameters for a DV IRS deal

In leg start date –: 01-jan-2004

Frequency -: Quarterly

In leg payment method -: Arrears

Accrual: ‘No’

In leg interest Component -: DV_IN_INT

Out leg start date -: 01-jan-2004

Frequency -: Half yearly

Out leg payment method -: Arrears

Accrual: ‘No’

Out leg interest Component -: DV_OUT_INT

Assume the following cash flows:

	In Schedule Dates		Out Schedule Dates		IN Interest amount		OUT Interest amount		Net Amount
	01-MAR-2004				100				NA
	01-JUL-2004		01-JUL-2004		100		50		+50
	01-OCT-2004				100				NA
	01-JAN-2005		01-JAN-2005		100		150		-50

Accounting entries passed on 01-MAR-2004

	DR/CR			Accounting Role			Amount Tag
			Role		Description		Tag		Amount
	DR		CUS­TOMER		Customer		DV_IN_INT_ILIQ		100
	CR		DV_IN_INT _INC		In leg Income GL		DV_IN_INT_ILIQ		100

Accounting entries passed on 01-JUL-2004 (Net Inflow)

	DR/CR			Accounting Role			Amount Tag
			Role		Description		Tag		Amount
	DR		CUS­TOMER		Customer		NET_INT_INC		50
	CR		DV_IN_INT _INC		Net Interest Income		NET_INT_INC		50

Accounting entries passed on 01-OCT-2004

	DR/CR			Accounting Role			Amount Tag
			Role		Description		Tag		Amount
	DR		CUS­TOMER		Customer		DV_IN_INT_ILIQ		100
	CR		DV_IN_INT _INC		In leg Income GL		DV_IN_INT_ILIQ		100

Accounting entries passed on 01-JAN-2005 (Net Outflow)

	DR/CR			Accounting Role			Amount Tag
			Role		Description		Tag		Amount
	DR		DV_OUT_INT _EXP		Net Interest Expense		NET_INT_EXP		50
	CR		CUS­TOMER		Customer		NET_INT_EXP		50

Assume the following parameters for a DV IRS deal

In leg start date -: 01-JAN-2004

Frequency -: Monthly

In leg payment method-: Arrears

Accrual is -: Yes

In leg interest Component-: DV_IN_INT

Out leg start date-: 01-JAN-2004

Frequency-: Monthly

Out leg payment method-: Arrears

Accrual is -: Yes

Out leg interest Component-: DV_OUT_INT

Netting Allowed: Yes

Assume the following cash flows:

	Schedule	Dates		IN Interest	Amount		OUT Interest	Amount		Net	Amount
	01-FEB-2004		100		60		+40
	01-MAR-2004		60		100		-40

Accrual Entries

	Accounting Role		Amount Tag		Dr/Cr		Amount
	DV_IN_INT_INC		DV_IN_INT_RAC		Cr		100
	DV_IN_INT_REC		DV_IN_INT_RAC		Dr		100
	DV_OUT_INT_EXP		DV_OUT_INT_PAC		Dr		60
	DV_OUT_INT_PAY		DV_OUT_INT_PAC		Cr		60

Accounting entries passed on 01-FEB-2004(Net inflow)

	DR/CR		Role		Description		Amount Tag		Amount
	DR		NET_­SET_BRIDGE		Net Settle­ment		DV_IN_INT_ ITLQ		100
	CR		DV_IN_INT_REC		In leg interest Receivable		DV_IN_INT_ ITLQ		100
	CR		NET_­SET_BRIDGE		Net Settle­ment		DV_IN_INT_OTLQ		60
	DR		DV_IN_INT_PAY		In leg interest Payable		DV_IN_INT_OTLQ		60
	DR		CUSTOMER		CUSTOMER		NET_­SET_INC		40
	CR		NET_­SET_BRIDGE		Net Settle­ment		NET_­SET_INC		40

Accrual Entries

	Accounting Role		Amount Tag		Dr/Cr		Amount
	DV_IN_INT_INC		DV_IN_INT_RAC		Cr		60
	DV_IN_INT_REC		DV_IN_INT_RAC		Dr		60
	DV_OUT_INT_EXP		DV_OUT_INT_PAC		Dr		100
	DV_OUT_INT_PAY		DV_OUT_INT_PAC		Cr		100

