FI331 Umoja Investment Accounting. Umoja Investment Accounting Version 13 1

Transcription

1 FI331 Umoja Investment Accounting Umoja Investment Accounting Version 13 Last Copyright Modified: United 16-August-13 Nations 1

2 Agenda Course Introduction Module 1: Transaction Execution Investments Module 2: Transaction Execution Foreign Exchange Module 3: Investment Accounting Daily Process Module 4: Investment Accounting Period-End Process Course Summary Course Assessment Course Survey 2

3 Introduction Please share with us: Your name Your section/unit Years of experience in the field An interesting fact about you 3

4 Ground Rules Please consider the following guidelines during the training session: Turn your cell phone to silent mode. Please step out of the class to take any important phone call. Please do not access your or the Internet outside of breaks. Participate fully in the training session and respect each other s contribution. Breaks are included at the discretion of the trainer. X X No Phones Do Not Access Participate Ask Questions Breaks 4

5 Course Overview The purpose of the Umoja Investment Accounting course is to explain the Investment Accounting processes and transactions in Umoja. The course will also cover relevant transaction simulations for Investment Accounting. Prerequisite Review You should have completed the following prerequisite courses: Umoja Overview Umoja Master Data & Coding Block Overview Umoja Cash Management and Treasury Overview Umoja ECC Navigation Umoja BI Navigation Course Duration: 6 hours 5

6 Course Objectives After completing this course, you will be able to: Explain the roles and responsibilities involved in the Investment Accounting processes Review FOREX exposure and perform spot transactions Process foreign exchange investment decisions Update the Umoja Security Master Enter and approve investment transactions in Umoja and post derived flows Account for premiums and discounts Modify investment transactions Generate, review and post accounting entries for accrued income and amortization of premiums/discounts Update the reference rates for Variable Rate Bonds (floating rate securities) Distribute the investment income and expense to the investment pool participants 6

7 Agenda Course Introduction Module 1: Transaction Execution Investments Module 2: Transaction Execution Foreign Exchange Module 3: Investment Accounting Daily Process Module 4: Investment Accounting Period-End Process Course Summary Course Assessment Course Survey 7

8 Module 1 Objectives After completing this module, you will be able to: Update the Umoja Security Master Enter investment transactions in Umoja Approve investment transactions entered into Umoja Post derived flows Account for premiums and discounts Modify investment transactions 8

9 Key Terminology Key Term Business Partner Online Trading Platform/System Payment Request Description It is a person or an organization that has a business interest with UN. A BP can be a commercial vendor that supplies goods or services to UN and also a UN agency or staff member. The vendors registered in UNGM are replicated in Umoja (Umoja SRM and ECC) as BP s. BP s can also be UN organizations, UN Staff Members and other parties. It is a software interface that allows a legally binding financial transaction to be performed on terminals or through a desktop software. System communication is performed via closed networks or secure Internet connections. It is a payment message created by the Umoja Treasury component after confirmation and settlement of the trade. Payment requests are cleared by Umoja, which results in a posting in the General Ledger (G/L) bank accounts and, where applicable, issuance of Payment Media (EFT, SWIFT and so on). 9

10 Key Terminology Key Term Straight-Through- Processing Society for Worldwide Interbank Financial Telecommunication (SWIFT) Trade Description It is a sequence of events set into a logical automated process without the need of re-entering master or transactional data across the entire process. It is an industry cooperative that provides a standard format for transmitting payments and other financial messages to more than 7,500 member banks, broker dealers and organizations around the world. It is a contract between the UN Treasury and an approved counterparty to buy or sell a financial instrument. 10

11 Roles & Responsibilities The following Umoja Enterprise roles are involved in the Investment Accounting process: Back Office Treasury User Cashier Confirms all investment trades Issues daily investment reports and ensures distribution of net income to participating funds and grants in overall International Public Sector Accounting Standards (IPSAS) compliance Maintains custodian relationship Reviews/authorizes treasury related wire transactions Provides supporting documentation related to investments for financial reporting Generates all payments (F110) in Umoja and manages cash control by fund/grant Raises the issues identified by the Cash Controller to Finance Managers for resolution Ensures that bank data is reflected in Umoja accurately and timely to allow Front Office to manage daily liquidity Verifies that all bank communication files are processed and accepted by SWIFT/banks in a timely manner 11

12 Roles & Responsibilities The following Umoja Enterprise roles are involved in the Investment Accounting process: Investment Cashier Generates all payments (F111) in Umoja Ensures that bank data is reflected in Umoja accurately and timely to allow Front Office to manage daily liquidity Verifies that all bank communication files are processed and accepted by SWIFT/banks in a timely manner 12

