SDA Modeling Recommendations 2016

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PUBLIC
2018-06-28
Smart Accounting
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Content
1 Smart Accounting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.1 Accounting Process Model and Book Value Components. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Financial Instruments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Insurance Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
1.2 Central GAAP and Delta GAAP Approach. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
1.3 Portfolios. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
1.4 Subledger Coding Block. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
Master Data Dimensions and Their Derived Subledger Dimensions. . . . . . . . . . . . . . . . . . . . . . .33
Flow Data Dimensions and Their Derived Subledger Dimensions. . . . . . . . . . . . . . . . . . . . . . . . 35
Analytical Control Parameters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Calculation Method Dimensions and Their Derived Subledger Dimensions. . . . . . . . . . . . . . . . . 41
Accounting Dimensions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
1.5 Charts of Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Subledger Chart of Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
G/L Chart of Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
1.6 Processes for Financial Instruments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Results Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Day Processing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Period-End Processing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Year-End Processing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154
Period-Opening Processing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157
Preparatory Processing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161
Tools. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162
1.7 Processes for Insurance Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166
Results Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169
Day Processing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182
Period-End Processing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197
Year-End Processing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .232
Period-Opening Processing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .234
Preparatory Processing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 238
Tools. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 239
1.8 Suspense Accounting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243
1.9 General Ledger Connection. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 246
1.10 Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 248
Determining Fair Value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 248
Maturity Grouping. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 249
Smart Accounting
2 PUBLIC Content
1.11 Additional Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250
Going Live with Smart Accounting for Financial Instruments. . . . . . . . . . . . . . . . . . . . . . . . . . 250
Value Added Tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 252
Processing SDL Products Mapped as Structured Products. . . . . . . . . . . . . . . . . . . . . . . . . . . .257
Purchased or Originated Credit Impaired (POCI) Financial Assets. . . . . . . . . . . . . . . . . . . . . . .259
Customer Enhancements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 259
Change of Legal Entity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 261
Smart Accounting
Content PUBLIC 3
1 Smart Accounting
Smart Accounting is a subledger for financial instruments and insurance contracts that integrates seamlessly
into the accounting documentation chain. It receives operational flow transactions, documents these at single
contract level and supports the valuation and documentation for multiple accounting standards. The positions
on the subledger accounts are transferred to the general ledger in an aggregated view at G/L account level. You
can use standard interfaces to make all the information from the subledger required for closing accounting
periods available for reporting purposes.
The following figure illustrates this scenario and contains links to more information:
● Processes for Financial Instruments [page 47]

● Processes for Insurance Contracts [page 166]
Smart Accounting
4 PUBLIC Smart Accounting
● General Ledger Connection [page 246]
●
●
Smart Accounting has a modular structure and is based on the information-producing processes of operational
position-managing systems and the documentation requirements of various accounting principles.
Smart Accounting is based on a logical accounting process model. This prescribes the functional
responsibilities of the individual process steps. The processes are based on the sequence in which the
operational systems provide information, and the sequence in which the accounting information and
documentation are required.
Smart Accounting for Financial Instruments and Insurance Contracts

Smart Accounting for Financial Instruments is used for the accounting of business transactions: Payments and
settlements are documented in the form of posting documents.
Smart Accounting for Insurance Contracts also involves the accounting of business transactions. In addition,
the system documents expected cash flows (BECF).
Processes in Smart Accounting
Smart Accounting can be subdivided into the following processes:
● Day Processing
You use day processing to register and document operational flow transactions and master data changes.
You can run this process multiple times in the course of a day and so stagger the processing of data
volumes. Once day processing has been completed, all the prerequisites are fulfilled to reconcile
operational feeder systems and the subledger.
● End-of-Day Processing
End-of-day processing follows day processing and comprises the following subprocesses:
During end-of-day processing (business transaction) the system generates business transaction-based
postings. These are based on the business transactions registered for a posting date.
During end-of-day processing (contract) the system updates contracts or securities positions in which
master data has been changed.
In addition, currency positions are updated due to flow transactions registered during the day in foreign
currency.
● Period-End Processing
Before you can execute period-end processing, you need to have completed end-of-day processing. You
use period-end processing to update accounting positions based on key dates and to document changes.
This means all the prerequisites are fulfilled for closing a reporting period on a key date. You can define the
period that period-end processing refers to according to your requirements. The defined period can be a
day, a month or a quarter, and includes special periods.
Usually processing is based on individual contracts or securities positions. If you need to process cross-
contract positions, process steps are available that update these types of accounting balances.
● Year-End Processing
After period-end processing for the last regular period of the fiscal year, you execute year-end processing.
You use year-end processing to close and open fiscal years by creating a year-opening balance. You can
make corrections within special periods. The system creates year opening positions both for single
contracts or securities positions and for cross-contract positions.
Smart Accounting
Smart Accounting PUBLIC 5
● Period-Opening Processing
You use period-opening processing to reset documents that were created during period-end processing or
end-of-day processing (contract) on the previous day.
Related Information
Central GAAP and Delta GAAP Approach [page 25]

Subledger Coding Block [page 31]
Charts of Accounts [page 43]
Processes for Financial Instruments [page 47]
Processes for Insurance Contracts [page 166]
1.1 Accounting Process Model and Book Value Components
Smart Accounting is based on an accounting process model that comprises individual process steps, each of
which builds on the previous step. Each process step has a clearly defined area of responsibility, which is
reflected in the book value components in each case.
The process model is defined by generic dimensions that bear no reference to an accounting principle.
Therefore, the model is intended to be universally valid.
● Accounting Process Model and Book Value Components for Financial Instruments [page 6]
● Accounting Process Model and Book Value Components for Insurance Contracts [page 21]
1.1.1 Financial Instruments
Dimensions of the Accounting Process Model
The process model is defined based on generic dimensions that can be used to logically structure the book
value components and related process steps.
● Operational vs. analytical

Operational flow transactions and master data changes originate in the operational source system. This
information therefore applies across all accounting principles.
Analytical position changes stem from an accounting perspective that is dependent on an accounting
principle. The system distinguishes between operational and analytical process steps and book value
components.
● Dependency on the value date
The value date for a given posting specifies the date on which the posting amount becomes effective.
Correction postings are therefore posted with a value date in the past to ensure the correct value date is
Smart Accounting
set for account settlement. This means that all posting documents that change long-term receivables,
accruals and deferrals are value-date-dependent.
● Event-driven vs. deterministic vs. stochastic
This dimension describes how operational flow transactions and analytical value adjustments originate.
This can be event-driven, deterministic or stochastic.
Event-driven means that a flow transaction or change in value is primarily caused by a business event (for
example, a deposit to or disbursement from a checking account).
Deterministic means that the documented value changes are foreseeable due to the timeframe involved.
For example, when a contract is created it is already known how an accrual or deferral will develop.
Stochastic describes value changes that are unforeseeable, such as changes in market price.
Book value components
The table below displays the most significant book value components in Smart Accounting with their
respective dependencies on the process model dimensions.
Book Value Component Dimension: Operational vs. Dimension: Dependency on Dimension: Event-Driven,
Analytical the Value Date Deterministic or Stochastic
Unpaid Principal Balance Operational Dependent on the value date Event-driven

(UPB)
Deferrals
Accruals Operational Dependent on the value date Deterministic
Deferrals Analytical Dependent on the value date Deterministic
Write-Down (Nominal) Analytical Not dependent on the value Event-driven

date
Valuation Remnants Analytical Not dependent on the value Deterministic

date
Credit Risk Adjustment Analytical Not dependent on the value Stochastic

date
Interest Rate Risk Adjust Analytical Not dependent on the value Stochastic
ment date
LCM Adjustment Analytical Not dependent on the value Stochastic

date
Fair Value Adjustment Analytical Not dependent on the value Stochastic

date
Write-Down Adjustment Analytical Not dependent on the value Stochastic

date
In addition to the listed book value components that it manages as subledger accounts in Smart Accounting,
the system also manages further subledger accounts at contract level that are not part of a book value.
Examples of this are P&L accounts (income and expenses) or short-term receivables. In addition, the system
manages custom subledger accounts at the granularity level of financial statement entities. Examples of this
are in-transit accounts, foreign currency positions and equivalent value positions.
Smart Accounting
Assignment of Book Value Components to Process Steps
You can assign the book value components to various process steps according to the process model. The
graphic below shows this relationship in simplified form; only the most important book value components are
displayed. (Special cases that require additional book value components are not taken into account here.)
For more information and a detailed overview of the process model, see Processes for Financial Instruments
[page 47].
 Note
More information is linked in the interactive graphic below: Hover over an arrow for a description. Click the
arrow for the documentation for relevant process step.
● Register [page 63]

● Accrue [page 97]
● Defer [page 99]
● Write Down [page 114]
● Release [page 115]
● Value TC [page 125]
Process Step Book Value Component
Register Unpaid Principal Balance (UPB)
Deferrals
Accrue Accruals
Smart Accounting
Defer Deferrals
Write Down Write-Down (Nominal)
Release Valuation Remnants
Value TC Credit Risk Adjustment
Interest Rate Risk Adjustment
LCM Adjustment
Fair Value Adjustment
Write-Down Adjustment
Related Information

Register [page 63]
Accrue [page 97]
Defer [page 99]
Write Down [page 114]
Release [page 115]
Value TC [page 125]
1.1.1.1 Product Scope
1.1.1.1.1 Impairment
Product Segment Impairment Own Credit Risk POCI
Cash on hand
Cash balances at Expected cash One-year expected Lifetime expected

central banks flow loss loss
Imported target Customer-specific impairment calcula

value tion
Deposits (credit Expected cash One-year expected Lifetime expected

institutions) flow loss loss

value tion
Smart Accounting
Product Segment Impairment Own Credit Risk POCI
Checking ac Expected cash One-year expected Lifetime expected

counts flow loss loss

value tion
Savings accounts
Term deposits
Derivatives (ETD) Expected cash One-year expected Lifetime expected

flow loss loss

value tion
Derivatives (OTC) Expected cash One-year expected Lifetime expected

flow loss loss

value tion
Equity instru Expected cash One-year expected Lifetime expected

ments flow loss loss

value tion
Debt securities Expected cash One-year expected Lifetime expected

flow loss loss

value tion
Debt securities Imported target

(issued) value
Loans and advan Expected cash One-year expected Lifetime expected Expected cash
ces flow loss loss flow

value tion
Financial guaran Expected cash One-year expected Lifetime expected

tees flow loss loss

value tion
Master agree Expected cash One-year expected Lifetime expected

ments flow loss loss

value tion
Smart Accounting
1.1.1.1.2 Hedge Accounting
Product Segment Hedge Accounting
Cash on hand
Cash balances at central banks
Deposits (credit institutions) Imported target value
Checking accounts Imported target value
Savings accounts Imported target value
Term deposits Imported target value
Derivatives (ETD) Imported target value
Derivatives (OTC) Imported target value
Equity instruments Imported target value
Debt securities Imported target value
Debt securities (issued) Imported target value
Loans and advances Imported target value
Financial guarantees Imported target value
Master agreements Imported target value
1.1.1.1.3 Multi-Currency Accounting
Product Segment Multi-Currency Accounting
Cash on hand X
Cash balances at central banks X
Deposits (credit institutions) X
Checking accounts X
Savings accounts X
Term deposits X
Derivatives (ETD) X
Derivatives (OTC) X
Equity instruments X
Debt securities X
Debt securities (issued) X
Loans and advances X
Financial guarantees X
Smart Accounting
Product Segment Multi-Currency Accounting
Master agreements X
1.1.1.1.4 Lot Accounting
Product Segment Lot Accounting
Cash on hand
Cash balances at
central banks
Deposits (credit
institutions)
Checking ac
counts
Savings accounts
Term deposits
Derivatives (ETD) FIFO LIFO HIFO LOFO
Maximum Profit Minimum Profit Import
Derivatives (OTC)
Equity instru FIFO LIFO HIFO LOFO