Accounting entries passed on 01-MAR-2004(Net Outflow)

	DR/CR		Role		Description		Amount Tag		Amount
	DR		NET_­SET_BRIDGE		Net Settlement		DV_IN_INT_ ITLQ		60
	CR		DV_IN_INT_REC		In leg interest Receivable		DV_IN_INT_ ITLQ		60
	CR		NET_­SET_BRIDGE		Net Settlement		DV_IN_INT_OTLQ		100
	DR		DV_IN_INT_PAY		In leg interest Payable		DV_IN_INT_OTLQ		100
	CR		CUSTOMER		CUSTOMER		NET_SET_EXP		40
	DR		NET_­SET_BRIDGE		Net Settlement		NET_SET_EXP		40

Accounting Entry Setup (Settlement on Non Cash basis - Advance Contracts)

	DR/CR			Accounting Role			Amount Tag
			Role		Description		Tag		Description
	DR		CUS­TOMER		Customer		DV_IN_INT_DLIQ		Interest amount (Inleg)
	CR		DV_IN_INT _RIA		In leg interest Received in advance		DV_IN_INT_DLIQ		Interest Amount (Inleg)
	DR		DV_OUT_INT_PIA		Out leg Expense Paid in Advance		DV_OUT_INT_DLIQ		Interest amount (Outleg)
	CR		CUS­TOMER		Customer		DV_OUT_INT_DLIQ		Interest amount (Outleg)
	DR		CUS­TOMER		Customer		NET_INT_INC		Net Income on Accrual basis
	CR		DV_IN_INT_RIA		Net Interest received in advance		NET_INT_INC
	DR		DV_OUT_INT_PIA		Net expense paid in advance		NET_INT_EXP		Net Expense on Accrual basis
	CR		CUS­TOMER		Net Expense paid in advance		NET_INT_EXP

 

Accounting Entry Setup (Settlement on Non Cash basis - Arrears Contracts)

	DR/CR			Accounting Role			Amount Tag
			Role		Description		Tag		Description
	DR		CUS­TOMER		Customer		DV_IN_INT_RLIQ		Interest amount (Inleg)
	CR		DV_IN_INT_REC		In leg receivable GL		DV_IN_INT_RLIQ		Interest Amount (Inleg)
	DR		DV_OUT_INT_PAY		Out leg payable GL		DV_OUT_INT_RLIQ		Interest amount (Outleg)
	CR		CUS­TOMER		Customer		DV_OUT_INT_RLIQ		Interest amount (Outleg)
	DR		CUS­TOMER		Customer		NET_INT_INC		Net Income on Accrual basis
	CR		DV_IN_INT_REC		Net Interest Receivable		NET_INT_INC
	DR		DV_OUT_INT_PAY		Net expense Pay­able		NET_INT_EXP		Net Expense on Accrual basis
	CR		CUS­TOMER		Net Expense		NET_INT_EXP

Accounting Entry Setup (Settlement on Non Cash basis - Advance Contracts-Netting

allowed)

Advance

	DR/CR		Role		Description		Tag		Description
	DR		NET_­SET_BRIDGE		Net Settlement		DV_IN_INT_ IADL		Interest amount (Inleg)
	CR		DV_IN_INT_RIA		In leg interest Received in advance		DV_IN_INT_ IADL		Interest amount (Inleg)
	CR		NET_­SET_BRIDGE		Net Settlement		DV_IN_INT_OADL		Interest amount (Outleg)
	DR		DV_IN_INT_PIA		Out leg Expense Paid in Advance		DV_IN_INT_OADL		Interest amount (Outleg)
	DR		CUSTOMER		CUSTOMER		NET_­SET_INC		Net Settle­ment Income on Accrual basis
	CR		NET_­SET_BRIDGE		Net Settlement		NET_­SET_INC
	CR		CUSTOMER		CUSTOMER		NET_SET_­EXP		Net Settle­ment Expense on Accrual basis
	DR		NET_­SET_BRIDGE		Net Settlement		NET_SET_­EXP

In Net liquidation event, the receivable and payable GLs is liquidated into a Net Settlement/Settlement Bridge GL, ensuring zero balance at the end of liquidation of cash-flows.