13 Introduction to UN Investment Pools UN HQ Treasury is responsible for managing excess cash on the behalf of missions and OAH. The investments are made according to the CPPI guidelines. The objectives of the investment pools in decreasing priority are as follows: 1) Security 2) Liquidity 3) Return To optimize investment returns and maintain liquidity, the UNHQ Treasury pools the investments in two portfolios: USD Investment Pool EUR Investment Pool In addition, the UNHQ Treasury also manages the investments in CHF on behalf of the UNSMIS. 13

14 Review of IPSAS Compliance for Investment Accounting The Umoja solution is designed to reinforce compliance of International Public Sector Accounting Standards (IPSAS). Compliance in UN investment accounting is achieved through the following parameters: Fair Value through Surplus or Deficit Adherence to Trade Date over Settlement Date 14

15 Contributing Factors to Investment Decisions The determination of appropriate investments by Front Office is based on the following factors: Interest Rates Duration Terms Risks Counterparty limits UNHQ Treasury invests in the following types of financial instruments: Time Deposits Money Market Funds Fixed/Variable Income Bonds (US Treasuries, Bonds, Notes and Bills) The settlement process followed depends on the type of financial instrument being traded. 15

16 Processing Investments in Umoja Investment Officers run the trades using Bloomberg Aim. Ultimately, trade details will be interfaced from Bloomberg to Umoja. However, this interface is not being implemented for Cluster 1. Until the interface is in place, the trades will have to be manually entered into Umoja. After a trade is recorded in Umoja, the Investment Back Office will go through the trade settlement process, which includes confirming trade details with the counterparty, creating SWIFT confirmation/payment instructions and posting the trade. If the trade involves a new financial instrument, then the following steps need to be completed before the trade can be recorded in Umoja: 1. If the instrument is from a new issuer, then the issuer has to be set up in BP as an issuer by the Master Data team 2. After the BP is created, then the Security Master details have to be set up in Umoja by the Investment Back Office 16

17 Processing Investments in Umoja The first part of this module reviews the different types of investment-related transactions that are processed. Recording and Settling Investment Pool Deposit and Withdrawals Recording, Confirming and settling Money Market Investments Recording, Confirming and Settling Fixed Income Investments Process steps conducted in Umoja are highlighted in blue. The second part of this module walks through the execution of Umoja-based activities conducted by Investment Operations and the Front Office. 17

18 Processing Investment Pool Deposit/Withdrawals Cashier s Office Investment Operations Master Data Team Create deposit/withdrawal blotter and submit to Investment Operations Confirm that the appropriate Investment Account exists No Create the necessary fund/business area/cost center Yes Transaction is uploaded using JVs Transaction is reviewed for accuracy No Balance sufficiency is confirmed Yes Release SWIFT message Post transactions and create SWIFT messages 18

19 Processing Fixed Term Deposits Cashier s Office Investment Operations Investment Front Office Master Data Team Place investments Confirm counterparty exists in Umoja No Add bank in BP as a counterparty Yes Confirm investment with counterparty Record investment in Umoja Release SWIFT message Approve and post investment, create SWIFT message 19

20 Processing Fixed Income Investments Cashier s Office Investment Operations Investment Front Office Master Data Team Run trade in Bloomberg Confirm broker/issuer exists in Umoja No Add broker/issuer to Umoja as BP Yes Enter Security Master details in Umoja No Confirm if security exists in Umoja Release SWIFT message Yes Record trade in Umoja Authorize trade settlement, create SWIFT message Confirm trade with counterparty 20

21 Investment Activities Conducted in Umoja The remainder of this module takes a detailed look at the activities conducted in Umoja to process different types of investments. These activities include: Updating the Security Master Entering Investment Transactions Approving Investment Transactions Posting Derived Flows Accounting for Premiums and Discounts Modifying Investment Transactions Reversing Investment Transactions 21

22 Update the Security Master Security Master details must exist in Umoja before a fixed income transaction can be recorded. Security Master would be automatically loaded from Bloomberg. However, until the Bloomberg to Umoja interface is in place, the information would be maintained by the Investment Operations team. The steps to add the Security Master details are as follows: Launch the Security Master screen: Enter FWZZ in the Command field 1 Click the Enter icon The Display Class Product Type screen appears. 22

23 Update the Security Master 3 Click the Create icon This launches a new Create Class window. 3 Enter the following information: Enter the Security ID number in the ID number field 4 Enter the product type in the Prod. type field 5 Enter the short name of the security in the Shrt field 6 Enter the long name of the security in the Long field 7 Unless an exact replica of an existing security is to be created, select the Without reference radio button. 8 Click the Create icon