ments
Debt securities FIFO LIFO HIFO LOFO
Debt securities FIFO LIFO HIFO LOFO

(issued
Loans and advan

ces
Financial guaran
tees
Master agree
ments
1.1.1.1.5 Manual Adjustment
Product Segment Manual Adjustment
Cash on hand X
Smart Accounting
Product Segment Manual Adjustment
Checking accounts X
Savings accounts X
Term deposits X
Derivatives (ETD) X
Derivatives (OTC) X
Equity instruments X
Debt securities X
Debt securities (issued) X
Master agreements X
1.1.1.1.6 Disclosure
Product Segment Disclosure
Cash on hand Maturity grouping
Cash balances at central banks Fair value determination
Deposits (credit institutions) Maturity grouping
Checking accounts Fair value determination
Savings accounts Maturity grouping
Term deposits Fair value determination
Derivatives (ETD) Maturity grouping
Derivatives (OTC) Fair value determination
Equity instruments Maturity grouping
Debt securities Fair value determination
Debt securities (issued) Maturity grouping
Loans and advances Fair value determination
Financial guarantees Maturity grouping
Master agreements Fair value determination
Smart Accounting
1.1.1.1.7 Accounting Methodologies
Scope per Accounting Methodology
Product Segment Amortized Cost
Cash on hand Effective-interest-rate-based Straight-line
Imported target value Custom methodology
Cash balances at central banks Effective-interest-rate-based Straight-line
Deposits (credit institutions) Effective-interest-rate-based Straight-line
Checking accounts Effective-interest-rate-based Straight-line
Savings accounts Effective-interest-rate-based Straight-line
Term deposits Effective-interest-rate-based Straight-line
Derivatives (ETD) Effective-interest-rate-based Straight-line
Derivatives (OTC) Effective-interest-rate-based Straight-line
Equity instruments Effective-interest-rate-based Straight-line
Debt securities Effective-interest-rate-based Straight-line
Debt securities (issued) Effective-interest-rate-based Straight-line
Loans and advances Effective-interest-rate-based Straight-line
Financial guarantees Effective-interest-rate-based Straight-line
Master agreements Effective-interest-rate-based Straight-line
Product Segment FVTPL
Cash on hand Cash flow discounting
Smart Accounting
Product Segment FVTPL
Cash balances at central banks Cash flow discounting
Deposits (credit institutions) Cash flow discounting
Checking accounts Cash flow discounting
Savings accounts Cash flow discounting
Term deposits Cash flow discounting
Derivatives (ETD) Cash flow discounting Mark-to-market
Derivatives (OTC) Cash flow discounting
Equity instruments Cash flow discounting Mark-to-market
Debt securities Cash flow discounting Mark-to-market
Debt securities (issued) Cash flow discounting Mark-to-market
Loans and advances Cash flow discounting
Financial guarantees Cash flow discounting
Master agreements Cash flow discounting
Product Segment FVTOCI
Smart Accounting
Product Segment FVTOCI
Product Segment Lower-of-Cost-and-Market tPL
Smart Accounting
Product Segment Lower-of-Cost-and-Market tPL
Product Segment Lower-of-Cost-and-Market tOCI
Smart Accounting
Product Segment Lower-of-Cost-and-Market tOCI
1.1.1.1.8 Determination of Asset/Liability Status
Product Segment Asset/Liability Status Determination
Cash on hand X
Checking accounts X
Savings accounts X
Term deposits X
Derivatives (ETD)
Derivatives (OTC) X
Equity instruments
Debt securities
Debt securities issued
Master agreements X
Related Information
Determination of Asset/Liability Status [page 37]
Smart Accounting
1.1.1.1.9 Business Content: Accounting Principles
Table 1: Preconfigured content per Accounting Principle

Product Segment IFRS 9 US GAAP Solvency
Traditional Ac Economic Ac Traditional Ac Economic Ac Economic Ac
counting counting counting counting counting
Cash on hand ACO N/A ACO N/A EVA
Cash balances at ACO N/A ACO N/A EVA

central banks
Deposits (credit ACO HfT, dFVPL ACO dFVPL EVA

institutions)
Checking ac ACO HfT, dFVPL ACO dFVPL EVA

counts
Savings accounts ACO HfT, dFVPL ACO dFVPL EVA
Term deposits ACO HfT, dFVPL ACO dFVPL EVA
Derivatives (ETD) N/A HfT, DHA N/A HfT EVA
Derivatives (OTC) N/A HfT, DHA N/A HfT EVA
Equity instru N/A HfT, mFVPL, N/A HfT, AfS EVA

ments dFVPL, FVOCI
Debt securities ACO mFVPL, dFVPL, HtM HfT, AfS EVA

FVOCI
Debt securities is ACO mFVPL, dFVPL, HtM HfT, AfS EVA
sued FVOCI
Loans and advan ACO HfT, mFVPL, ACO, HfS dFVPL EVA
ces dFVPL, FVOCI
Financial guaran ACO N/A ACO N/A EVA

tees
Master agree ACO N/A ACO N/A EVA

ments
ACO = Amortized Cost
AfS = Available for Sale
dFVPL = designated Fair Value through Profit and Loss
DHA = Derivatives - Hedge Accounting
EVA = Economic Value Added
FVOCI = Fair Value through Other Comprehensive Income
HfS = Held for Sale
HfT = Held for Trading
HtM = Held to Maturity
mFVPL = mandatory Fair Value through Profit and Loss
Smart Accounting
1.1.1.1.10 Business Content: Accounting Topics
Table 2: Preconfigured Products

Product Segment Products
Cash on hand Cash account, bank-internal account
Cash balances at central banks Central bank account
Deposits (credit institutions) Nostro account, vostro account
Checking accounts Checking account
Savings accounts Savings account, savings plan
Term deposits Term deposit
Derivatives (ETD) Future Equity future, interest-rate future, FX

future
Options Equity options, FX options, interest-rate

options
Derivatives (OTC) Cap, Floor Cap, Floor
Forwards Equity forward, FX forward, interest-

rate forward
Options Credit spread option, equity option, FX

option, swaption
Swaps Cross-currency interest-rate swap, in

terest-rate swap, credit default swap,
mark-to-market swap, total return swap
Equity instruments Shares
Debt securities Corporate bond, government bond,

convertible bond
Debt securities issued Corporate bond
Loans and advances Installment loan, mortgage loan, revolv

ing loan, repurchase agreement, securi
ties lending
Financial guarantees Facility, financial guarantee
Master agreements Master agreement
Smart Accounting
1.1.2 Insurance Contracts
Dimensions
The process model is defined based on generic dimensions that can be used to logically structure the book
value components and related process steps.
● Uninterpreted vs. interpreted

The term uninterpreted is used to describe position changes that are based on best estimate cash flows
(BECFs). The BECF is not valuated and is not dependent on any accounting principle.
Interpreted, however, describes position changes that are subject to measurement in accordance with a
specific accounting standard.
Operational vs. analytical
Operational flow transactions and master data changes originate in the operational source system. This
information therefore applies across all accounting principles.
Analytical position changes stem from an accounting perspective that is dependent on an accounting
principle. The system distinguishes between operational and analytical process steps and book value
components.
● Dependency on the value date
The value date for a given posting specifies the date on which the posting amount becomes effective.
Correction postings are therefore posted with a value date in the past to ensure the correct value date is
set for account settlement. This means that all posting documents that change long-term receivables and
accruals are value-date-dependent.
● Event-driven vs. deterministic vs. stochastic
This dimension describes how operational flow transactions and analytical value adjustments originate.
This can be event-driven, deterministic or stochastic.
Event-driven means that a flow transaction or change in value is primarily caused by a business event (for
example, a premium payment).
Deterministic means that the documented value changes are foreseeable due to the timeframe involved.
For example, when a contract is created it is already known how an accrual will develop.
Stochastic describes value changes that are unforeseeable, such as changes in market price.
Book value components
The table below displays the most significant book value components in Smart Accounting for Insurance
Contracts with their respective dependencies on the process model dimensions.
Smart Accounting
Dimension: Operational vs.
Analytical
or
Dimension: Interpreted vs. Dimension: Dependency on Dimension: Event-Driven,

Book Value Component Uninterpreted the Value Date Deterministic or Stochastic
Receivables/Payables Operational Dependent on the value date Event-driven
Accrual Operational Dependent on the value date Deterministic
Receivable/Payable (Ex Uninterpreted Not dependent on the value Event-driven

pected) date
Adjustment (Alternative Uninterpreted Not dependent on the value Event-driven

Cash Flow) date
Adjustment (Contract Boun Uninterpreted Not dependent on the value Event-driven

daries) date
Adjustment (New Business) Uninterpreted Not dependent on the value Event-driven

date
Adjustment (Cash Flow Uninterpreted Not dependent on the value Event-driven

Dates) date
Adjustment (Inflation) Uninterpreted Not dependent on the value Event-driven

date
Interest Rate Risk Adjust Interpreted Not dependent on the value Deterministic
ment (Locked-In) date
Inflation Risk Adjustment Interpreted Not dependent on the value Deterministic

(Locked-In) date
Credit Risk Adjustment Interpreted Not dependent on the value Deterministic

(Locked-In) date
Liquidity Risk Adjustment Interpreted Not dependent on the value Deterministic

(Locked-In) date
Other Risk Adjustment Interpreted Not dependent on the value Deterministic

(Locked-In) date
Prudence Adjustment Interpreted Not dependent on the value Deterministic

(Locked-In) date
Interest Rate Risk Adjust Interpreted Not dependent on the value Stochastic
ment date
Smart Accounting
Dimension: Operational vs.
Analytical
or
Dimension: Interpreted vs. Dimension: Dependency on Dimension: Event-Driven,

Book Value Component Uninterpreted the Value Date Deterministic or Stochastic
Inflation Risk Adjustment Interpreted Not dependent on the value Stochastic

date
Credit Risk Adjustment Interpreted Not dependent on the value Stochastic

date
Liquidity Risk Adjustment Interpreted Not dependent on the value Stochastic

date
Other Risk Adjustment Interpreted Not dependent on the value Stochastic

date
Prudence Adjustment Interpreted Not dependent on the value Stochastic

date
Margin (Risk Capital Costs) Interpreted Not dependent on the value Stochastic
date
Offset (Income UBNI) Interpreted Not dependent on the value Stochastic

date
Provisions (Income) Interpreted Not dependent on the value Stochastic

date
Assignment of Book Value Components to Process Steps
You can assign the book value components to various process steps according to the process model. The
graphic below shows this relationship in simplified form. It uses an insurance contract as an example and
includes only the most important book value components. (Special cases that require additional book value
components are not taken into account here.)
For more information and a detailed overview of the process model, see Processes for Insurance Contracts
[page 166].
 Note
More information is linked in the interactive graphic below: Hover over an arrow for a description. Click the
arrow for the documentation for relevant process step.
Smart Accounting
● Capture (Central GAAP) [page 189]
● Capture (Delta GAAP) [page 201]
● Unwind and Release [page 202]
● Recognize Profit [page 212]
Register Unpaid Principal Balance (UPB)
Capture (Central GAAP) Receivable/Payable (Expected)
Accrue Accrual
Capture (Delta GAAP) Adjustment (Alternative Cash Flow)
Adjustment (Contract Boundaries)
Adjustment (New Business)
Adjustment (Cash Flow Dates)
Adjustment (Inflation)
Smart Accounting
Unwind and Release Interest Rate Risk Adjustment (Locked-In)
Inflation Risk Adjustment (Locked-In)
Credit Risk Adjustment (Locked-In)
Liquidity Risk Adjustment (Locked-In)
Other Risk Adjustment (Locked-In)
Prudence Adjustment (Locked-In)
Value TC Interest Rate Risk Adjustment
Inflation Risk Adjustment
Credit Risk Adjustment
Liquidity Risk Adjustment
Other Risk Adjustment
Prudence Adjustment
Margin (Risk Capital Costs)
Recognize Profit Offset (Income UBNI)
Provisions (Income)
Related Information

Register [page 183]
Capture (Central GAAP) [page 189]
Accrue [page 199]
Capture (Delta GAAP) [page 201]
Unwind and Release [page 202]
Value TC [page 207]
Recognize Profit [page 212]
1.2 Central GAAP and Delta GAAP Approach
Postings that are processed by a subledger for financial instruments or insurance contracts can be dependent
on or independent of the relevant GAAP. Smart Accounting follows a central GAAP approach. This means that
the system creates cross-GAAP postings only once, and GAAP-specific postings once per accounting principle.
Smart Accounting
Based on the Smart Accounting process model, there are process steps that are purely operational and
therefore have no direct reference to an accounting principle. The operational process steps document the flow
transactions and value changes across GAAP and using central GAAP documents. Analytical process steps
are dependent on an accounting principle. They document their value changes specific to GAAP and in the
form of delta GAAP documents because the amounts are usually GAAP-specific.
The figure below illustrates the structure of central GAAP and delta GAAP documents, and the interaction
between the Smart Accounting subledger and the general ledger:
A subledger document in Smart Accounting consists of a document header and several document line items. A
central GAAP document also records a set of GAAP-specific characteristics per line item for each accounting
principle. Delta GAAP documents record only one set of characteristics per line item; these characteristics are
GAAP-dependent.
Central GAAP documents (depicted in yellow in the figure) that are created by the operational Register and
Accrue process steps refer to all the accounting principles defined in the system. Delta GAAP documents
(depicted in red and green) are created by the analytical process steps for each accounting system.
Compatibility with the General Ledger
As a subledger, Smart Accounting provides data to the general ledger on the basis of general ledger
documents. The central GAAP approach also applies to the general ledger documents from Smart Accounting.
However, the criterion as to whether a document is a central GAAP document or not differs to the criterion for
the subledger documents. Only central GAAP subledger documents that have the same general ledger account
for all accounting principles result in a central GAAP general ledger document. All other documents are
recorded as delta GAAP general ledger documents.
Smart Accounting
The figure below illustrates this context:
The general ledger that you want to supply with data must be able to receive central GAAP general ledger
documents and delta GAAP general ledger documents.
The general ledger depicted serves as an example only. The ledgers in the general ledger can be defined
differently. The figure above shows a possible general ledger configuration in which the main ledger records
only the central GAAP general ledger documents and the delta ledgers record the delta GAAP general ledger
documents.
Smart Accounting
Example in T-account view
The figure below uses a simplified example to illustrate the central GAAP approach for subledger documents
and general ledger documents that are transferred to the general ledger:
Abbreviations
SLA = subledger account
GLA = general ledger account
If the general ledger accounts (derived in subledger accounting dependent on GAAP) of a central GAAP
document are identical in all accounting principles, this document is assigned to the central GAAP when the
general ledger documents are prepared. Otherwise, the system prepares multiple delta GAAP general ledger
documents.
Related Information
General Ledger Connection [page 246]
1.3 Portfolios
Financial risks and underwriting risks are not necessarily estimated at the level of an individual financial
contract, insurance contract or securities position, but rather at the level of homogenous portfolios for a
specific purpose.
While their documentation always takes place in accounting, you can define and create portfolios either in
accounting (accounting portfolios) or before accounting (for example, actuarial portfolios):
Smart Accounting
● If you already create portfolios before accounting, you need to inform the system of how they have been
defined and then import the portfolios themselves.
● If you define portfolios in accounting, you can also enter them there.
A portfolio category is assigned to each portfolio in accounting. You use this category to define the purpose of
the portfolio and which accounting process steps it is relevant for.
You can assign a number of insurance contracts, financial contracts or actuarial portfolios to a portfolio.
Actuarial portfolio (portfolio category 1000)