Accounting Entry Setup (Settlement on Non Cash basis - Arrears Contracts, Netting al

lowed)

Arrears

	CR/DR		Role		Description		Tag		Description
	DR		NET_­SET_BRIDGE		Net Settlement		DV_IN_INT_ ITLQ		Interest amount (Inleg)
	CR		DV_IN_INT_REC		In leg interest Receivable		DV_IN_INT_ ITLQ		Interest amount (Inleg)
	CR		NET_­SET_BRIDGE		Net Settlement		DV_IN_INT_OTLQ		Interest amount (Outleg)
	DR		DV_IN_INT_PAY		In leg interest Pay­able		DV_IN_INT_OTLQ		Interest amount (Outleg)
	DR		CUSTOMER		CUSTOMER		NET_SET_INC		Net Settle­ment Income on Accrual basis
	CR		NET_­SET_BRIDGE		Net Settlement		NET_SET_INC
	CR		CUSTOMER		CUSTOMER		NET_SET_­EXP		Net Settle­ment Expense on Accrual basis
	DR		NET_­SET_BRIDGE		Net Settlement		NET_SET_­EXP

Note

• In all the above scenarios (Settlement on cash and non cash basis), netting tags (NET_INT_INC and NET_INT_EXP) will be updated only if the in leg and out leg schedules coincide. Other amount tags will not be applicable in this case.
• For non cash basis settlements, if netting is allowed and accrual is set as Yes, net­ting tags NET_SET_INC, NET_SET_EXP will be updated along with other amount tags mentioned in the above table.

9.4.5 DPLQ: Contract Principal Liquidation

Accounting Entries

	Accounting Role		Amount Tag		Dr./Cr.
	CONT_ASSET		INLEG_PRN_DECR		CREDIT
	CONT_ASSET_OFS		INLEG_PRN_DECR		DEBIT
	CUSTOMER		INLEG_PRN_DECR		DEBIT
	INLEG_ASSET		INLEG_PRN_DECR		CREDIT
	CONT_ASSET		INLEG_PRN_INCR		DEBIT
	INLEG_ASSET		INLEG_PRN_INCR		DEBIT
	CUSTOMER		INLEG_PRN_INCR		CREDIT
	CONT_ASSET_OFS		INLEG_PRN_INCR		CREDIT
	CONT_ASSET		INLEG_PRN_LIQD		CREDIT
	CONT_ASSET_OFS		INLEG_PRN_LIQD		DEBIT
	CUSTOMER		INLEG_PRN_LIQD		DEBIT
	INLEG_ASSET		INLEG_PRN_LIQD		CREDIT
	CONT_ASSET_OFS		OUTLEG_PRN_DECR		CREDIT
	OUTLEG_LIAB		OUTLEG_PRN_DECR		DEBIT
	CUSTOMER		OUTLEG_PRN_DECR		CREDIT
	CONT_LIAB		OUTLEG_PRN_DECR		DEBIT
	CONT_ASSET_OFS		OUTLEG_PRN_INCR		DEBIT
	OUTLEG_LIAB		OUTLEG_PRN_INCR		CREDIT
	CUSTOMER		OUTLEG_PRN_INCR		DEBIT
	CONT_LIAB		OUTLEG_PRN_INCR		CREDIT
	CONT_LIAB		OUTLEG_PRN_LIQD		DEBIT
	OUTLEG_LIAB		OUTLEG_PRN_LIQD		DEBIT
	CUSTOMER		OUTLEG_PRN_LIQD		CREDIT
	CONT_LIAB_OFS		OUTLEG_PRN_LIQD		CREDIT

 