24 Update the Security Master The Display Class Product Type screen re-appears with the security s information populated across the following seven tabs: Search Terms Basic Data Conditions Exchanges Notice Regulatory Reporting User Data The information modified in each tab will now be reviewed. 24

25 Update the Security Master Fill in the required fields located in the Basic Data tab: 9 Issuer Currency 10 Issue Start Date 11 End of Term Date Click the Enter icon to validate the inputs before moving to the next tab 13 Click the Conditions tab 14 Note: The maturity date is determined by the Issue start and End of term dates. The same date should be used for both of these fields. 25

26 Update the Security Master The Conditions tab contains all the information related to coupon and final payment, such as interest rates, calculation method, interest payment frequency and schedule. Enter the following information: 15 Percent Frequency 16 Click the Enter icon to populate the Calculation Date and Due Date Note: Information should be modified in Int. (per-quoted) only. Final repayment should not be modified. 26

27 Update the Security Master Double-click the int. (per quotes) row to view the condition details 17 The Condition Details window appears. 18 Select the appropriate Int.calc.method (specifies the coupon calculation method) 18 Note: The due date listed must match the first payment date of the security (Eff. From date). If the dates do not match, modify the due date manually. 27

28 Update the Security Master The Exchanges tab specifies the initial price (normally price at first purchase) Click the Insert Row icon to open the Assign Exchanges window Select OTC_US and click the Save icon Highlight the OTC_US row and click the Market Prices button

29 Update the Security Master The Security Prices Change screen appears Click the Display <-> Change icon Enter the price date and rate and click the Save icon 22 29

30 Entering an Investment Transaction into Umoja The process followed to enter an investment transaction in Umoja differs depending on the type of financial instrument being traded. To demonstrate the process followed, a fixedinterest bond is entered in Umoja in the succeeding slides. The Treasury Front Office enters the trade information in Umoja via the following steps: Access the Create Financial Transaction screen and perform the following steps: 1 2 Enter FTR_create in the Command field Click the Enter icon

31 Entering an Investment Transaction into Umoja The Create Financial Transaction screen appears. The information entered in the Header section of this screen defines the product being traded. Product Types CPS Commercial Papers and Discounted Securities FIB - Fixed Interest Bonds VIB - Variable Interest Bonds FTD - Fixed Term Deposits The Transaction Types available: Product Types PUR - purchase (Bonds) SAL - sale (Bonds) INV - investments (FTD) 31

32 Entering an Investment Transaction into Umoja Enter the required transaction data in the following fields: 3 Company Code (always 1000) 4 Product Type 5 Transaction Type 6 Partner 7 Transaction Currency 8 Portfolio The ID number automatically populates. 9 Click the Enter icon 7 8 USD USDPOOL 32

33 Entering an Investment Transaction into Umoja The Create Security Transaction: Structure screen appears containing detailed information on the transaction being created across a series of tabs. Let s review each of the tabs and walk through the information entered in each of them while entering an investment transaction in Umoja. 33

34 Entering an Investment Transaction into Umoja The Structure tab contains information that defines the terms of the transaction, including transaction nominal and payment amounts, valuation class, payment/value/posting dates, market price and accrued interest. Enter the required information in the following fields in the Structure tab: Securities Acct Pos. Value Date Nominal Amount Check Incl. box After populating the data, click the Enter icon. 34

35 Entering an Investment Transaction into Umoja The Administration tab contains information that identifies the location from which the trading funds will be pulled, required authorizations and investment type. Enter the following information in the Administration tab: 15 Portfolio Fund Grant (always GMNR) After populating the data, click the Enter icon

36 Entering an Investment Transaction into Umoja The Other Flows tab contains information on interest, costs and charges that will be factored into the transaction total. Examples include Accrued interest and processing charges. 19 Confirm that the Accrued interest amount displayed in the other flows table is correct 19 36

37 Entering an Investment Transaction into Umoja The Payment details tab displays specific information on where payment funds are being pulled from and whether or not a payment will be submitted with the trade settlement. The House Bank Account from which the funds are being pulled is auto populated based on the information entered earlier in the process. Note: Today, payment is not submitted with each trade. The custodian handles payments for individual trades and is then paid in a bulk sum at the end of the day. If trades are paid individually, the Payment Req. must be checked. 37

38 Entering an Investment Transaction into Umoja The Cash flow tab lists all flows included in the transaction including the actual purchase and additional flows listed in the Other flows tab. Confirm that Umoja generated flows match the Bloomberg ticket 20 38

39 Entering an Investment Transaction into Umoja Click the Save icon after all the tabs have been reviewed and completed. The Create Position Indicator window appears 21 Click the Create Automatically button 22 The investment transaction is successfully entered into Umoja