Actuarial portfolios are created at the granularity level at which an actuary estimates future cash inflows (for
example, premiums) and cash outflows (for example, claims).
For this portfolio category, best estimate cash flows are imported and documented in accounting. For
insurance accounting, the actuarial portfolio therefore behaves in the same way as a single contract.
 Note
Operational business transactions and reserves (“RBND balances”) that are documented in the Register
and Accrue process steps continue to relate to the individual legal contract.
The following characteristics are defined in the system. You can add custom characteristics to these:
Characteristic Description Must Be Entered
/BA1/C11PRDCTR Production Control No
/BA1/C55LGENT Legal Entity Yes
/BA1/C55PFID Portfolio Yes
/BA1/C55PFSTA Portfolio Status No
/BA1/C55SRCSYS Source System Yes
/BA1/C80ORGUNI Organizational Unit ID Yes
/BA1/CIDPSEID Coverage No
/BA1/CR4PFCT Portfolio Category Yes
Based on the portfolio category, the system identifies that the following process steps for the actuarial portfolio
have to be executed:
Capture
Portfolio (Delta Unwind and Recognize
Category Capture GAAP) Release Value TC Profit Value FX Classify
1000 X X X X (X) X X
Actuarial
Portfolio
 Note
You can run the Recognize Profit process step at the granularity level of the actuarial portfolio if this is
required. However, you can also define separate profit recognition portfolios for this.
Smart Accounting
The reason for this is that profit recognition portfolios (for example, CSM portfolios in IFRS 17) may not
necessarily be subject to the homogeneity criteria that the actuary has applied to the definition of the
actuarial portfolios, but they can be subject to regulatory homogeneity criteria.
Accounting Portfolios
What the portfolios in this group have in common is that they are used purely for accounting purposes (in other
words, they solve an accounting problem).
Profit recognition portfolio (portfolio category 2070)

Profit recognition portfolios (for example, CSM portfolios in IFRS 17) are used to control the recognition of net
profits and the determination of the onerousness status for a group of contracts or actuarial portfolios that are
defined as homogenous from a regulatory perspective.
This portfolio category is therefore only relevant in the Recognize Profit process step:
Capture
2070 X
Profit Recog
nition
For this portfolio category, you also need to assign the corresponding insurance contracts and actuarial
portfolios in the system. To create the contractual service margin (CSM) some of the income and expense from
assigned contracts needs to be capitalized. This makes information about these essential.
Portfolios for asset/liability status determination (portfolio category 2100)

Portfolios for determining the asset/liability status (related terms: on-balance-sheet netting, asset and liability
offsetting) are used to determine an overall asset/liability status for a group of contracts.
 Note
You can also offset legal contract groups and securities groups in the same way. To do so, you do not need
to define separate portfolios but instead specify the legal entity used to create the group (for example,
master contract) in the system.
Portfolios are used in this context mainly to simplify the provisioning of data. Receivables and payables can
usually only be offset if there is a legal basis for doing so.
This means that for this portfolio category there is no accounting documentation of the results in the portfolio
itself but instead the system triggers a reclassification of all the contracts involved that do not match the
common asset/liability status.
The determination of the asset/liability status only solves the accounting problem of balance sheet reporting
and leads to a balance sheet reduction. Therefore, this portfolio category is relevant only in the Classify process
step:
Smart Accounting
Capture
2100 X
Asset/Liabil
ity Status De
termination
Activities
In Customizing for Bank Analyzer under Processes and Methods Smart Accounting Portfolios , choose:
● Actuarial Portfolios
● Accounting Portfolios
○ Profit Recognition
○ Asset/Liability Status Determination
In the respective Define Portfolio Customizing activity, you can display portfolio characteristics and define new
characteristics.
Related Information
1.4 Subledger Coding Block
The definition of the subledger coding block is a prerequisite for the documentation of accounting information
in the subledger. In other words, defining the set of characteristics that is to be provided in a posting document.
This defines the granularity of accounting.
Only characteristics that meet the following requirements can be recorded in a document:
● The contract ID (financial transaction ID) forms the link to other characteristics of the contract, including
the business partner (counterparty).
● The securities ID (financial transaction ID) forms the link to other characteristics of the security, including
the business partner (issuer).
● The portfolio ID (contract ID) forms the link to other characteristics of the portfolio.
● The characteristics are part of the general ledger coding block.
● The characteristics are relevant for the profit and loss statement (pro rata temporis).
However, you can still use characteristics that do not meet these criteria for balance sheet reporting purposes
when you balance the subledger (multidimensional accounting/reporting).
Smart Accounting
The subledger coding block is structured as follows:
Master data fine-grained Operational Contract What?
Securities
Portfolio
Loss event
Business partner With whom?
Where?
Organization Who?
coarse-grained Analytical (derived) Contract What?
Securities
Portfolio
Loss event
Business partner With whom?
Where?
Organization Who?
Control parameters
Flow data fine-grained Operational Business transaction What?
Cash flow
When?
How much?
coarse-grained Derived in accounting Business transaction What?
Cash flow
When?
How much?
Analytical (derived) Control parameters
Information requirements of any kind (both internal and external) can be structured on the basis of the
following questions:
● What (kind of product is relevant for this)?

● Who (manages the contract)?
● Where (is the contract partner resident)?
● With whom (was the contract concluded)?
Smart Accounting
Different levels of detail may be required here, ranging from very detailed (for example, retail checking account)
to very coarse-grained (for example, demand deposit). While this information is available at the finest
granularity level from a contract processing (operational) perspective, coarser-grained views are sufficient for
balance sheet reporting (analytically derived).
 Example
● From an operational system perspective, the product in question is a “retail loan, fixed interest, charge
04/2015” (fine-grained). For balance sheet reporting it is sufficient to categorize it into the product
segment “Loans” (coarse-grained).
● The business partner for the loan lives at 25 Sample Street, 12345 Sampletown in Ireland (fine-
grained). For balance sheet reporting it is sufficient to categorize the customer as resident in the EU
(coarse-grained).
Prerequisites
You have made the relevant settings in Customizing for Bank Analyzer under Processes and Methods
Smart Accounting Subledger Coding Block .
Subledger Coding Block versus General Ledger Coding Block
Due to the difference in granularity between general ledger and subledger only a subset of the subledger
coding block is part of the general ledger coding block. This subset is defined in Customizing.
1.4.1 Master Data Dimensions and Their Derived Subledger

Dimensions
The master data dimensions include all characteristics that are transferred directly and without being changed
from the operational master data (contract, security, portfolio, loss event, business partner, organization) to
the subledger coding block.
You can view the characteristics predefined as SAP standard values for contract, security and portfolio, and
assign more characteristics, if required, in Customizing under Subledger Coding Block Master Data
Definition of Master Data Characteristics .
Master data Operational Contract Contract ID
Contract node number
Production control
Smart Accounting
Source system contract
Contract status
Contract category
Securities account category
Legal entity
Coverage
Security Securities ID
Securities node number
Instrument type
Securities source system
Securities status
Portfolio Contract ID
Production control
Source system contract
Contract status
Contract category
Legal entity
Onerousness status at initial

recognition
Coverage
Portfolio category
Loss event Loss event ID
Organization Organizational unit ID
The master data dimensions also include all characteristics that were derived from these master data
characteristics within accounting.
In Customizing under Subledger Coding Block Master Data Derivation from Master Data
Characteristics , you can define derivation rules for the derived characteristics predefined as SAP standard
values.
Smart Accounting
Master data Analytical (derived) Contract Product segment
Lifecycle segment
Security Product segment
Lifecycle segment
Portfolio Product segment
Lifecycle segment
Organization Profit center
Business area
 Note
For financial contracts, the Product Segment subledger coding block characteristic is taken from the
product concept of the contract, while for securities the operational product concept of the securities
contract is not suitable for this. In this use case, the instrument type of the security is essential (for
example, German government bonds are recorded under the product segment 700 Debt Securities).
1.4.2 Flow Data Dimensions and Their Derived Subledger

Dimensions
The flow data dimensions include all characteristics that are transferred directly and without being changed
from the operational flow transactions (business transactions and cash flows) to the subledger coding block.
Customizing: Subledger Coding Block Flow Data Definition of Flow Transaction Characteristics
● Define Business Transaction Characteristics:
Flow Data Operational Business transaction Business transaction ID
Source system BT
System date in feeder system
Item number
Reversal business transaction
ID of reversed BT
System time in feeder system
Document date
Smart Accounting
Value date
● Define Cash Flow Characteristics:
Flow data Operational Cash flow Cash flow category
Payment category
Version number
Reset indicator
Reset reference
Loss event ID
Insurance business type
Insurance inventory group
Tranche start date
The flow data dimensions also include all characteristics that were derived from these flow transaction
characteristics within accounting.
Customizing:
Subledger Coding Block Flow Data Derivation from Flow Transaction Characteristics
Flow data Derived in accounting Business transaction Posting record
1.4.3 Analytical Control Parameters
Analytical control parameters are mapped in the system as analytical statuses. You define how contracts,
portfolios and securities positions are categorized from an analytical application perspective.
Customizing: Subledger Coding Block Analytical Statuses
Master data Analytical (derived) Control parameters Accrual status
Write-down status
Market conformity status
Impairment status
Holding category
Fair value level
Smart Accounting
Onerousness status
Asset/liability status
Term segment
You can display the start values for the following analytical statuses in Customizing for the subledger coding
block. The value is set and persisted when a new contract or business transaction for a securities position is
registered
● Accrual status
The start value is set to Accruing.
● Write-down status
The start value is set to Not Written Down.
● Market conformity status
The start value is set to Market-Conform.
● Onerousness status
The start value is set to Not Onerous.
For actuarial or accounting portfolios, the start value of the onerousness status is taken from the
onerousness status on initial recognition (provided there is an entry in this field).
You can define the start values of the following analytical statuses in Customizing for the subledger coding
block. The start value defined here is set and, with the exception of the asset/liability status, persisted when a
contract or securities position is created.
● The start value of the impairment status is dependent on the accounting principle. A start value can be
defined for each accounting system.
● The start value of the holding category is dependent on the derivation. A start value can be defined for
each accounting system.
● The start value of the fair value level is dependent on the calculation method for the fair value.
● The start value of the asset/liability status is dependent on the product segment. A start value can be
defined for each product segment and optionally for each production control or instrument type.
● The start value of the term segment is dependent on the accounting system and the product segment.
1.4.3.1 Determination of Asset/Liability Status
You can also determine the asset/liability status for groups of contracts.
In general processing, the system only determines the asset/liability status at the level of the book value of the
individual contract, whereas this process enables you to determine the status over several related contracts.
Contract Groups
Financial Contract Groups

You can offset contracts against each other, provided that they are legally grouped together (in a master
contract, for example)
Smart Accounting
The process determines a common asset/liability status for all contracts that are in an object relationship with
a master contract on the balance sheet key date (including the master contract). You can configure which
object relationships are to be assigned to the group in Customizing.
 Example
Contracts B, C and D are assigned to master contract A on the balance sheet key date. Before the
determination of the asset/liability status, the book values of the individual contracts are as follows:
Asset/Liability Sta
tus Book Value Book Value
(A = Asset, L = Liabil (Transaction Cur (Functional Cur

Master Contract Assigned Contract ity) rency) rency)
Master contract A Master contract A A EUR 100 EUR 100
Contract B A EUR 150 EUR 150
Contract C L EUR -200 EUR -200
Contract D L EUR -75 EUR -75
L EUR -25 EUR -25
Table 3: Balance Sheet before Determination of Asset/Liability Status

Assets Liabilities
Balance sheet Master contract A EUR 100 Balance sheet Contract C EUR -200
item A1 item L1
Contract B EUR 150 Contract D EUR -75
Total Assets EUR 250 Total Liabilities EUR -275
 Note
The system always uses the amount in functional currency to determine the book value.
The total book value of the group is therefore USD -25, which corresponds to the status “L” (liability). This
means that all contracts with the asset / liability status “A” (asset) need to be reclassified to “L”. To do this,
the system generates analytical decisions for these contracts. These are processed in the Register process
step and reclassify master contract A and master contract B in the Classify process step:
Asset/Liability Sta
tus Book Value Book Value
(A = Asset, L = Liabil (Transaction Cur (Functional Cur