Advices

Nil

9.4.6 DRVL: Contract Revaluation

Accounting Entries

	Accounting Role		Amount Tag		Dr./Cr.
	CONT_FAIR_VAL		CUR_INRVL_PAY		CREDIT
	INLEG_RVL_EXP		CUR_INRVL_PAY		DEBIT
	CONT_FAIR_VAL		CUR_INRVL_REC		DEBIT
	INLEG_RVL_INC		CUR_INRVL_REC		CREDIT
	CONT_FAIR_VAL		CUR_NETRVL_EXP		CREDIT
	NET_RVL_EXP		CUR_NETRVL_EXP		DEBIT
	CONT_FAIR_VAL		CUR_NETRVL_INC		DEBIT
	NET_RVL_INC		CUR_NETRVL_INC		CREDIT
	CONT_FAIR_VAL		CUR_OUTRVL_PAY		CREDIT
	OUTLEG_RVL_EXP		CUR_OUTRVL_PAY		DEBIT
	CONT_FAIR_VAL		CUR_OUTRVL_REC		DEBIT
	OUTLEG_RVL_INC		CUR_OUTRVL_REC		CREDIT
	CONT_FAIR_VAL		PRV_INRVL_PAY		DEBIT
	INLEG_RVL_EXP		PRV_INRVL_PAY		CREDIT
	CONT_FAIR_VAL		PRV_INRVL_REC		CREDIT
	INLEG_RVL_INC		PRV_INRVL_REC		DEBIT
	CONT_FAIR_VAL		PRV_NETRVL_EXP		DEBIT
	NET_RVL_EXP		PRV_NETRVL_EXP		CREDIT
	CONT_FAIR_VAL		PRV_NETRVL_INC		CREDIT
	NET_RVL_INC		PRV_NETRVL_INC		DEBIT
	CONT_FAIR_VAL		PRV_OUTRVL_PAY		DEBIT
	OUTLEG_RVL_EXP		PRV_OUTRVL_PAY		CREDIT
	CONT_FAIR_VAL		PRV_OUTRVL_REC		CREDIT
	OUTLEG_RVL_INC		PRV_OUTRVL_REC		DEBIT

 

Advices

No advices allowed for this Event.

9.4.7 DIAM: Contract Inception Amortization

Accounting Entries

	Accounting Role		Amount Tag		Dr./Cr.
	INCP_EXP		INCP_EXP_AMORT		DEBIT
	INCP_LOSS_DEF		INCP_EXP_AMORT		CREDIT
	INCP_GAIN_DEF		INCP_INC_AMORT		DEBIT
	INCP_INC_AMORT		INCP_INC_AMORT		CREDIT

 

Advices

No advices allowed for this Event.

9.4.8 DTER: Contract Termination

Accounting Entries for NPV/Rebate

	Accounting Role		Amount Tag		Dr./Cr.
	DV_IN_INT_INC		DV_IN_INT_IAC		CREDIT
	DV_IN_INT_RIA		DV_IN_INT_IAC		DEBIT
	DV_IN_INT_INC		DV_IN_INT_JEAC		DEBIT
	DV_IN_INT_REC		DV_IN_INT_JEAC		CREDIT
	DV_OUT_INT_EXP		DV_OUT_INT_EAC		DEBIT
	DV_OUT_INT_PIA		DV_OUT_INT_EAC		CREDIT
	DV_OUT_INT_EXP		DV_OUT_INT_JIAC		CREDIT
	DV_OUT_INT_PAY		DV_OUT_INT_JIAC		DBEIT
	CONT_ASSET		INLEG_PRN_CONT		CREDIT
	CONT_ASSET_OFS		INLEG_PRN_CONT		DEBIT
	CONT_ASSET		INLEG_PRN_LIQD		CREDIT
	CUSTOMER		INLEG_PRN_LIQD		DEBIT
	CONT_ASSET_OFS		INLEG_PRN_LIQD		DEBIT
	INLEG_ASSET		INLEG_PRN_LIQD		CREDIT
	CONT_LIAB		OUTLEG_PRN_CONT		DEBIT
	CONT_LIAB_OFS		OUTLEG_PRN_CONT		CREDIT
	CONT_LIAB		OUTLEG_PRN_LIQD		DEBIT
	OUTLEG_LIAB		OUTLEG_PRN_LIQD		DEBIT
	CUSTOMER		OUTLEG_PRN_LIQD		CREDIT
	CONT_LIAB_OFS		OUTLEG_PRN_LIQD		CREDIT
	CUSTOMER		TRMN_GAIN		DEBIT
	TRMN_INC		TRMN_GAIN		CREDIT
	CUSTOMER		TRMN_LOSS		CREDIT
	TRMN_EXP		TRMN_LOSS		DEBIT

 

Advices

	Advice Name		Description
	DV_FRA_TRMN		FRA Termination

 

