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.