Master Contract Assigned Contract ity) rency) rency)
Master contract A Master contract A L EUR 100 EUR 100
Contract B L EUR 150 EUR 150
Contract C L EUR -200 EUR -200
Contract D L EUR -75 EUR -75
L EUR -25 EUR -25
Smart Accounting
Table 4: Balance Sheet after Determination of Asset/Liability Status
Assets Liabilities
Balance sheet Balance sheet Master contract A EUR 100

item A1 item L1
Contract B EUR 150
Contract C EUR -200
Contract D EUR -75
Groups of insurance contracts
Unlike for financial contracts, for insurance contracts the group is not defined by object relationships in the
Source Data Layer (SDL), but using the reference type and reference external number in the coverage tab of
the claim.
Apart from this, this type of group is based on the same business logic as the groups of finance contracts.
Actuarial portfolios
This process also includes the assignment of insurance contracts (and the assigned insurance claims) to
actuarial portfolios: If an insurance contract has been assigned to an actuarial portfolio, the system determines
the asset/liability status for the actuarial portfolio.
 Example
Asset/Liability
Status Book Value Book Value
Actuarial Portfo Insurance Con (A = Asset, L = (Transaction Cur (Functional Cur

lio tract Claim Liability) rency) rency)
Actuarial Portfo Insurance con Insurance con A EUR 100 EUR 100
lio 1 tract A tract A
Insurance con Claim B A EUR 150 EUR 150

tract A
Insurance con Claim C L EUR -200 EUR -200

tract A
Insurance con Insurance con L EUR -75 EUR -75

tract D tract D
L EUR -25 EUR -25
Table 5: Balance Sheet before Determination of Asset/Liability Status

Assets Liabilities
Balance sheet Insurance con EUR 100 Balance sheet Claim C EUR -200
item A1 tract A item L1
Claim B EUR 150 Insurance con EUR -75

tract D
Smart Accounting
The book value for all of the insurance contracts and claims assigned to the actuarial portfolio A is EUR -25.
This means that all of these contracts are to be reported as liabilities:
Asset/Liability
Status Book Value Book Value
Actuarial Portfo Insurance Con (A = Asset, L = (Transaction Cur (Functional Cur

lio tract Claim Liability) rency) rency)
Actuarial Portfo Insurance con Insurance con L EUR 100 EUR 100
lio 1 tract A tract A
Insurance con Claim B L EUR 150 EUR 150

tract A
Insurance con Claim C L EUR -200 EUR -200

tract A
Insurance con Insurance con L EUR -75 EUR -75

tract D tract D
L EUR -25 EUR -25
Table 6: Balance Sheet after Determination of Asset/Liability Status

Assets Liabilities
Balance sheet Balance sheet Insurance con EUR 100

item A1 item L1 tract A
Claim B EUR 150
Claim C EUR -200
Insurance con EUR -75

tract D
Prerequisites
You have made the following settings in Customizing for Bank Analyzer under Processes and Methods
Smart Accounting Subledger Coding Block Analytical Statuses Cross-Contract Asset/Liability Status
Determination :
● Define Groups for Determining Asset/Liability Status

Here you define which object relationships in the Source Data Layer (SDL) the system takes into account
when it selects groups for asset/liability status determination.
● Methods:
○ Display Methods for Determining Asset/Liability Status
You have the option of adjusting the properties of the methods.
○ Derive Methods for Determining Asset/Liability Status
Smart Accounting
Activities
To run the process for financial contracts, on the SAP Easy Access screen, choose Bank Analyzer
Processes and Methods Smart Accounting Subledger Accounting Financial Instruments Preparatory
Processing Determine Accounting Status Determine Asset/Liability Status (Financial Contracts) .
To run the process for insurance contracts, on the SAP Easy Access screen, choose Bank Analyzer
Processes and Methods Smart Accounting Subledger Accounting Insurance Contracts Preparatory
Processing Determine Accounting Status Determine Asset/Liability Status (Insurance Contracts) .
Related Terms
On-balance sheet netting, netting, balance-sheet pooling
Related Information
Portfolios [page 28]
1.4.4 Calculation Method Dimensions and Their Derived

Subledger Dimensions
The calculation method dimensions include all the characteristics that result from the calculation methods.
In Customizing under Subledger Coding Block Calculation Methods , you can view and derive the
characteristics predefined as SAP standard values for calculation methods, and can assign further
characteristics if required.
Calculation method characteristic Analytical (derived) Change reason
Calculation method
Calculation methodology
Inflow/outflow indicator
Smart Accounting
1.4.5 Accounting Dimensions
The accounting dimensions include all characteristics that are required in the concept of double-entry
accounting.
You can view the process characteristics predefined as SAP standard values and assign more characteristics, if
required, in Customizing under Subledger Coding Block Process Edit Process Characteristics .
Flow Data Analytical (derived) Control parameters Document number
Document item number
Flow type
Posting date
Posting date of reset
Fiscal year
Inversion document
Subledger account lifecycle

stage
Lot ID
Subledger account
Period/fiscal year
Process step ID
Process category
Accounting system
Reference to inverted docu

ment
Reference to parked docu

ment
Reference to reset document
Reset document
G/L chart of accounts
G/L account
Debit/credit indicator
Smart Accounting
Currency of subledger ac
count
1.5 Charts of Accounts
Definition
From a subledger perspective there are two relevant charts of accounts: the subledger chart of accounts and
the general ledger chart of accounts. The subledger chart of accounts has to be transferred to the general
ledger chart of accounts.
Related Information
Subledger Chart of Accounts [page 43]

G/L Chart of Accounts [page 46]
1.5.1 Subledger Chart of Accounts
Definition
The subledger chart of accounts is a structured directory of all subledger accounts for the production of
information and for balance sheet reporting. The financial statement segment is used for the basic structuring
of both views. The financial statement segment is used to assign each subledger account either to the balance
sheet (assets and liabilities), to the profit and loss statement or to equity. Financial statement segments are
predefined by SAP.
Prerequisites
You make the settings for the subledger chart of accounts in Customizing for Bank Analyzer under Processes
and Methods Smart Accounting Charts of Accounts Subledger Chart of Accounts .
Use
Information production
Smart Accounting
Subledger accounts are assigned to subledger account groups for the production of information (as defined by
the accounting process model). Subledger account groups determine which process steps are responsible for
updating the account balance of the assigned subledger accounts.
The cardinality of subledger accounts assigned to a subledger account group is predefined by SAP. Usually, any
number of subledger accounts can be assigned to a subledger account group. However, there are use cases in
which only a 1:1 or a 1:2 assignment is predefined.
Subledger account groups are predefined by SAP and are assigned to one financial statement segment.
 Example
The following subledger accounts are assigned to the subledger account group 100201 Accruals: Income:
● 10020101 (Accruals: Interest Income (Requested))

● 10020102 (Accruals: Fee Income (Requested))
● 10020105 (Accruals: Premium Income (Requested))
● 10020108 (Accruals: Claim Income (Requested))
● 10020109 (Accruals: Acquis. Costs Income (Requ.))
● 10020110 (Accruals: Profit Sharing Income (Requ.))
The subledger account group can be extended. The balances on the accounts in the subledger account
group can only be changed in the Accrue process step.
Balance sheet reporting
For balance sheet reporting, it is advisable to assign all or some of the subledger accounts of one or more
subledger account groups to a financial statement subsegment. This enables you to group a number of
subledger accounts for balance sheet reporting so that you can report them in one balance sheet item.
Since balance sheet reporting is defined by the guidelines of an accounting principle, the assignment of
subledger accounts to a financial statement subsegment depends on the relevant accounting principle applied.
If a financial statement subsegment is defined in the same way in all accounting principles, you can also assign
one financial statement subsegment to all accounting principles. Financial statement subsegments and the
assignment of subledger accounts to financial statement subsegments is predefined by SAP. However, you can
create custom financial statement subsegments and/or edit the assignment of accounting principles
(accounting systems) and subledger accounts to financial statement subsegments.
 Example
The subledger accounts for the book value (financial statement subsegment 1001 (Book Value) differ in
IFRS (net reporting) and HGB (gross reporting).
In IFRS the book value comprises the following subledger accounts:
● 10010101 Receivables/Payables (Not Due)
Smart Accounting
● 10020101 Accruals: Interest (Debit)
● 10020102 Accruals: Fees (Debit)
● 10021101 Accruals: Interest (Credit)
● 10021102 Accruals: Fees (Credit)
● 10030101 Deferrals: Interest Revenue (Debit)
● 10030102 Deferrals: Interest Revenue (Credit)
● 10030103 Deferrals: Fee Income (Debit)
● 10030104 Deferrals: Fee Income (Credit)
● 10031101 Deferrals: Interest Expense (Debit)
● 10031102 Deferrals: Interest Expense (Credit)
● 10031103 Deferrals: Fee Expense (Debit)
● 10031104 Deferrals: Fee Expense (Credit)
Since accruals and deferrals are reported in separate balance sheet items in German HGB, the book value
is defined as follows:
● 10010101 Receivables/Payables (Not Due)
In HGB, the accruals are assigned to the financial statement subsegments Accruals (Debit) and Accruals
(Credit), while the deferrals are assigned to the financial statement subsegments Receivables (Due) and
Payables (Due).
Smart Accounting
The figure below illustrates this scenario:
Figure 1: Structure of Subledger Chart of Accounts for Selected Subledger Accounts
1.5.2 G/L Chart of Accounts
Definition
The general ledger provides the subledger with the general ledger chart of accounts. The subledger is
responsible for the complete transfer of the subledger chart of accounts to the general ledger chart of
accounts. Note that a general ledger account (unlike a subledger account) is a concatenation of several
subledger dimensions.
 Example
The general ledger account 1051111 Financial Assets AFS: Debt Instruments is predefined by the general
ledger. This general ledger account comprises the following four subledger dimensions (implicit general
ledger dimensions):
● Asset/liability status: asset (financial position)

● Holding category: AFS (available for sale)
● Product segment: debt instrument
Since this general ledger account is the product-specific balance sheet item, the book value needs to be
reported here.
Smart Accounting
● Product-specific balance sheet item: financial statement subsegment = book value
Prerequisites
You make the settings for the chart of accounts in Customizing for Bank Analyzer under Processes and
Methods Smart Accounting Charts of Accounts General Ledger Chart of Accounts .
1.6 Processes for Financial Instruments
The application menu for Smart Accounting for Financial Instruments groups the processes that need to be run
according to the time of processing.
Smart Accounting
● Day Processing [page 62]
● Period-End Processing [page 94]
● Year-End Processing [page 154]
● Period-Opening Processing [page 157]
● Preparatory Processing [page 161]
Hover over each box for a description. Click the box for more information.
Day Processing
Day processing comprises the activities that are usually executed once or multiple times a day.
● Set Posting Date [page 62]

● End-of-Day Processing (Business Transaction) [page 70]
● End-of-Day Processing (Contract) [page 90]
Smart Accounting
● Impairment Attribute Determination (IAD) [page 92]
Period-End Processing
Period-end processing updates position components to fulfil a balance sheet reporting requirement.
For this, you need to define which position components (and the resulting profit and loss statement) need to be
provided in updated form for which source systems and for which GAAP, and how frequently this needs to be
done.
In period-end processing, you can also open and close posting periods.
The process steps are as follows:

● Defer [page 99]
● Move and Transform [page 138]
● Value FX [page 144]
● Classify [page 146]
● Adjust [page 149]
● Close [page 152]
Year-End Processing
You use year-end processing to open and close fiscal years. Period-end processing is a prerequisite for this.
In year-end processing you can execute the Adjust [page 149] process step (period-end processing for special
periods). To avoid redundancy, this process step is only incorporated in the menu for period-end processing
and not in the year-end processing menu.
You can also execute the Carry Forward [page 155] process step (balance carryforward) in year-end
processing. You use the balance carryforward function to carry the year-end balance of the current fiscal year
forward to the year-opening balance of the new fiscal year (period 00). You execute the process for the last
time once you have closed all the periods of the current fiscal year for all process steps.
Period-Opening Processing
Period-Opening Processing [page 157] resets documents that were created during period-end processing or
You can also reset manual adjustments.
Preparatory Processing
Before you execute day processing at the end of the period you have the option of predetermining the
accounting status. Before you execute period-end processing you can also predetermine the target values.
Related Information
Day Processing [page 62]
Smart Accounting
Period-End Processing [page 94]
Year-End Processing [page 154]
Period-Opening Processing [page 157]
Preparatory Processing [page 161]
1.6.1 Results Data
1.6.1.1 Methodologies for Determining Target Values
In Smart Accounting for Financial Instruments (Smart AFI), the calculation of a target value for a subledger
account and the account assignment (including determination of the difference amount) are separated.
You can use different methodologies to calculate the target values for subledger accounts depending on the
accounting process step. These methodologies can be grouped according to the pattern described below.
Depending on the semantics of the subledger account, the system either determines target values for this
subledger account (for example, target value of an accrual item) or it determines target values that are used in
accounting to determine the target values for subledger accounts (for example, amortized cost or fair value).
 Note
The system calculates target values in position currency.
Table 7: Assignment of Process Steps and Methodologies