9.4.9 DAMN: Contract Amendment

Accounting Entries

	Accounting Role		Amount Tag		Dr./Cr.
	CONT_ASSET		INLEG_PRN_DECR		CREDIT
	CONT_ASSET_OFS		INLEG_PRN_DECR		DEBIT
	CONT_ASSET		INLEG_PRN_INCR		DEBIT
	CONT_ASSET_OFS		INLEG_PRN_INCR		CREDIT
	CONT_LIAB		OUTLEG_PRN_DECR		DEBIT
	CONT_LIAB_OFS		OUTLEG_PRN_DECR		CREDIT
	CONT_LIAB		OUTLEG_PRN_INCR		CREDIT
	CONT_LIAB_OFS		OUTLEG_PRN_INCR		DEBIT

 

Advices

	Advice Name		Description
	DV_FRA_AMND		FRA Amendment

 

9.4.10 DIAC: Contract Interest Accrual

Accounting Entries

	Accounting Role		Amount Tag		Dr./Cr.
	DV_IN_INT_INC		DV_IN_INT_IAC		CREDIT
	DV_IN_INT_RIA		DV_IN_INT_IAC		DEBIT
	DV_IN_INT_INC		DV_IN_INT_RAC		CREDIT
	DV_IN_INT_REC		DV_IN_INT_RAC		DEBIT
	DV_OUT_INT_EXP		DV_OUT_INT_EAC		DEBIT
	DV_OUT_INT_PIA		DV_OUT_INT_EAC		CREDIT
	DV_OUT_INT_EXP		DV_OUT_INT_PAC		DEBIT
	DV_OUT_INT_PAY		DV_OUT_INT_PAC		CREDIT

 

Entries that are passed for the DIAC event (Arrears Contracts) for transfer of unrealized to realized income are as follows:

	In/Out leg		Dr./Cr. Indicator		Accounting Role		Amount Tag
	In		Debit		Component_REC		Component_RAC
		Credit		Component_INC_UNRLZ		Component_RAC
	Out		Debit		Component_EXP_UN­RLZ		Component_PAC
		Credit		Component_PAY		Component_PAC
	In		Credit		DV_IN_INT_INC		DV_IN_INT_RAC
		Debit		DV_IN_INT_REC		DV_IN_INT_RAC
	Out		Debit		DV_OUT_INT_EXP		DV_OUT_INT_PAC
		Credit		DV_OUT_INT_PAY		DV_OUT_INT_PAC

Entries that are passed for the DIAC event (Advance Contracts) for transfer of unrealized to realized income are as follows:

	In/Out leg		Dr./Cr. Indicator		Accounting Role		Amount Tag
	In		Debit		Component_RIA		Component_IAC
		Credit		Component_INC_UNRLZ		Component_IAC
	Out		Debit		Component_EXP_UN­RLZ		Component_EAC
		Credit		Component_PIA		Component_EAC
	In		Credit		DV_IN_INT_INC		DV_IN_INT_IAC
		Debit		DV_IN_INT_RIA		DV_IN_INT_IAC
	Out		Debit		DV_OUT_INT_EXP		DV_OUT_INT_EAC
		Credit		DV_OUT_INT_PIA		DV_OUT_INT_EAC
				Final Accruals (In addition to above)
	In		Debit		Component_INC_UNRLZ		Compo­nent_DLIQ_PY
		Credit		Component_INC		Compo­nent_DLIQ_PY
		Debit		Component_INC_UNRLZ		Compo­nent_DLIQ_CY
		Credit		Component_INC		Compo­nent_DLIQ_CY
	Out		Debit		Component_EXP		Compo­nent_DLIQ_PY
		Credit		Component_EXP_UN­RLZ		Compo­nent_DLIQ_PY
		Debit		Component_EXP		Compo­nent_DLIQ_PY
		Credit		Component_EXP_UN­RLZ		Compo­nent_DLIQ_PY

Advices

No advices allowed for this Event.

9.4.11 DTAM: Contract Termination Amortization

Accounting Entries

	Accounting Role		Amount Tag		Dr./Cr.
	TRMN_EXP		TRMN_EXP_AMORT		DEBIT
	TRMN_LOSS_DEF		TRMN_EXP_AMORT		CREDIT
	TRMN_GAIN_DEF		TRMN_INC_AMORT		DEBIT
	TRMN_INC		TRMN_INC_AMORT		CREDIT

 

Entries that are passed during the for transfer of unrealized to realized income are as follows:

		Gain/Loss			Dr./Cr.			Accounting Role		Amount Tag
		Gain			Debit			TRMN_GAIN_DEF		TRM­N_INC_AMORT
				Credit			TRMN_INC_UNRLZ		TRM­N_INC_AMORT
		Loss			Debit			TRMN_EXP_UNRLZ		TRMN_EX­P_AMORT
				Credit			TRMN_LOSS_DEF		TRMN_EX­P_AMORT
							On Contract Maturity (In addition to above)
	Gain			Debit			TRMN_INC_UNRLZ			TRMN_GAIN_PY
				Credit			TRMN_INC			TRMN_GAIN_PY
				Debit			TRMN_INC_UNRLZ			TRMN_GAIN_CY
				Credit			TRMN_INC			TRMN_GAIN_CY
	Loss			Debit			TRMN_EXP			TRMN_LOSS_PY
				Credit			TRMN_EXP_UNRLZ			TRMN_LOSS_PY
				Debit			TRMN_EXP			TRMN_LOSS_CY
				Credit			TRMN_EXP_UNRLZ			TRMN_LOSS_CY

If the amount tag is of type Component_RLIQ/DLIQ_PY and if the accounting role pertains to unrealized income/expense, the head for the accounting role will be replaced by the previous year adjustment GL, while passing accounting entries.

Note

The transfer of income/expense from the previous year adjustment GL to the realized in­come/expense GL happens only if the Track PY P&L Adjustment option has been set as a branch preference through the ‘Branch Parameter’ screen.

For example,

You are processing an FRA contract which has the following interest components:

• DV_IN_INT – In leg
• DV_OUT_INT – Out leg

The previous year unrealized Income/Expense for the components are as follows:

• DV_IN_INT – 300 (Unrealized Income)
• DV_OUT_INT – 400 (Unrealized Expense)

Assuming the deal to be in net profit, with inflow as 500 and outflow as 275, the accounting entries passed during liquidation and final accrual are:

DILQ

	Debit		CUSTOMER		500 (DV_IN_INT_DLIQ)
	Credit		DV_IN_INT_RIA		500
	Debit		DV_OUT_INT_PIA		275 (DV_OUT_INT_DLIQ)
	Credit		Customer		225

DIAC

Assuming accrual amounts to be 75 and 45 for in and out legs respectively

	Debit		DV_IN_INT_RIA		75 (DV_IN_INT_IAC)
	Credit		DV_IN_INT_INC_ UNRLZ		75
	Debit		DV_OUT_INT_EXP_ UNRLZ		45 (DV_OUT_INT_EAC)
	Credit		DV_OUT_INT_PIA		45

Moving Unrealized Income/Expense to real Income/Expense

	Debit		Previous Yr Adjustment GL		300 (DV_IN_INT_DLIQ_PY)
	Credit		DV_IN_INT_INC		300
	Debit		DV_IN_INT_INC_UN­RLZ		200 (DV_IN_INT_DLIQ_CY)
	Credit		DV_IN_INT_INC		200
	Debit		DV_IN_INT_EXP		275 (DV_OUT_INT_DLIQ_PY)
	Credit		Previous Yr Adjustment GL		275

Note

When an arrears contract is liquidated (DILQ event) or an advance contract completes ac­cruals (DIAC event), the income transfer to the realized income GL from the unrealized GL is performed first using the Previous Year Adjustment GL maintained in Chart of Accounts. This is because the previous year unrealized income would have already moved to the year ends P and L (EYPL) GL after financial closure. The remaining amount if any is deb­ited from the current year unrealized income GL.

 

9.4.12 DRRL: Contract Revaluation Reversal

Accounting Entries

Case I – Next Day in BOD (when next day is not the beginning of a new financial year) or at the time of the next revaluation.

 

	Accounting Role		Amount Tag		Debit /Credit
			In Leg entries
	INLEG_RVL_INC		PRV_INRVL_REC		Debit
	CONT_FAIR_VAL		PRV_INRVL_REC		Credit
	CONT_FAIR_VAL		PRV_INRVL_PAY		Debit
	INLEG_RVL_EXP		PRV_INRVL_PAY		Credit
			Out Leg entries
	OUTLEG_RVL_INC		PRV_OUTRVL_REC		Debit
	CONT_FAIR_VAL		PRV_OUTRVL_REC		Credit
	CONT_FAIR_VAL		PRV_OUTRVL_PAY		Debit
	OUTLEG_RVL_­EXP		PRV_OUTRVL_PAY		Credit
			In case of Revaluation Netting
	NET_RVL_INC		PRV_NETRVL_INC		Debit
	CONT_FAIR_VAL		PRV_NETRVL_INC		Credit
	CONT_FAIR_VAL		PRV_NETRVL_EXP		Debit
	NET_RVL_EXP		PRV_NETRVL_EXP		Credit

 

Case II – Next Day during BOD (if the next day is the beginning of a new financial year).