40 Approving an Investment Transaction in Umoja After the investment transaction is created, it goes to the Investment Operations group for confirmation and settlement. The steps to approve and post the investment transaction in Umoja are as follows: 1 2 Enter FTR_EDIT in the Command field Click the Enter icon The Edit Financial Transaction screen appears next

41 Approving an Investment Transaction in Umoja Enter 1000 in the Company Code field Enter the correct transaction number in the Transaction field Click the Settle button. Verify the accuracy of transaction by reviewing each of the tabs on the screen Click the Save icon

42 Posting the Derived Flows in Umoja Derived flows are created when the investment transaction is entered into Umoja, but these flows cannot be posted until the transaction has been approved. After the transaction has been approved, the derived flows are posted using the T-code TBB1. The steps to post the derived flows are as follows: 1 2 Enter TBB1 in the Command field Click the Enter icon

43 Posting the Derived Flows in Umoja The Treasury: Post Flows screen appears. In the General selections section, enter details in the following fields: Company Code Transaction Up to and including Due Date Select the Test Run check box Click the Execute icon 5 3 Note: A test run should be conducted first to make sure that the correct postings are made. 4 43

44 Posting the Derived Flows in Umoja The Posting Log: Posted Business Transactions screen appears displaying the accounting flows for the transaction as they will appear in the General Ledger (G/L). After confirming that the information listed is correct, the flows must be posted (remember, this posting was run in test mode) Click the Back icon Clear the Test Mode checkbox Click the Execute icon 44

45 Account for all Premiums and Discounts Finally, all premiums and/or discounts applicable to the approved transaction must be accounted for. This transaction should also be run in test mode, first to review and then to confirm the information generated. The steps to post account premium/discount are as follows: 1 2 Enter TPM18 in the Command field Click the Enter icon The Fix and Post Derived Business Transactions screen appears next

46 Account for all Premiums and Discounts Select the Securities check box Enter details in the following fields: Company Code ID Number Securities Account TRL Date (must match posting date) Click the Execute icon

47 Account for all Premiums and Discounts A table containing the positions with derived business transactions to be fixed appears on the screen. 6 7 Confirm that the information is correct Click the Fix button to post the flows

48 Account for all Premiums and Discounts The premium/discount flows are posted. 48

49 Modify or Reverse a Transaction Modifications/reversals of trade should be initiated by the person/group that recorded the trade. It is possible to modify a trade even after security flows have been posted so the need to reverse a trade should be very rare. After a transaction is modified or reversed, the accompanying flows must be reversed before re-posting the flows again. Investment Operations will be responsible for reversing the appropriate flows, depending on what stage the transaction is in. Example: If the trades do not match, Investment Operations will inform Front Office who will take the required action by modifying or reversing the trade. Modify a Transaction Resolve Differences with Counterparty Correct Trade in Trading Platform Modify Transaction in Umoja Reverse a Transaction If Reversal is Required, Initiate Reversal Confirm Reversal Reverse Trade Clear in Trading all open items Platform Reconcile Trading Platform Position with Umoja Note: If a transaction needs to be modified, but it has already been approved and its flows have been posted, then the transaction must first be reversed before it can be modified. 49

50 Modify a Transaction The process followed to modify an investment transaction varies, depending on where in the entry process of the transactions is. If The investment transaction is in contract state The investment transaction has settled The investment transaction has settled and the derived flows have been posted (TBB1 and TPM18) Accruals (TPM44) and amortization (TPM1) postings have been made then The transaction can be modified Reverse the transaction to contract state Reverse the transaction to contract state and run TPM10 to reverse the postings which took place in TBB1 and TPM18 Delete the postings by running TPM45 and TPM2 respectively, Reverse the transaction to contract state and run TPM10 to reverse the postings which took place in TBB1 and TPM18 Note: To delete the transaction from Umoja entirely, reverse the transaction from contract state. 50

51 Reverse a Transaction Let s now discuss how to reverse a transaction whose derived flows have not been posted. Reversal of transactions should be initiated by the Front Office. The steps to reverse a transaction are as follows: 1 2 Enter FTR_EDIT in the Command field Click the Enter icon The Edit Financial Transaction screen appears next

52 Reverse a Transaction Enter 1000 in the Company Code field Enter the correct transaction number in the Transaction field Click the Reverse button

53 Reverse a Transaction The steps to reverse a transaction whose derived flows have been posted are as follows: 1 2 Enter FTR_EDIT into the Command field Click the Enter icon The Edit Financial Transaction screen appears next

54 Reverse a Transaction Enter 1000 in the Company Code field Enter the correct transaction number in the Transaction field Click the Reverse button Select the appropriate reversal reason and save the transaction in the subsequent window