Subledger-Account-
Bus.-Transaction-
Cash-Flow-
Parametric
Contract-
Import
Based
Based
Based
Based
Process Step
Determine X X
Price Gain
Accrue X (X)*
Defer X X X X** X
Write Down X (X)*
Release X X X X**
Value TC
Credit Risk X X X X
Smart Accounting
Subledger-Account-
Bus.-Transaction-
Cash-Flow-
Parametric
Contract-
Import
Based
Based
Based
Based
Process Step
Interest Rate X (X)*

Risk (Hedged)
Fair Value X X X X
Fair Value (Col X (X)*

lateral)
* The realization method is executed automatically if a contract or securities position has the lifecycle segment
40 (Contract End).
** Non-accrual
Import methodology
For each process step, you can import accounting target values that have already been calculated outside of
Smart AFI. For more information, see Importing Results and Granularity [page 57].
Contract-based methodologies
In Smart AFI, contract-based methodologies are methodologies that require no further input parameters other
than the contractual information (for example, lifecycle segment).
You can use the following methods in the process steps:
● Realization
If you apply the realization method, the system clears an existing balance completely.
● Freeze
If you apply the freeze method, the system keeps an existing balance (it is “frozen”).
 Note
The system executes the realization method automatically if a contract or securities position has the
lifecycle segment 40 (Contract End).
Smart Accounting
Parametric methodologies
Parametric methodologies group all methods that require various reference parameters for calculation (for
example, market prices or probability of default). These parameters are applied to a partial book value or to the
balance of a given subledger account (taking scaling into account where required).
Specific use cases for this include the following:
● The one-year expected loss methodology for determining the credit risk adjustment (book value x PD x
LGD)
● The mark-to-market methodology for determining the fair value (amount x market price)
Cash-flow-based methodologies
Cash-flow-based methodologies group all methods that determine accounting target values based on a cash
flow.
The key parameters for this approach are as follows:
● Selection of the relevant cash flow (contractual cash flow, behavioral cash flow, credit-risk-adjusted cash
flow)
● Depending on the target value to be calculated, the interest rate or yield curve used for discounting is
either implicitly defined by the system (for example, effective interest rate for determining amortized cost)
or you need to explicitly enter it (for example, yield curve for determining fair value).
Subledger-account-based methodologies
These methodologies calculate target values on subledger accounts by evaluating the balances of the
subledger account concerned and of further reference subledger accounts (taking time limits and amount-
based limits into account if required). The non-accrual methods are examples of use cases for this.
Business-transaction-based methodologies
These methodologies are used only for process steps that carry out their interpretation after business
transactions have occurred (Determine Price Gain and Defer). The methodologies either amortize business-
transaction-based amounts over a period of time (Defer) or determine accounting price gain effects, taking lot
selections into account.
Smart Accounting
1.6.1.1.1 Change Reasons
Change reasons explain the change in the balance of a subledger account group between two evaluation dates
on a balance sheet key date or between two balance sheet key dates.
Depending on the methodology you use, the calculators in Smart Accounting for Financial Instruments
determine the following change reasons:
● 200: Amortization
● 400: Catch-Up Adjustment (Business Transaction)
● 500: Modification (Contractual Cash Flow)
You can use change reasons to define offsetting postings in more detail in the profit and loss statement.
 Note
The change reasons provided by a valuation method depend on the context and the method used. For
example, if the fair value is determined stochastically the deterministic amortization effects are not
reported.
Prerequisites
In Customizing for the relevant process step under Bank Analyzer Processes and Methods Smart
Accounting Process Steps for Financial Instruments [Name of Process Step] Account Assignment , you
can view the combinations of subledger accounts provided by SAP for postings in the relevant process step.
You can edit these or add your own combinations. If required, you can make more detailed settings for the
assignment of accounts for expense and income by specifying change reasons.
If you are using cash flow-based methods, also note the following conditions when you define the methods in
Customizing: It is not possible to separate change reasons if Any Cash Flow Change has been set as an event
for the recalculation of effective interest or if the Suppress One-Time Effects has been selected.
Description of Change Reasons
Period-based change reasons

Period-based change reasons determine the expected changes to a balance over time under constant
(“current”) conditions, in advance.
Amortization (200)
Amortization describes the deterministic change to a target value due only to the time expired under constant
conditions (Period-based).
Time-based change reasons

Unlike the period-based change reasons, the following change reasons are caused by unexpected changes
made to the conditions at a given point in time.
Smart Accounting
These effects need to be reported according to who caused the change. This can be divided into the following
categories:
● Customer (unilaterally)
● Bank and customer (bilaterally)
● Bank (unilaterally)
Catch-Up Adjustment (400)
A catch-up adjustment effect is the result of a change to the expected constant conditions caused by a change
in customer behavior.
This change always occurs when the customer behavior differs from the expectations fixed in the contract
(such as in the contract cash flow).
● The customer can make a payment earlier or later than expected, or the payment amount is too high or too
low.
● Moreover, in some cash flows the probability of the customer exercising his contractual rights (such as the
option of an unscheduled repayment) is not taken into account.
● In cash flow-based contracts this change is reflected in the cash flow. In these cases, the change reason
arises as a result of the change in the cash flow that is due to a change in customer behavior.
Modification (500)
A modification effect is the result of a change to the expected constant conditions due to a joint decision
taken by both contract parties.
This also results in a new contractual cash flow, however the reason needs to be entered separately to that of
the catch-up adjustment.
Account Assignment
For account assignment, you can use all the change reasons that a calculation method can determine. When
change reasons are assigned to accounts, you can differentiate between the following patterns:
Pattern 1
It is already apparent in the balance sheet subledger whether the change is posted to income or expense (in
the process steps Accrue, Defer or Release, for example)
Position Account Change Reason Offsetting Account
10030101 Deferrals: Interest 500 Modification 40010108 Income: Modifica-

tion
Income (Debit)
10030101 Deferrals: Interest All unassigned 40010101 Income: Interest

change reasons (Realized)
Income (Debit)
Pattern 2
The direction of the delta postings (in the process step Write Down, for example) determines whether the
postings are to income or expense.
Smart Accounting
Change Rea
Position Account
son Offsetting Account (Income) Offsetting Account (Expense)
10040201 Write-down All unassigned 40010201 Income: Write- 50010201 Expense: Write-
(nominal) change reasons Down Down
Pattern 3
In addition to the difference mentioned in pattern 2, the accounting methodology in the underlying contract
also has to be taken into account. Here a distinction is made between the methodologies that can be used to
report “through profit and loss” and “through comprehensive income”. This pattern is used in the process step
Value
Offsetting Ac Offsetting Ac

Offsetting Ac Offsetting Ac count (Income count (Expense
Position Account Change Reason count (Income) count (Expense) OCI) OCI)
10075201 All unassigned 40010204 50010204 34010204 35010204

change reasons
Fair value adjust Income: Fair Value Expense: Fair Income (OCI): Fair Expense (OCI):
ment Adjustment Value Adjustment Value Adjustment Fair Value Adjust
ment
This entry means that, from the perspective of the offsetting account, changes made on the credit side are
posted as follows:
● To account 40010204 - Income: Fair Value Adjustment, for contracts that have been assigned to a holding
category with the accounting methodology Fair Value Through Profit and Loss or LCM Through Profit and
Loss.
● To account 34010204 - Income (OCI): Fair Value Adjustment, for contracts that have been assigned to a
holding category with the accounting methodology Fair Value Through Other Comprehensive Income or
LCM Through Other Comprehensive Income.
Related Information
Example: Change Reasons [page 55]
1.6.1.1.2 Example: Change Reasons
The amortized cost for a contract on balance sheet key date t1 is EUR 90. This is distributed to subledger
accounts as follows:
Amount in Transaction Cur

Process Step Subledger Account rency
Register 10010101 Receivable (Not Due) EUR 100.00
Smart Accounting
Accrue 10020101 Accruals Interest Income EUR 5.00

(Debit)
Defer 10030102 Deferrals Interest Income EUR −15.00

(Credit)
Amortized Cost EUR 90.00
Between balance sheet key date t1 and balance sheet key date t3, a modification in the contractual cash flow
occurred on date t2. The contractual effective interest rate remains the same, leading to a one-time
modification effect (EUR 5 in this example).
After changes to the accrual item have been deducted, the other changes in amortized cost are due entirely to
the passage of time (amortization of the position).
 Note
The selected amounts are random and used only to illustrate the concept.
On the following balance sheet key date t3, the amortized cost is distributed as follows:

Register 10010101 Receivable (Not Due) EUR 100.00
Accrue 10020101 Accruals Interest Income EUR 6.00

(Debit)
Defer 10030102 Deferrals Interest Income EUR −9.00

(Credit)
Amortized Cost EUR 95.00
This produces the following result on the subledger account of the deferred item on date t3:
Subledger Ac
count Balance t1 Balance t2 Total Delta (t1, t2) Modification Amortization
10030102 Deferral EUR −15.00 EUR −9.00 EUR 6.00 EUR 5.00 EUR 1.00
Interest Income
(Credit)
The effect of the modification is to be reported in the profit and loss statement to income account X
(modification income, for example). The amortization effect is posted to income account Y (interest income,
for example).
Smart Accounting
1.6.1.2 Importing Results and Granularity
You can import results data for Smart Accounting using the Data Load Layer (DLL). You can find the import
methods in Customizing for the relevant Smart Accounting process step under Methodology.
Prerequisites
● You have created RDL result types.

● You have created RDL result views for Smart Accounting results that are stored in a semantic cluster table.
Activities
Use the of the Data Load Layer (DLL).
Results That Can Be Imported
RDL Result Type (Descrip Smart Accounting Results

tion) RDL Result Category Category (Description) Import
S_SLPD (Smart Accounting: HFSPD 900 (Subledger Document) Not possible

Subledger Document)
S_GLPD (Smart Accounting: HFSPD 950 (Classification Status/ Not possible

General Ledger Document) Holding Category)
S_SCT_STAT (Smart Ac HKAAS 080 (Classification Status/ Possible

counting: Analytical Status) Holding Category)
081 (Impairment Status) Possible1
082 (Write-Down Status) Mandatory
083 (Accrual Status) Possible1
084 (Asset/Liability Status) Not possible
085 (Market Conformity Sta Mandatory

tus)
S_SCT_TVAL (Smart Ac HKTVL 005 (Price Gain/Loss) Possible

counting: Target Values)
Smart Accounting
010 (Accrued Interest (Con Mandatory

tract))
015 (Accrued Interest) Mandatory
020 (Deferrals) Possible
025 (Amortized Cost) Possible
035 (Amortized Valuation Possible

Costs)
050 (Credit Risk Adjust Possible

ment)
051 (Interest Rate Risk Ad Possible

justment)
070 (Fair Value of Collateral) Mandatory
075 (Fair Value) Mandatory
200 (Statement About Con Mandatory

tract Modification)
800 (Free Line) Not possible
901 (Maturity Grouping) Possible
S_CF (Smart Accounting: HKCFR 250 (Contractual Cash Flow) Mandatory

Cash Flow)
251 (Behavioral Cash Flow) Mandatory
252 (Credit Risk Adjusted Mandatory

Cash Flow)
S_SCT_PGD (Smart Account HKPGD 300 (Lot) Not possible

ing: Price Gain Determina
tion)
S_SCT_IMPR (Smart Ac HKIMT 030 (Write-Down (Nominal)) Mandatory

counting: Impairment)
450 (Delinquency) Mandatory
451 (Master Rating) Mandatory
452 (Probability of Default) Mandatory
Smart Accounting
453 (Probability of Default Mandatory

(Subportfolio))
454 (Loss Given Default Mandatory

(Contract))
455 (Loss Given Default Mandatory

(Subportfolio))
456 (Credit Conversion Fac Mandatory

tor (Contract))
457 (Credit Conversion Fac Mandatory

tor (Subportfolio))
458 (Impairment Processing Mandatory

Mode)
Legend for the Import column:
● Not possible: The system is not designed to allow imports and does not support this.
● Possible: The system allows imports. Alternatively, the results can also be created by Smart Accounting
processes. If results are imported, the system applies these imported results and does not overwrite them
with Smart Accounting processes.
● Mandatory: An import is essential if the result is important. No Smart Accounting processes are provided
to create these results.
Special Features
Semantic cluster tables
The following results storage locations are semantic cluster tables:
● Smart AFI: Analytical Status (S_SCT_STAT)