	Accounting Role		Amount Tag		Debit /Credit
			In Leg entries
	INLEG_RVL_INC		PRV_INRVL_REC_PY		Debit
	CONT_FAIR_VAL		PRV_INRVL_REC_PY		Credit
	CONT_FAIR_VAL		PRV_INRVL_PAY_PY		Debit
	INLEG_RVL_EXP		PRV_INRVL_PAY_PY		Credit
			Out Leg entries
	OUTLEG_RVL_INC		PRV_OUTRVL_REC_PY		Debit
	CONT_FAIR_VAL		PRV_OUTRVL_REC_PY		Credit
	CONT_FAIR_VAL		PRV_OUTRVL_PAY_PY		Debit
	OUTLEG_RVL_­EXP		PRV_OUTRVL_PAY_PY		Credit
			In case of Revaluation Netting
	NET_RVL_INC		PRV_NETRVL_INC_PY		Debit
	CONT_FAIR_VAL		PRV_NETRVL_INC_PY		Credit
	CONT_FAIR_VAL		PRV_NETRVL_EXP_PY		Debit
	NET_RVL_EXP		PRV_NETRVL_EXP_PY		Credit

 

For FRA contracts satisfying the following conditions the accounting entries for the Interest Settlement (Cash and Accrual) and Interest Accrual events are given below with the help of an example.

Conditions

 

• The Netting Required option has to be enabled at the derivatives type level and Accrual Required has to be either enabled or disabled for both the legs. An error message will be shown if this is not the case.
• This applies only to FRA contracts having the following definition of the derivative type attached in the product:
  • Netting Required should be checked
  • Payment method for both the in leg and out leg is ‘Advance’.
  • Principal Exchange required is No.
  • Asynchronous Interest schedules are not allowed.
  • Asynchronous Revision schedules are not allowed

For example,

An FRA contract has DV_IN_INT as the In Leg interest component, and DV_OUT_INT as the Out Leg interest component. The deal is settled on Value Date with the following values for interest components:

	Contract		Amount
	DV_IN_INT =		USD 57.9818955567
	DV_OUT_INT =		USD 32.1851185555

Rounded amounts before netting

	Contract		Amount
	DV_IN_INT =		USD 57.98
	DV_OUT_INT =		USD 32.19

The Net Interest income is 57.98 – 32.19 = USD 25.79.

Case I - Settlement on Cash basis

	Debit/Credit		Accounting Role		Amount Tag		Amount
	Debit		Customer		NET_INT_INCC		USD 25.79
	Credit		NET_INT_INC		NET_INT_INCC		USD 25.79

Case II - Settlement on Accrual basis

Since the deal makes a net profit for the bank, the accounting entries for the liquidation event (DILQ) are:

	Debit/Credit		Accounting Role		Amount Tag		Amount
	Debit		Customer		NET_INT_INCA		USD 25.79
	Credit		NET_INT_RIA		NET_INT_INCA		USD 25.79

Accruals for In and Out Leg are performed separately. For the above deal, In Leg accrued amount is USD 5.25 and the Out Leg accrued amount is USD 3.47. The deal has made a net profit since the inflow is more than the outflow.

Entries passed during Contract Interest Accrual (DIAC) are given below.

	Debit/ Credit		Accounting Role		Amount Tag		Amount
	Debit		NET_INT_RIA		DV_IN_INT_IAC_NPRF		USD 5.25
	Credit		NET_INT_INC		DV_IN_INT_IAC_NPRF		USD 5.25
	Debit		NET_INT_INC		DV_IN_INT_IAC_NPRF		USD 3.47
	Credit		NET_INT_RIA		DV_IN_INT_IAC_NPRF		USD 3.47

Note

Component_IAC/EAC_NLSS/NPRF tags for each of the interest components are created automatically on creation of a new interest class.