55 Reverse a Transaction If the derived flows have already been posted (TBB1 and TPM18) then they should be reversed by the Investment Back Office. The steps to access the Fix, Post or Reverse Transactions screen and reverse a transaction are as follows: 1 Enter TPM10 in the Command field Click the Enter icon

56 Reverse a Transaction The Fix, Post or Reverse Transactions screen appears. Note: If a transaction is reversed or modified after the input date, that is, if TPM1 and TPM44 have already run, then those postings have to be reversed using TPM2 and TPM45 respectively. The reversals have to be run one day at a time. 56

57 Reverse a Transaction Valuation and Accruals Accruals and amortization will need to be reversed separately for each day since the settlement date of the transaction. Example: If today is June 15 th and we want to reverse a transaction that was settled on June 12 th, accruals and amortization must be reversed separately for the 15 th, 14 th, 13 th and 12th respectively. The steps to reverse a valuation are as follows: 1 2 Enter TPM2 in the Command field Click the Enter icon

58 Reverse Valuation The Reverse Valuation screen appears. First, confirm whether the Key Date for Valuation is correct. Select the appropriate Reason for Reversal Select the Test Run checkbox so that data can be verified before actual execution Click the Execute icon

59 Reverse Accrual/Deferral of Expenses and Revenues The steps to reverse accrual/deferral of expenses and revenues are as follows: 1 2 Enter TPM45 in the Command field Click the Enter icon

60 Reverse Accrual/Deferral of Expenses and Revenues Confirm that the Accrual/Deferral Key Date is accurate 3 Select the appropriate Reason for Reversal 4 Select the Test Run checkbox so that data can be verified before actual execution 5 Click the Execute icon

61 Modify a Transaction The steps to modify a transaction in Umoja are as follows: 1 2 Enter FTR_EDIT in the Command field Click the Enter icon The Edit Financial Transaction screen appears next

62 Modify a Transaction Enter 1000 in the Company Code field Enter the correct transaction number in the Transaction field Click the Change button The Change [investment type]: Structure screen appears next. 62

63 Modify a Transaction 6 7 Modify the data that needs to be updated Click the Save icon 6 63

64 Learning Checkpoint 1 An investment transaction can be modified in which of the following situation? Select the correct option. A. If the investment transaction is in contract state B. If the investment transaction has settled C. If the investment transaction has settled and the derived flows have been posted D. If the accruals (TPM44) and amortization (TPM1) postings have been made 64

65 Learning Checkpoint 1 An investment transaction can be modified in which of the following situation? Select the correct option. A. If the investment transaction is in contract state B. If the investment transaction has settled C. If the investment transaction has settled and the derived flows have been posted D. If the accruals (TPM44) and amortization (TPM1) postings have been made Option A is the correct answer. An investment transaction can be modified if the transaction is in contract state. 65

66 Learning Checkpoint 2 Which of the following T-codes is used to approve an investment transaction in Umoja? Select the correct option. A. TPM_CREATE B. TPM_EDIT C. FTR_CREATE D. FTR_EDIT E. TPM1 66

67 Learning Checkpoint 2 Which of the following T-codes is used to approve an investment transaction in Umoja? Select the correct option. A. TPM_CREATE B. TPM_EDIT C. FTR_CREATE D. FTR_EDIT E. TPM1 Option D is the correct answer. The T-code FTR_EDIT is used to access the relevant screen to approve an already created investment transaction in Umoja. 67

68 Module 1 Summary The key points covered in this module are listed below: Front Office determination of appropriate investments is based on specific factors such as interest rates, duration, terms, risks and counterparty limits Securities are setup in the Umoja Security Master prior to the execution of investment transactions Investment transactions are entered in Umoja via the T-code FTR_CREATE and approved, modified and reversed via the T-code FTR_EDIT Derived flows, premiums and discounts must be reversed individually for transaction modifications and reversals 68

69 Agenda Course Introduction Module 1: Transaction Execution Investments Module 2: Transaction Execution Foreign Exchange Module 3: Investment Accounting Daily Process Module 4: Investment Accounting Period-End Process Course Summary Course Assessment Course Survey 69

70 Module 2 Objectives After completing this module, you will be able to: Review FOREX Exposure Perform Spot transactions Process Foreign Exchange (FX) investment decisions 70

71 Key Terminology Key Term Functional Currency FX FX Exposures Spot Transactions Forward contract Description It is an accounting concept relating to the currency in which the majority of transactions are performed. These are transactions involving purchase and sale of other currencies. It is the risk of loss stemming from exposure to adverse foreign exchange rate movements. These are transactions to buy or sell a particular currency on the spot date. In the FX market, spot transactions normally settle two business days after the trade date. It is a financial contract between two parties to buy or sell an asset at a specified price at a future date after the spot date. 71