● Smart AFI: Target Values (S_SCT_TVAL)
● Smart AFI: Price Gain Determination (S_SCT_PGD)
● Smart AFI: Impairment (S_SCT_IMPR)
Semantic cluster tables can contain several Smart Accounting result categories that have semantic aspects in
common and are read together in a Smart Accounting process. The Smart Accounting result categories that
are stored together in a sematic cluster table are imported separately according to Smart Accounting result
category. To import the results categories, you need the RDL results views with a structure that matches the
structure of the Smart Accounting result category in each case. These RDL result views are provided in the
Business Content.
Smart Accounting
Granularity of Smart Accounting Results
The following table displays the granularity of Smart Accounting results. Results are expected in Smart
Accounting or created by Smart Accounting either at the granularity level Financial Contract (or loan, referred
to as “Contract” below), Security or Securities Position (combination of a security and a securities account
contract).
You can also manage information referring to securities positions at the granularity level Lot. In selected areas
Smart Accounting allows you to define specific portfolios so that the relevant results can be managed at the
granularity level (Sub-)Portfolio).
Note the respective granularity level when importing results:
RDL Result Type Smart Accounting Results Category Granularity
S_SLPD (Smart Accounting: Subledger 900 (Subledger Document) Subledger coding block
Document)
S_GLPD (Smart Accounting: General 950 (General Ledger Document) General ledger coding block
Ledger Document)
S_SCT_STAT (Smart Accounting: Ana 080 (Classification Status/Holding Cat Contract or securities position
lytical Status) egory)
081 (Impairment Status) Contract or securities position / lot
082 (Write-Down Status) Contract or securities position
083 (Accrual Status) Contract or securities position
084 (Asset/Liability Status) Contract or securities position
085 (Market Conformity Status) Contract or securities position
S_SCT_TVAL (Smart Accounting: Tar 005 (Price Gain/Loss) Business transaction/securities posi
get Values) tion2
010 (Accrued Interest (Contract)) Contract
015 (Accrued Interest) Securities
020 (Deferrals) Contract or securities position / lot
025 (Amortized Cost) Contract or securities position / lot
035 (Amortized Valuation Costs) Contract or securities position / lot
050 (Credit Risk Adjustment) Contract or securities position / lot
051 (Interest Rate Risk Adjustment) Contract or securities position / lot
070 (Fair Value (Collateral)) Contract or securities position / lot
Smart Accounting
RDL Result Type Smart Accounting Results Category Granularity
(075) (Fair Value) Contract or securities position / lot
200 (Statement About Contract Modifi- Contract or securities position

cation)
800 (Free Line) Contract
801 (Maturity Grouping) Contract or securities position / lot
S_CF (Smart Accounting: Cash Flow) 250 (Contractual Cash Flow) Contract or securities position
251 (Behavioral Cash Flow) Contract or securities position
252 (Credit Risk Adjusted Cash Flow) Contract or securities position
S_SCT_PGD (Smart Accounting: Price 300 (Lot)

Gain Determination)
S_SCT_IMPR (Smart Accounting: Im 030 (Write-Down (Nominal)) Contract or securities position
pairment)
450 (Delinquency) Contract
451 (Master Rating) Contract or securities position
452 (Probability of Default) Contract or securities position
453 (Probability of Default (Subportfo Subportfolio

lio))
454 (Loss Given Default (Contract)) Contract or securities position
455 (Loss Given Default (Subportfolio)) Subportfolio
456 (Loss Given Default (Subportfolio)) Subportfolio
457 (Credit Conversion Factor (Sub Subportfolio

portfolio))
458 (Impairment Processing Mode) Contract or securities position
1 Note that the status can either be imported or determined by the Determine Impairment Attributes process
(Impairment Attribute Determination = IAD). The IAD can override impairment and deferral statuses that are
imported from external sources. You can prevent this by using results category 458 to set the impairment
processing mode manually.
2Price gains/losses are determined at the Business Transaction granularity level. The securities position is
managed in the results in addition to the business transaction.
Smart Accounting
Related Information
Smart Accounting [page 4]
1.6.2 Day Processing

● Register Business Transactions [page 63]
● Impairment Attribute Determination (IAD) [page 92]
1.6.2.1 Set Posting Date
You use this transaction to define a posting date up to which the Smart Accounting processes create posting
documents for the specified source systems. For example, the Register process step processes business
transactions only up to this posting date.
Context
Before you register business transactions and master data changes, you need to set a posting date for each
source system. This date defines the latest posting date or the latest business record date for business
transactions and master data changes that are transferred.
The posting date is set as leading in the relevant operational system (source system) (opening of a posting
day). By applying this date, accounting can determine whether a newly registered business transaction might
be a correction (posting date (business transaction) < posting date (source system)) or whether this can be
ruled out (posting date (business transaction) = posting date (source system)).
It is also possible to not report the posting date in accounting until a posting date has been completely
processed (in the subledger and if required in the general ledger), and required end-of-day and period-end
processing has been executed. Therefore, the posting date for each source system must always be earlier than
or equal to the posting date in the operational system. The “earlier than” results only from the requirement
outlined previously.
Procedure
1. On the SAP Easy Access screen, choose Bank Analyzer Processes and Methods Smart Accounting
Subledger Accounting Insurance Contracts Day Processing Set Posting Date .
Smart Accounting
2. Enter the latest posting date required and the source systems.
3. Choose Execute.
1.6.2.2 Register
You use the Register process step to document in accounting all business transactions imported since the step
was last executed and all business transactions not completely or correctly processed in a previous register
run. In addition, the system receives master data changes and analytical decisions, and marks the relevant
contracts or securities positions for end-of-day processing. Prerequisite for this is that the source system is
relevant for Smart Accounting.
You can schedule the Register process step to run as often as required during a day.
 Note
If you start Register runs for different source systems, you need to take various dependencies into account.
For more information, see Dependencies Between Source Systems [page 67].
Prerequisites
● You have made the settings in Customizing for Bank Analyzer under Processes and Methods Smart
Accounting Process Steps for Financial Instruments Register .
● In Customizing for Bank Analyzer under Processes and Methods Smart Accounting Basic Settings
Basic Settings Define Source Systems , you have made sure that the source system is relevant for
Smart Accounting.
● You have set the posting date. For more information, see Set Posting Date [page 62].
Activities
On the SAP Easy Access screen, choose Bank Analyzer Processes and Methods Smart Accounting
Subledger Accounting Financial Instruments Day Processing Register .
1.6.2.2.1 Register Business Transactions
The Register process step transfers operational flow transactions (mapped in the SDL as business
transactions) to Smart Accounting, and documents these as subledger documents.
The system only transfers business transactions to Smart Accounting for which the following conditions apply:
● The posting date of the business transaction is before or the same as the posting date defined for Smart
Accounting.
Smart Accounting
● The business transaction class of the business transaction is relevant for Smart Accounting.
Prerequisites
In Customizing for Bank Analyzer under Processes and Methods Smart Accounting Technical Settings
Define Relevant Business Transaction Classes , you have made sure that the business transaction class is
Process
Register Business Transactions

When the system registers a business transaction, it creates a central GAAP document for each business
transaction item. For more information, see Central GAAP Approach [page 25].
The system specifies which subledger account groups are permitted for creating a subledger document in the
Register process step. It determines the corresponding posting records with the specific subledger accounts
from the business transaction data and the business transaction item. In this way, the system reduces detailed
operational information to a few analytical consequences.
For more information, see Customizing for Bank Analyzer under Processes and Methods Smart Accounting
Process Steps for Financial Instruments Register Account Assignment .
The system determines the subledger coding block [page 31] based on the following data:
● Business transaction header and item

● The first version (valid at the start of the subledger document posting date) of the following:
○ The referenced contract
○ The referenced security
○ The corresponding business partner
○ The corresponding analytical status
The system flags the contract or securities position affected by the business transaction item for end-of-day
processing on the posting date of the created subledger document.
Business Transaction for a Securities Position

In addition to registering the business transaction item, during end-of-day processing the Determine Price Gain
[page 81] process step determines and documents a potential price gain or loss in the event of a position
change.
Business Transaction in Foreign Currency

If the transaction currency or the position currency in the business transaction item differs from the functional
currency, the transaction is a foreign-currency-relevant scenario. The system translates the amounts in foreign
currency using the exchange rate available in the system on the posting date of the business transaction and at
the time of registration.
Smart Accounting
The following foreign currency constellations are possible:
1. Position currency and transaction currency in the business transaction item are the same but differ from
the functional currency.
○ Both subledger accounts of the derived posting record belong to the financial statement segment
Balance Sheet: Assets and Liabilities.
○ P&L in foreign currency: At least one of the subledger accounts of the derived posting record belongs
to the financial statement segment Profit and Loss Statement.
2. Change of payment currency: Position currency and transaction currency in the business transaction item
are different.
In case 1, the subledger document of the Register process step creates preliminary currency positions. In case
2, the document also creates a preliminary equivalent value position, if required.
In end-of-day processing, the Move and Transform process step fixes the exchange rate and posts the amounts
to the following accounts:
● P&L
● Currency Position
● Equivalent Value Position
For more information, see the posting examples under Move and Transform [page 138].
Reversal Business Transaction
Smart Accounting only registers reversal business transactions that carry the business transaction items to be
reversed. You need to define that these kinds of reversal business transactions are reversal business
transactions by value. To do so, you first need to have made the appropriate setting in Customizing for the
business transaction class.
For more information, see Customizing for Bank Analyzer under Source Data Layer Primary Objects Flow
Data Business Transactions Edit Business Transaction Classes .
For documentation purposes, the reversal business transaction can optionally contain the reference to the
reversed business transaction.
The posting date of the reversal business transaction and the posting date of the reversed business transaction
can differ.
The registration of a reversal business transaction follows the same logic as the registration of a business
transaction with the following differences:
● In the document, the system inverts the amount in transaction currency (in other words, it multiplies it by
-1) while keeping the debit/credit indicator. (The amounts with a reference to other currencies are
determined based on the amount in transaction currency according to the usual schema.)
● The reversal indicator is set in the document, and if available, the reference to the reversed business
transaction.
Business Transaction in a Closed Period
If the posting date for a business transaction to be registered is in a closed period, the Register process step
shifts the posting date of the subledger document to be created to the first day of the first open period for each
business transaction item. The posting date of the business transaction remains in the document date of the
subledger document from the Register process step for documentation purposes. In all other scenarios, the
system creates subledger documents using the procedure as previously described.
Smart Accounting
For more information about opening and closing periods, see Close [page 152].
Error Situations (Suspense Accounting)

Business transactions that the Register process step is unable to document correctly remain in the worklist for
this process step until they have been processed correctly.
For more information, see Suspense Accounting [page 243].
Related Information

Set Posting Date [page 62]
Close [page 152]
Suspense Accounting [page 243]
1.6.2.2.2 Register Master Data Changes
The Register process step registers master data changes to contract data, securities data, and business
partner data (mapped in the SDL as a new master data version).
The system only transfers the master data changes to Smart Accounting when the business date of the change
is before or the same as the posting date set for Smart Accounting.
For a master data change (to a contract, security, or business partner), the system marks the contracts or
securities positions affected by the change for end-of-day processing (contract) on the business record date of
the change.
For more information, see Master data change in End-of-Day Processing (Contract) [page 90].
1.6.2.2.3 Register Analytical Decisions
An analytical decision results from a change in an analytical status.
The analytical statuses are as follows:
● Accrual status
● Impairment status
● Holding category
● Fair value level
● Asset/liability status
● Term segment
Smart Accounting
The change in analytical status is imported or, in the case of the accrual status and the impairment status, it
can happen automatically.
For more information, see Impairment Attribute Determination (IAD) [page 92].
An analytical decision is dependent on the accounting principle (represented by the accounting system).
The Register process step only transfers the analytical decisions to Smart Accounting for which the business
date of the decision is before or the same as the posting date set for Smart Accounting.
The system flags the contract or securities position affected by the analytical decision for end-of-day
processing for the accounting system of the analytical decision and for the leading accounting system on the
business date of the change.
For more information, see the Analytical Decision section under End-of-Day Processing [page 90].
1.6.2.2.4 Reregister Business Transactions
If you want the system to register a business transaction, a master data change or an analytical decision with a
posting date or business record date that is before the current posting date defined for Smart Accounting, this
is referred to as a correction.
When the system registers a master data change or an analytical decision due to a correction, it flags already
registered business transaction items for the affected contracts or securities positions to be registered again.
This applies more specifically to business transaction items for which the posting date of the corresponding
Register subledger document is after the date of the correction and at the same time in an open period.
Reregistering business transaction items only has consequences if the master data change or the analytical
decision change the subledger coding block. For each affected business transaction item, the system creates
an inversion document for the existing subledger document, and creates a subledger document for the
business transaction item again.
The system then marks the affected contracts or securities for end-of-day processing on the date of the
correction.
For more information, see End-of-Day Processing [page 90] in the Updating Executed Period-End Process
Steps section.
Related Information
Dependencies Between Source Systems [page 67]
1.6.2.2.5 Dependencies Between Source Systems
If you start Register runs in parallel for different source systems, you need to take various dependencies into
account.
The source systems for the following data can all be different:
Smart Accounting
● Business transactions for contracts or securities positions
● The master data of contracts
● The master data of securities
● The master data of the relevant business partners
● Analytical decisions
The Register process step can be executed at the same time in one run for several source systems.
Dependencies in parallel Register runs
If you have started several Register runs in parallel for different source systems, you need to take various
dependencies into account.
If you ignore these dependencies, lock conflicts can occur. These conflicts mean that objects are not processed
and are put on hold for the next Register run.
Lock conflicts for contracts

Table 8: Case 1
Register Run Source System Source System Data Constraints
1 A Business transactions Register runs 1 and 2 should

not be started in parallel.
2 B Contract master data
Table 9: Case 2
1 A Contract master data Register runs 1 and 2 should

