Hierarchy
EA-FINSERV (Software Component) SAP Enterprise Extension Financial Services⤷
FIN-FSCM-TRM-TM (Application Component) Transaction Manager⤷
FTHM (Package) Hedge Management - central objects
Basic Data
| Data Element | THM_CASH_FLOW_EFF_CAT |
| Short Description | Method of ineffectiveness measurement |
Data Type
| Category of Dictionary Type | D | Domain |
| Type of Object Referenced | No Information | |
| Domain / Name of Reference Type | THM_CASH_FLOW_EFF_CAT | |
| Data Type | INT1 | 1-byte integer, integer number <= 255 |
| Length | 3 | |
| Decimal Places | 0 | |
| Output Length | 3 | |
| Value Table |
Further Characteristics
| Search Help: Name | ||
| Search Help: Parameters | ||
| Parameter ID | ||
| Default Component name | ||
| Change document | ||
| No Input History | ||
| Basic direction is set to LTR | ||
| No BIDI Filtering |
Field Label
| Length | Field Label | |
| Short | 10 | Cash Flow |
| Medium | 15 | Cash Flow Det. |
| Long | 22 | Cash Flow Det. 133/138 |
| Heading | 14 | Cash Flow Det. |
Documentation
Definition
The method of ineffectiveness measurement determines on a company-code level, for cash flow hedges involving a swap, how the amount to be posted to accumulated other comprehensive income versus the amount posted to P&L is calculated.
Currently, this can be done either following the procedure laid out in FAS 133, par 30 (b), stating that the balance of accumulated other comprehensive income is to be adjusted to the lesser of the cumulative gain or loss on the derivative (less the excluded components less amounts previously reclassified) and the portion of the cumulative gain or loss on the derivative necessary to offset the cumulative change in expected future cash flows (less previously reclassified amounts). In other words, looking at the log of the effectiveness test, the OCI balance is brought to the lesser of 'sum of delta derivative' and 'sum of delta hedged item'.
Even in a perfectly effective hedging relationship, the resulting amount transferred to OCI may be different from the amount posted as a fair value change for the derivative, and the difference between the two is posted to P&L. This can happen, e.g., when the ineffectiveness measurement is carried out using changes in cash flows, or discounted cash flows (whereas the full fair value change of the derivative has to be posted in any case).
The second way of setting up the ineffectiveness measurement is following method 1 of the methods suggested in DIG issue G7. This method suggests to compare the fair value of the variable leg of the swap and the present value of the cumulative change in the expected future interest cash flows on the floating-rate liability or asset. OCI is then adjusted to a balance that reflects the difference between the overall change in fair value of the swap since its inception and the amount of ineffectiveness that must be recorded in earnings. In other words, the difference in the two calculated fair values of the ineffectiveness measurement is what is transferred to OCI. The remainder of the fair value change of the derivative, i.e. swap, is tranferred to OCI. However, according to FAS 133, par. 30(b), ineffectiveness is only reported in earnings in those cases where the fair value change of the respective cash flows of the derivative exceeds that of the cash flows of the debt or asset; if the fair value changes of the debt or asset are bigger, no ineffectiveness is reported.
History
| Last changed by/on | SAP | 20020219 |
| SAP Release Created in |