72 Key Terminology Key Term Option contract Online Trading Platform Description It is a financial contract that provides the buyer the right, but not the obligation, to engage in a specific transaction, while the seller incurs the obligation to fulfill the transaction if so requested by the buyer. It is a software interface, which allows legally binding financial transaction to be performed on terminals or through desktop software, on closed networks or over secure Internet connections. 72

73 FX Transaction Execution Process: High-Level Process The FX Transaction Execution process comprises of three key steps: Review FX Exposure and Requirement Perform Required FX Transactions Confirm and Settle Transactions 73

74 Review FX Exposure Review FX Exposure and Requirement Perform Required FX Transactions Confirm and Settle Transactions The process begins with the review of FX requirements of missions and OAHs and any FX exposures to determine which currencies need to be purchased or sold. As Umoja will allow for aggregation of FX requirements, it will lead to better forecasting of FX requirements and significant savings in transaction costs. Note: The investment portfolio will be marked-to-market twice a year (June and December). This will be done at the portfolio level (UNHQ Treasury), with allocations to portfolio participants. 74

75 Perform Required FX Transactions Review FX Exposure and Requirement Perform Required FX Transactions Confirm and Settle Transactions Once the FX transaction requirements have been determined, the Investment Officer may perform the FX trade in the spot or forward market, depending on the requirement. Both spot and forward FX transactions are performed in FXAll, the FX trading platform used by UNHQ Treasury. Once the FX trade is performed, the trade details are re-entered in Umoja for settlement and accounting purposes. 75

76 Confirm & Settle Transactions Review FX Exposure and Requirement Perform Required FX Transactions Confirm and Settle Transactions After the transaction has been entered in Umoja by the trader, the Settlement Officer must perform the following steps to complete the trade: 1. Process the transaction and calculate the required cash flows 2. Confirm the trade with counterparty. If there are discrepancy then send the trade back to the investment officer 3. Review the standard settlement instruction for the counterparty and generate SWIFT message for payment to the counterparty 4. Post the trade, which updates the liquidity forecast and related cash flow information 76

77 Learning Checkpoint 1 Which of the following types of transactions are performed in FXAll? Select the correct option. A. Spot transactions B. Forward Transactions C. All of the above D. None of the above 77

78 Learning Checkpoint 1 Which of the following types of transactions are performed in FXAll? Select the correct option. A. Spot transactions B. Forward Transactions C. All of the above D. None of the above Option C is the correct answer. Both spot and forward transactions are performed in FXAll. 78

79 Module 2 Summary The key points covered in this module are listed below: The FX Transaction Execution process involves reviewing FX requirements and exposure, executing spot and forward transactions and confirming and settling the trade While FX trades are performed in FXAll, they are also recorded in Umoja for accounting and settlement purposes. The settlement process brings the FX trade to closure by making the required payment to the FX counterparty Investment officers may meet FX requirements by trading in the spot or forwards market 79

80 Agenda Course Introduction Module 1: Transaction Execution Investments Module 2: Transaction Execution Foreign Exchange Module 3: Investment Accounting Daily Process Module 4: Investment Accounting Period-End Process Course Summary Course Assessment Course Survey 80

81 Module 3 Objectives After completing this module, you will be able to: Generate, review and post accounting entries for cash flows related to maturities, redemptions, coupon and other interest income received Generate, review and post accounting entries for accrued income and amortization of premiums/discounts Update reference rates for Variable Rate Bonds (floating rate securities) Distribute investment income and expense to the investment pool participants 81

82 Process Interest Accruals/Deferrals For interest accruals and deferrals to be calculated, all incoming coupons must be recognized and posted in Umoja. Incoming coupons are recognized using a two-step process: Recognize Receipt of Coupon Post Incoming Coupons Steps performed in Umoja ECC This process is reviewed in detail over the next four slides. 82

83 Process Interest Accruals/Deferrals Recognize Receipt of Coupon Post Incoming Coupons The steps to recognize the receipt of a coupon are as follows: 1 Enter FWZE in the Command field 2 Click the Enter icon. The Manual Debit Position Screen is displayed Populate the appropriate details in the following fields: 3 Company Code ID Number Securities Account Settlement Currency 4 Press the Enter key on the keyboard

84 Process Interest Accruals/Deferrals Recognize Receipt of Coupon Post Incoming Coupons The Manual Debit Positions are displayed. 4 Review the data generated and modify as needed 5 Click the Post business transaction button 5 84

85 Process Interest Accruals/Deferrals Recognize Receipt of Coupon Post Incoming Coupons Now that the coupon received has been recognized in Umoja, it can be posted. The steps to post incoming coupons are as follows: 1 Enter FWSO in the Command field 2 Click the Enter icon 2 1 The Securities: Automatic Debit Position screen is displayed. 85

