A.4.12 DRRL: Contract Revaluation Reversal

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.

Table A-15 Accounting Entries

Accounting Role	Amount Tag	Debit /Credit
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
Outleg 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
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).

Table A-16 Accounting Entries

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
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.

Enable the Netting required option at the derivatives type level, and the required accrual must be either enabled or disabled for both the legs. An error message displays if this is not the case.

This applies only to FRA contracts having the following definition of the derivative type attached in the product:

• Check the required netting
• The payment method for both the in leg and out leg in 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:

Rounded amounts before netting

Table A-17 Interest Component Values

Contract	Amount
DV_IN_INT =	USD57.9818955567
DV_OUT_INT =	USD32.1851185555

Table A-18 Net Interest Income

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.

Table A-19 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

Table A-20 Case II - Settlement on Accrual basis

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. The In Leg accrued amount for the above deal 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.

Table A-21 Contract Interest Accrual (DIAC)

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 the creation of a new interest class.