2 B ● Master data for the con
tract business partner
or
Lock conflicts for securities positions

Table 10: Case 1

Smart Accounting
2 B ● Securities account mas

ter data
or
● Securities master data
or
● Master data for the se
curities business part
ner
Table 11: Case 2
1 A Securities account master Register runs 1 and 2 should

data not be started in parallel.
2 B ● Securities master data

or
● Master data for the se
curities business part
ner
or
Dependencies in reregistration
If you register business transactions again, you need to take the following into account regarding the source
systems:
● For contracts:
○ Change to master data of a contract
The system reregisters the business transaction items in the same Register run only if you have
specified the source system for the business transactions in addition to the source system for the
contract master data. Otherwise, the system does not register them until the next run with the source
system for the business transactions.
○ Change to master data for a business partner of a contract or of an analytical decision:
The system only reregisters the business transaction items in the same run if you have specified the
source system for the contract and the source system for the business transactions in addition to the
source system for the master data of the business partner in the contract and the source system for
the analytical decision. Otherwise, the system does not register the business transaction items again
until the relevant subsequent runs.
● For securities:
○ Change to securities account master data:
The system reregisters the business transaction items in the same run only if you have specified the
source system for the business transactions in addition to the source system for the master data of
Smart Accounting
the securities account. Otherwise, the system does not register them until the next run with the source
system for the business transactions.
○ Master data change to a security, the business partner for a security or an analytical decision:
source system for the securities account and the source system for the business transactions in
addition to the source system for the master data of the security, the source system for the master
data of the business partner, or the source system for the analytical decision. Otherwise, the system
does not reregister the business transaction items until the relevant subsequent runs.
Related Information
Register [page 63]

Register Business Transactions [page 63]
Register Master Data Changes [page 66]
Register Analytical Decisions [page 66]
Reregister Business Transactions [page 67]
1.6.2.3 End-of-Day Processing (Business Transaction)
End-of-Day Processing (Business Transaction) generates business transaction-based postings on the basis of
the business transactions registered for a posting date, for all accounting systems in a legal entity.
It executes specific business transaction-based steps for the processing of business transactions on securities
positions. In addition, the currency rates are fixed for the registered FX-relevant business transactions.
The following individual steps are run during End of Day Processing (Business Transaction):
● Define lots
● Allocate Register postings to lots
● Determine price gain
● Move and transform (business transaction)
The first three steps are only relevant for securities positions, however you can use the Move and Transform
process step for transactions on securities positions and contracts.
If a scenario for a securities position (such as a business transaction, master data change or analytical
decision) registered by the Register process step is before a business transaction-related step (that has already
been executed in End-of-Day Processing (Business Transaction)), the system executes the process step again in
End-of-Day Processing (Business Transaction).
This only applies to contracts if scenarios are registered that result in a change to the subledger coding block
(such as a master data change, or analytical decision) and only applies to the Move and Transform (Business
Transaction) process step.
The reference value relevant for a registered business transaction is the posting date of the Register subledger
document. This means that the system re-executes all the business transaction-related steps for the relevant
contract or securities position that were executed on a key date later than the posting date of the Register
subledger document. The reference value relevant for a master data change or an analytical decision is the
Smart Accounting
business record date of the change if it is in an open period. Otherwise, it is the first day of the next open period
after the change.
Prerequisites
You have executed the Register process step. The foreign exchange rates have been imported (for example, the
day's mid-market rate).
Activities
Subledger Accounting Financial Instruments Day Processing End-of-Day Processing (Business
Transaction) .
Related Information
Determine Price Gain [page 81]

Define Lots [page 73]
Allocate Register Postings [page 73]
Move and Transform (Business Transaction) [page 139]
1.6.2.3.1 Lot Accounting
Lot Accounting is used to document securities positions in accounting.
The basis for lot accounting is the division of securities positions into single positions or lots. These lots are
built up by inflows to the securities position and reduced by outflows, according to a defined lot selection
method. An “inflow” is a debit posting to a debit position or a credit posting to a credit position; an “outflow” is
a credit posting to a debit position or a debit posting to a credit position.
In lot accounting, the posting information generated by Smart AFI for the securities position refers to the lots
for the securities position. The system assigns postings to lots when documenting both operational scenarios
and calculated analytical amounts. This involves both postings to balance sheet subledger accounts and to
subledger accounts for the profit and loss statement. Cross-contract postings are not assigned to a lot.
You decide in Customizing whether lot accounting is to be used for a securities position for each accounting
standard (and depending on other master data characteristics of the subledger coding block). You use the
methodology of the price gain determination method derived for the securities position to define whether lot
accounting is used. If the method is assigned to the methodology Price Gain Determination by Lot Selection
Method, lots are created for the securities position and lot accounting is applied.
Smart Accounting
The assignment of an operational flow transaction to lots depends on the operational sequence of all
operational transactions that have been executed for the securities position on a posting day. This means that
the assignment of flow transactions to lots is not stable until all operational transactions for the posting day
have been registered. (A stable assignment cannot be guaranteed when flow transactions are registered during
the day.)
Business transaction postings in foreign currencies are fixed with the currency rates valid at the end of the day.
The system runs the following steps in End of Day Processing (Business Transaction) to document business
transaction postings:
● Definition and update of lots as a result of position changes (Define Lots)

● Allocation of register postings to lots (Register (Allocate to Lots))
● Documentation of prices gains (Determine Price Gain)
● Fixing of foreign currency amounts as a result of the registration of business transactions (Register (Move
& Transform))
If lot accounting is applied to a securities position, the postings (to subledger accounts at the “Contract”
granularity level) generated by the process steps for End of Day Processing (Contract), Period End Processing
(Contract) and Period-Opening Processing (Contract) also refer to lots for the securities position.
This also means that the calculators called by the process steps calculate at lot level and, if required, save their
results at lot level on the database.
If you import a key date value for a securities position or a security (in the case of accrued interest) for
documentation in the subledger, the system scales this according to the nominal value or quantity for each lot
to the lots for the securities position. The process step documents the key date value to the lots referred to in
the subledger documents.
In order to determine the impairment status (in connection with the relevant criterion) an initial master rating
must be defined for each lot and the impairment status must be determined for each lot. The system manages
all other analytical statuses at security position level.
When balance carryforwards are created the assignment of balances to lots remains unchanged.
Information for Notes to Financial Statements is determined by the relevant processes (Determine Fair Value,
Execute Maturity Grouping) at lot level.
Related Information
End-of-Day Processing (Business Transaction) [page 70]

End-of-Day Processing (Contract) [page 90]
Carry Forward [page 155]
Notes to Financial Statements [page 248]
Smart Accounting
1.6.2.3.2 Define Lots
The Define Lot step determines lot results (Smart AFI Results Category 300 (Lot)), if required, and price gain
results (Smart AFI Results Category 005 (Price Gains)) for a position change on a securities position.
The system calls the price gain calculator to do this.
Related Information
Calculation of Price Gains [page 83]
1.6.2.3.3 Allocate Register Postings
The Allocate Register Postings step allocates register postings for a security position to the lot for the security
position.
Cross-contract register postings are not allocated to lots.
The system allocates register postings to lots for securities positions that are handled in lot accounting. (This
means that the price gain determination method derived for the securities position belongs to the Price Gain
Determination According to Lot Selection Method methodology). An allocation document is created for each
register document for each relevant accounting system.
The context defined by the business transaction determines which allocation algorithm is applied to a register
posting. A distinction is made between the following situations:
1. The business transaction changes a position (the business transaction contains a business transaction
item that changes the acquisition value of the securities position)
2. The business transaction does not change a position
○ The register posting to be allocated reduces a short-term receivable
○ The register posting to be allocated does not reduce a short-term receivable (and so could affect a
subledger account that does not belong to the subledger account group 100801 (Receivables/
Payables (Due))
3. The business transaction is the reversal of a business transaction described in 1 or 2
For simplicity, the following description assumes that all business transaction items for a business transaction
affect the same securities position. Any reversal business transactions that are included are referred to
explicitly.
Position-changing business transaction
In the Define Lots step, the position-changing business transaction item is distributed to the lots based on the
lot selection method for the price gain determination. Amount B in position currency for the position-changing
business transaction item is partitioned into amounts Bi per lot Li. In other words, B = ∑i Bi.
Smart Accounting
The amount in transaction currency A in the register posting allocated to Lot Li is given by Ai = A*Bi / B
(following the partition above).
Non-position-changing business transaction
a. Register posting reduces short-term receivable
In this case the register posting is made to a subledger account from the subledger account group 100801
(Receivables/Payables (Due)) and the related business transaction item has the posting direction Credit.
The amount in transaction currency A in the register posting is allocated to the lots in proportion to balance
BALi per lot Li in relation to the total balance BAL of the subledger account for the register posting. Therefore,
the following applies to amount Ai allocated to lot Li: Ai = A*BALi / BAL.
When an overpayment is made (the payment amount is larger than the short-term receivable to be cleared) the
overpayment amount is allocated to the lots in the same way as in the following case.
b. Register posting does not reduce short-term receivable
Amount in transaction currency A in the register posting is allocated to the lots in proportion to quantity
(nominal or number of units) Qi per lot Li in relation to the total quantity Q of the securities position. Therefore,
the following applies to amount Ai allocated to lot i: Ai = A*Qi / Q
Reversal business transaction
In this case there is a register posting for the reversed business transaction that corresponds to the register
posting for the reversal business transaction.
The allocation document for the register posting for the reversal business transaction is created when the
allocation document for the register posting of the reversed business transaction is reset, while retaining the lot
assignment. The following information is transferred from the allocation document for the corresponding
register posting for the reversed business transaction to the new allocation document:
● The amounts in transaction currency allocated to the lots multiplied by -1

● The debit/credit indicator of the relevant document line item
● The assignment of the allocated amount to the respective lot
Furthermore, the reversal indicator is set in the newly created allocation document.
1.6.2.3.3.1 Examples of Lot Allocation
Business transactions
Smart Accounting
Business Transaction Position Quantity (Posi
Posting Date Value Date Transaction BT Item Type Amount tion Change)
January 21 January 23 BT1 1 Purchase 1000 10 units
2 Charge (to pay) 1
February 10 February 12 BT2 1 Purchase 3300 30 units
2 Charge (to pay) 1
February 20 February 22 BT3 1 Purchase 6500 50 units
2 Charge (to pay) 1
March 20 March 22 BT4 1 Sale 2500 20 units
March 22 March 22 BT5 1 Incoming pay 2500

ment
April 4 April 13 BT6 1 Dividends (acti 70

vated)
April 13 April 13 BT7 1 Incoming pay 70

ment
April 13 April 13 BT8 1 Reversal of in 70

coming pay
ment
Register documents
Business Transac Quantity Debit/

Value Transac Reversal Transac tion (Position Credit In Subledger
Date Date tion BT Item Indicator tion Type Amount Change) dicator Account
January January BT1 1 Purchase 1000 10 units D Acquisi

21 23 tion value
Charge (to -1000 C
pay) In-transit
account
payment
clearing
2 Charge (to -1 C Expense

pay) from
1 D
charges
Acquisi
tion value
Smart Accounting
February February BT2 1 Purchase 3300 30 units D Acquisi

10 12 tion value
-3300 C
In-transit
account
payment
clearing

pay) from
1 D
charges
Acquisi
tion value
February February BT3 1 Purchase 6500 50 units D Acquisi

20 22 tion value
-6500 C
In-transit
account
payment
clearing

pay) from
1 D
charges
Acquisi
tion value
March 20 March 22 BT4 1 Sale -2500 -20 units C Acquisi

tion value
2500 D
Receivable
(due)
March 22 March 22 BT5 1 Incoming -2500 C Receivable

payment (due)
2500 D
In-transit
account
payment
clearing
Smart Accounting
April 4 April 13 BT6 1 Dividends 70 D Receivable

(acti (due)
-70 C
vated)
Income
from divi
dends
April 13 April 13 BT7 1 Incoming -70 C Receivable

payment (due)
70 D
In-transit
account
payment
clearing
April 13 April 13 BT8 1 X Reversal 70 C Receivable

of incom (due)
-70 D
ing pay
In-transit
ment
account
payment
clearing
Assignment of business transactions to lots (in the relevant accounting system) FIFO
Business Transac
Date tion BT Item Lot ID Quantity BT in Lot Amount BT in Lot
January 21 BT 1 1 1 10 units 1000
February 10 BT 2 1 2 30 units 3300
February 20 BT 3 1 3 50 units 6500
March 20 BT 4 1 1 -10 units -1250
2 -10 units -1250
Allocation documents (in the relevant accounting system)
No allocation is made for cross-contract document items (in this case postings to the in-transit account for
payment clearing).
Smart Accounting
Algorithm for position changing BT items
The allocation assigns the business transactions to lots:
Business Transac Quantity Debit/ Sub

Value Transac Reversal Transac tion (Position Credit ledger
Date Date tion BT Item Indicator tion Type Amount Change) Indicator Account Lot ID
January January BT1 1 Purchase -1000 -10 units C Acquisi

21 23 tion value
1000 10 units D Acquisi 1

tion value
February February BT2 1 Purchase -3300 -30 units C Acquisi

10 12 tion value

tion value
February February BT3 1 Purchase -6500 -50 units C Acquisi

20 22 tion value

tion value
March 20 March 22 BT4 1 Sale 2500 20 units D Acquisi

tion value
-1250 -10 units C Acquisi 1

tion value
-1250 -10 units C Acquisi 2

tion value
-2500 C Receiva
ble (due)
1250 D Receiva 1
ble (due)
1250 D Receiva 2
ble (due)
Algorithm for BT items in business transaction with other position-changing

items
The system allocates by scaling proportionally based on the assignment of the business transaction to lots. If
there is more than one lot, the system allocates only to the lot that belongs to the business transaction.
Smart Accounting
January January BT1 2 Charge -1 -10 units C Expense

21 23 (to pay) from
charges
1 10 units D Expense 1
from
charges
February February BT2 2 Charge -1 -30 units C Expense

10 12 (to pay) from
charges
from
charges
February February BT3 2 Charge -1 -50 units C Expense

20 22 (to pay) from
charges
from
charges
Algorithm for non-position-changing business transaction without reducing

short-term receivables
The system uses the total current securities position (balance of acquisition value per lot) for the allocation and
scales proportionally:

April 4 April 13 BT6 Divi -70 C Receiva

dends ble (due)
(acti
vated) 20 D Receiva 2
ble (due)
50 D Receiva 3
ble (due)
Smart Accounting
70 D Income
from divi
dends
-20 C Income 2
from divi
dends
-50 C Income 3
from divi
dends
Algorithm for reducing short-term receivables
The system uses the current balance of short-term receivables for each lot for the allocation and scales
proportionally. If an appropriate balance of short-term receivables is no longer available, the remainder is
allocated according to algorithm 3.