86 Process Interest Accruals/Deferrals Recognize Receipt of Coupon Post Incoming Coupons 3 Populate the appropriate details in the following fields: Company Code Product Type ID Number* Securities Account* Up to and including due date* Document Date* 4 Click the Execute icon Note: Fields marked with a * are automatically populated based on the information entered when the coupon was recognized. 86

87 Investment Accounting: Daily Process For accounting purposes, the following four activities need to be performed daily: Account for Interest Accrual Account for Amortization of Premium and Discounts Update Reference Rates for Variable Rate Bonds Distribute Investment Income and Expense Activities 1 and 2 are run automatically as part of a nightly batch job. Activities 3 and 4 are conducted manually. These daily processes are run for all three portfolios, but can be run for individual securities or portfolio if needed. In this module, we review the process followed to recognize the receipt and posting of a coupon. We then walk through the process followed to complete each of the four daily activities in Umoja. 87

88 Account for Interest Accrual Let s start by discussing activity 1. Account for Interest Accrual You can account for interest accrual by using the T-code TPM44. Note: The detailed steps are discussed in the subsequent slides. 88

89 Process Planned Interest, Dividend & Coupon Flows The steps to account for interest accrual are as follows: 1 Enter TPM44 in the Command field 2 Click the Enter icon. The Execute Accrual/Deferral of Expenses and Revenues screen is displayed 3 Populate appropriate details in the following fields: Company Code ID Number Securities Account Accrual/Deferral Key Date (must match purchase date) Select the Test Run check box 4 5 Click the Execute icon Note: A test run should be performed first to confirm that the postings are correct. 89

90 Process Planned Interest, Dividend & Coupon Flows The Execute Accrual/Deferral of Expenses and Revenues report is displayed. Review the information for accuracy. Next, execute the earlier steps again with the Test Run check box cleared. 90

91 Account for Amortization of Premium and Discounts Account for Amortization of Premium and Discounts You can account for amortization of premium and discounts by using the T-code TPM1. Note: The detailed steps are discussed in the subsequent slides. 91

92 Process Amortization of Premiums & Accounts The T-code TPM1 is run daily to process amortization of premiums and accounts. It also updates money market changes and FOREX changes. The steps to account for amortization of premium and discounts are as follows: 1 Enter TPM1 in the Command field Click the Enter 2 icon

93 Process Amortization of Premiums & Accounts The Execute Valuation screen is displayed. 4 3 Enter appropriate data in the Key Date for Valuation field 4 Click the Execute icon 3 Note: A test run should be conducted first to confirm that the information is correct. 93

94 Process Amortization of Premiums & Accounts The Valuation Log showing the daily amortization is displayed. 94

95 Update Reference Rates for Variable Rate Bonds Update Reference Rates for Variable Rate Bonds Update reference rates for Variable Rate Bonds (floating rate securities). The rates must be updated on the rate fix date. Until the Umoja Bloomberg interface is in place, this step will be done manually via OB83. Note: The detailed steps are discussed in the subsequent slides. 95

96 Process Interest Rate fixing for Floating Rate Instruments The steps to record reference rates for Variable Rate Bonds (VRBs) are as follows: 1 Enter OB83 in the Command field Click the Enter icon. The Change View Reference Interest Rate Values Overview screen is displayed

97 Process Interest Rate fixing for Floating Rate Instruments The Change View Reference Interest Rate Values Overview screen appears. 3 The rates should be entered on rate fixing dates, which are normally two days before the value date. If there is a market data feed to Umoja, then the rates would be updated automatically as needed. 3 Click the New Entries button 97

98 Process Interest Rate fixing for Floating Rate Instruments The New Entries: Overview of Added Entries screen appears. 4 Populate appropriate details in the following fields: Reference Description Valid from (fixing date) Interest rate 5 Click the Save icon 4 98

99 Distribute Investment Income and Expense Use the T-code ADB to distribute investment income and expense to the investment pool participants. Distribute Investment Income and Expense Note: The detailed steps are discussed in the subsequent slides. 99

100 Process Net Revenue Allocation to Investment Fund Participants FMADB_post is used to distribute income and expenses to the investment pool participants. The distribution can be run daily. However, initially it will be run once a month but run thirty times to capture daily balances. As with all Umoja processes, ADB can be run in test mode prior to posting the distribution. If any revenue or expense posting document is reversed then ADB_POST should be re-run for that date to account for the change. Instead of accruing interest daily and capitalizing every six months, interest will be distributed on a daily basis based on the daily balance. Let s walk through this process in Umoja. 100

