Iron Out the Wrinkles in Your Rate Calculations

  • by Amber Christian, Founder, Ace LLC
  • October 29, 2015
Learn how to smooth the process of creating rate calculation formulas using SAP ERP Central Component (ECC) enhancement package 6.
Learning Objectives

In this article you will learn how to:

  • Create formulas for complex rate calculations
  • Make new formulas visible within Treasury and Risk Management
  • Update variable interest rates with the automatic interest rate adjustment transaction
Key Concept

Variable rates are any type of rate that changes on a predefined schedule. Variable rates can be either market defined rates, such as Intercontinental Exchange London Interbank Offered Rate (LIBOR) rates, or internally defined rates.

Formulas are used for complex calculation of rates. They are particularly helpful for treasury transactions that have multiple floating rates, such as investments in Brazil. Additionally, they can be used to create complex rates for any internal calculations. Functionality for rate calculations has existed in SAP Treasury and Risk Management since release 4.7 of SAP Corporate Finance Management (CFM). The scenario that I write about is based on a system using SAP ERP Central Component (ECC) enhancement package 6. I use a scenario based on a formula that has an Intercontinental Exchange London Interbank Offered Rate (LIBOR) as well as a manual internally created rate.

The standard system setup for variable rates allows for the selection of one rate plus or minus a number. Formulas are used to allow for calculation of a combination of values needed to determine a rate. The formulas screen is available by opening an interest rate instrument by executing transaction code FTR_EDIT. Alternatively, select Accounting > Financial Supply Chain Management > Treasury and Risk Management > Transaction Manager > Money Market > Back Office > Edit Financial Transaction (Figure 1). Select the detail view for interest conditions by clicking the detail view interest conditions  icon.


Figure 1
Interest structure from the Edit Financial Transaction screen

To select an existing formula, click the Formula button (Figure 2).


Figure 2
Condition details interest rate instrument

The existing standard formulas appear in the screen shown in Figure 3.


Figure 3
Standard formulas

Amber Christian

Amber Christian is the founder of Ace LLC. She has worked on SAP solutions for over 13 years, with the last seven years as a consultant. She has implemented Accounts Receivables, Accounts Payable, Treasury, and Cash Management solutions for North America, South America, Europe, and Asia in industries such as chemical, transportation, professional services, mining, and manufacturing. She is a frequent blogger and conference presenter on a variety of SAP finance and treasury topics.

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