101 Process Net Revenue Allocation to Investment Fund Participants The steps to distribute income and expenses to the investment pool participants are as follows: 1 Enter FMADB_POST in the Command field 2 Click the Enter icon. The Enter ADB ID pop-up box is displayed 3 Enter appropriate information in the ADB Rule field and press the Enter key on the keyboard

102 Process Net Revenue Allocation to Investment Fund Participants The Weighted Balance Distribution screen is displayed. The ADB Rule is populated based on the selection in the ADB pop-up box. 4 Enter appropriate data in the From and To fields to define the Calculation Period. Note that calculation periods should be run one day at a time, not over extended duration 5 Select the Call account derivation check box 6 Select the Test Run checkbox 7 Click the Execute icon Investment updates to G/L occur automatically as other T-codes are run. 102

103 Investment Portfolio Reconciliations The asset reconciliation process will be automated in Umoja. MT-535 from the custodian would be uploaded into Umoja to compare the asset position in Umoja to that recognized by the custodian. After the comparison is run, a status will be sent to the Back Office staff nightly. If there are any failures, action must be taken immediately. Similarly, when Bloomberg to Umoja interface is in place, positions in the two systems will also be reconciled. 103

104 Module 3 Summary The key points covered in this module are listed below: Generate, review and post accounting entries for cash flows related to maturities, redemptions, coupon and other interest income received Generate, review and post accounting entries for accrued income and amortization of premiums/discounts Update reference rates for Variable Rate Bonds (floating rate securities) Distribute investment income and expense to the investment pool participants 104

105 Agenda Course Introduction Module 1: Transaction Execution Investments Module 2: Transaction Execution Foreign Exchange Module 3: Investment Accounting Daily Process Module 4: Investment Accounting Period-End Process Course Summary Course Assessment Course Survey 105

106 Module 4 Objectives After completing this course, you will be able to: Run the Investment Accounting Period-End process 106

107 Investment Accounting: Period-End Process The Investment Accounting Period-End process comprises two key activities: 1. Load market prices into Umoja 2. Confirm that all daily processes have been successfully run Let s review the process followed to load market prices into Umoja. 107

108 Investment Accounting: Period-End Process The steps to upload market prices are as follows: 1 Enter TBEX in the Command field 2 Click the Enter icon 3 Click the Spreadsheet tab 4 Click the new box 5 Copy and paste the rates as below 108

109 Module 4 Summary The key points covered in this module are listed below: The Investment Accounting Period-End process comprises two key activities: loading market prices into Umoja and confirming that all daily processes have been successfully run 109

110 Agenda Course Introduction Module 1: Transaction Execution Investments Module 2: Transaction Execution Foreign Exchange Module 3: Investment Accounting Daily Process Module 4: Investment Accounting Period-End Process Course Summary Course Assessment Course Survey 110

111 Course Summary Now that you have completed the course, you can: Explain the roles and responsibilities involved in the Investment Accounting processes Review FOREX exposure and perform spot transactions Process foreign exchange investment decisions Update the Umoja Security Master Enter and approve investment transactions into Umoja and post derived flows Account for premiums and discounts Modify investment transactions Generate, review and post accounting entries for accrued income and amortization of premiums/discounts Update reference rates for Variable Rate Bonds (floating rate securities) Distribute investment income and expense to the investment pool participants 111

112 Agenda Course Introduction Module 1: Transaction Execution Investments Module 2: Transaction Execution Foreign Exchange Module 3: Investment Accounting Daily Process Module 4: Investment Accounting Period-End Process Course Summary Course Assessment Course Survey 112

113 Course Assessment Now that you have completed all the modules in this course, you can test your knowledge by completing the Course Assessment. To receive credit for completing this course, you must pass this assessment with a minimum score of 90%. To complete the assessment you must return to the Learning Management System: 1. Log into Inspira 2. Navigate to Main Menu -> Self-Service -> Learning -> My Learning 3. Search for the name of the course under the My Learning Activities section 4. Click the Start link of the course assessment 5. Click the Submit button once you have completed the assessment 113

114 Agenda Course Introduction Module 1: Transaction Execution Investments Module 2: Transaction Execution Foreign Exchange Module 3: Investment Accounting Daily Process Module 4: Investment Accounting Period-End Process Course Summary Course Assessment Course Survey 114

115 Course Survey Your feedback is important to the continuous improvement of our training program. Please complete the evaluation for this course using the following steps: 1. Log into Inspira 2. Navigate to Main Menu -> Self-Service -> Learning -> My Learning 3. Search for the name of the course under the My Learning Activities section 4. Click the Start link of the course survey 5. Click the Submit button once you have completed the course survey 115

116 Congratulations! You have successfully completed the Umoja Investment Accounting course. 116