March 22 March 22 BT5 1 Incoming 2500 D Receiva

payment ble (due)
-1250 C Receiva 1
ble (due)
-1250 C Receiva 2
ble (due)
April 13 April 13 BT7 1 Incoming 70 D Receiva

payment ble (due)
-20 C Receiva 2
ble (due)
-50 C Receiva 3
ble (due)
Smart Accounting
Algorithm for reversal business transaction
For the allocation of the reversal business transaction, the system reverses the allocation for the reversed
business transaction.

April 13 April 13 BT8 1 X Incoming -70 D Receiva

payment ble (due)
20 C Receiva 2
ble (due)
50 C Receiva 3
ble (due)
1.6.2.3.4 Determine Price Gain
The Determine Price Gain process step documents the nominal price gain for a securities position resulting
from a position change.
The price gain calculator determines the nominal price gain.
For a transaction on a securities position, the Register process step posts the purchase price or sale price
against the balance sheet subledger account 10010102 Acquisition Value (Securities).
The nominal price gain is posted against the balance sheet subledger account 10015101 Acquisition Value
(Securities) Adjustment.
This ensures that the operational quantity Acquisition Value remains reconcilable.
The nominal price gain is recognized in profit and loss and posted against the P&L subledger accounts
40010106 Income: Price (Realized) and 50010106 Expense: Price (Realized).
For a securities position in foreign currency, the system posts the nominal price gain to the preliminary P&L.
The Move and Transform [page 138] process step recognizes the nominal price gain in profit and loss.
Prerequisites
You make the account assignment settings for price gain determination in Customizing for Bank Analyzer
under Processes and Methods Smart Accounting Process Steps for Financial Instruments Register
Account Assignment Determine Price Gain Assign Subledger Accounts .
Smart Accounting
 Note
● On January 21, 10 units of security X are purchased in securities account Y at a total price of EUR
1,000.
● On February 10, 30 units of security X are purchased in securities account Y at a total price of EUR
3,300.
6,500.
● On March 10, 20 units of security X are sold from securities account Y at a price of EUR 2,500.
● The resulting price gain of EUR 100 (see example under Calculation of Price Gains Based on the
Average Cost Method [page 83]) needs to be entered in the accounts accordingly.
This produces the following postings:
Day Processing Process Step D/C Subledger Ac Position Cur Quantity
count rency
January 21 Register D Acquisition Value EUR 1,000 10
C ITA: Payment - EUR 1000

Transactions
February 10 Register D Acquisition Value EUR 3,300 30
C ITA: Payment - EUR 3300

Transactions
February 20 Register D Acquisition Value EUR 6,500 50
C ITA: Payment - EUR 6,500

Transactions
March 20 Register C Acquisition value - EUR 2,500 20
D Receivables (Due) EUR 2,500
March 20 Determine Price D Acquisition Value EUR 100

Gain Adjustment
C Income: Price - EUR 100
Related Information
Calculation of Price Gains [page 83]

Move and Transform [page 138]
Smart Accounting
1.6.2.3.4.1 Calculation of Price Gains
The price gain calculator determines the price gain for a position change on a securities position.
The price gain calculator determines the price gain determination method to be used from Customizing,
depending on the accounting system (and on other master data characteristics of the subledger coding block).
You can use the following methodology to determine the price gain:
● Price Gain Determination Based on the Average Cost Method

● Price Gain Determination Based on Lot Selection Method
● External Import of Price Gain
 Note
Note that it is not possible to change the methodology for a securities position in the system. A change of
methodology may be triggered by a change of holding category or subledger coding block characteristic,
for example.
Note the following additional information if the determination of price gain is based on the average cost method
or on the lot selection method:
● Results of the Price Gain Calculator:

In addition to the price gain results, the price gain calculator also determines lot results for the collective
position (average cost method) or the lots for the securities position (lot selection method) and updates
these from the posting date of the position change onwards. The lot result contains the (average)
acquisition value, the nominal value or quantity, and the creation date of the collective position or of the
corresponding lot. It represents a nominal view by posting date of the collective position or the lots. You
can gain non-nominal views or views by value date by evaluating the balances.
The price gain and lot results of the price gain calculator are saved in the Results Data Layer (Smart AFI
result categories 005 (price gains) and 300 (lot)).
● Processing in the System:
The system processes the position changes to be settled sorted by posting date of the business
transaction. For a given posting date, the system sorts the business transactions in the sequence in which
they were created in the operational system. To do so, the system uses the Date and Time fields from the
operational system. You, therefore, need to provide these values in the business transaction.
● Short-Long Transition:
If a position change leads to a short-long or a long-short transition, it is broken down into an outflow (that
brings the lot quantity down to zero) and an inflow.
● Reversal of a Position Change:
Position changes and reversals of position changes are processed in the same sequence according to the
posting date of the business transaction and creation time in the operational system.
The price gain for a reversal is determined by resetting the price gain of the reversed business transaction.
Reversal chains (reversal of reversals) are not supported.
Prerequisites:
○ If a position-changing business transaction is reversed, all of the business transactions for the same
financial instrument in the same securities account with a later posting date or operational date, or a
later operational time, must be reversed.
○ You need to enter the reference to the reversed business transaction in the reversal business
transaction.
Smart Accounting
○ The reversal and the reversed business transaction must have the same source system. Moreover, the
item number of the business transaction item in the reversal must be the same as the item number of
the reversed business transaction item.
Related Information
Importing Results and Granularity [page 57]

Price Gain Determination Based on the Average Cost Method [page 84]
Price Gain Determination Based on the Lot Selection Method [page 86]
External Import of Price Gain [page 89]
1.6.2.3.4.1.1 Price Gain Determination Based on the Average

Cost Method
In Customizing for Bank Analyzer under Processes and Methods Smart Accounting Process Steps for
Financial Instruments Register Methods Determine Price Gain , you can display the methods for
determining price gain based on the average cost method and define the derivation of methods for price gain
determination.
As part of this methodology, SAP provides the method 0501000 Average Cost Method (Permanent, LTD).
Average cost method The position considered when determining the price gain is
the collective position (defined by the securities account, the
security and the position currency). The reference value is
the average price per security and per unit in the collective
position based on the (average) acquisition value of the col
lective position.
Permanent The system determines the potential price gain for each po
sition change.
The (average) acquisition value that the price gain calculator

uses as the basis for settling a business transaction is taken
only from position changes that were processed earlier
(from an operational perspective) than the business trans
action to be settled (date and time in operational system).
Life-to-date (LTD) To determine the price gain, the system always reverts to the
last status of the lot since the creation of the collective posi
tion.
The (average) acquisition value of a collective position is up

dated as of the creation of the position. There is no periodic
balancing.
Smart Accounting
When there is a position change, the lot result of the collective position is updated (on the posting date of the
business transaction) as follows:
● The adjustment of the quantity or nominal value of the lot (collective position) is calculated by adding the
quantity or the nominal of the position change (taking the plus/minus sign of the business transaction into
account)
● The adjustment of the lot acquisition value (collective position) is calculated as follows:
○ For an inflow (in other words, a debit posting to a debit position (long position) or a credit posting to a
credit position (short position)):
By adding the position amount of the position change (taking the plus/minus sign of the business
transaction into account)
○ For an outflow (in other words, a credit posting to a debit position or a debit posting to a credit
position):
By multiplying the quantity/nominal after the change with the existing price per unit
● The price per unit of the lot (collective position) is calculated by scaling the acquisition value of the lot to
the unit in the lot.
For an outflow, the price gain is calculated as the difference between the following:
● Price of the position change

● Quantity/nominal of the position change multiplied by the existing price per unit of the lot (collective
position)
The price gain for an inflow is 0.
 Example
● On January 21, 10 units of security X are purchased in securities account Y at a total price of EUR
1,000.
3,300.
6,500.
● On March 10, 20 units of security X are sold from securities account Y at a price of EUR 2,500. A price
gain of 100 EUR is created.
Date Type of Posi Quantity Acquisition Quantity Price per Price Gain
tion Change (Position Lot ID (Ini Value (Lot) (Lot) Unit
Change) tial)
January 21 Inflow 10 0 EUR 1,000 10 EUR 100 -
February 10 Inflow 30 0 EUR 4,300 40 EUR 107.50 -
February 20 Inflow 50 0 EUR 10,800 90 EUR 120 -
March 20 Outflow 20 0 EUR 8,400 70 EUR 120 EUR 100 ( =

( = EUR EUR 2,500 –
10,800 – EUR
EUR 20*(10,800/
20*(10,800/ 90))
90))
Smart Accounting
1.6.2.3.4.1.2 Price Gain Determination Based on the Lot
Selection Method
Financial Instruments Register Methods Determine Price Gain , you can display the methods for
determining price gain based on the lot selection method and define the derivation of methods for price gain
determination.
Within this methodology SAP provides the following methods:
Method Description Procedure
0502000 First In First Out (Permanent, LTD) FIFO
The lots are selected in the sequence in

which they were created. The system
defines this sequence by sorting by the
following fields in the business transac
tion that generated the lot, in ascending
order:
● Posting Date
● Date in Operational System
● Time in Operational System
0502100 Last In First Out (Permanent, LTD) LIFO
The lots generated most recently are

selected first (in the same way as FIFO,
only sorted in descending order)
0503000 Lowest In First Out (Permanent, LTD) LOFO
The lots are selected according to the

price per unit for the lot. The lot with
the lowest price is selected first.
0503100 Highest In First Out (Permanent, LTD) HIFO

price per unit for the lot. The lot with
the highest price is selected first.
0504000 Maximum Profit (Permanent, LTD) Maximum Profit

book value per unit for the lot. The lot
with the lowest book value per unit is
selected first.
The method aims to attain the largest

possible profit.
Smart Accounting
Method Description Procedure
0504100 Minimum Profit (Permanent, LTD) Minimum Profit

book value per unit for the lot. The lot
with the highest book value is selected
first.
The method aims to attain the lowest

profit.
Methods according to lot selection method The positions considered for the determination of price gain
are the lots (defined by securities account, security, position
currency and lot ID).
Every inflow (a debit posting to a debit position (long posi

tion) or a credit posting to a credit position (short position))
generates a new lot.
Every outflow (a credit posting to a debit position or a debit

posting to a credit position) reduces one or more lots.
The reference value is the price per unit for the lot. This is
determined from the acquisition value and the nominal value
or the quantity of the lot.
Permanent The system determines the potential price gain for each po
sition change.
The acquisition value that the price gain calculator uses as

the basis for settling a business transaction is only taken
from position changes that were processed earlier (from an
operational perspective) than the business transaction to be
settled (date and time in operational system).
Life-To-Date (LTD) To determine the price gain, the system always reverts to the
last status of the lot since the creation of the collective posi
tion.
The acquisition value of a position is updated from its crea

tion onwards. There is no periodic balancing.
Lot ID
The lot ID identifies a lot generated by an inflow within a securities position. The system assigns an identical
value for each (relevant) accounting system.
The lot ID comprises the fiscal year and the lot number, which is taken from the number range /BA1/BRLOT.
You make the Customizing settings for the number range for each legal entity under Bank Analyzer
Processes and Methods Smart Accounting Basic Settings Legal Entity Define Legal Entities . In the
Basic Settings choose the Lot Number Range button and use transaction SNRO to set up the buffer size.
Smart Accounting
Lot Status
A lot can have the following statuses:
● 01 Active
● 02 Used Completely: This status is used for lots with a nominal value /quantity of 0 where the inflow is not
reversed. Lots that are used completely are only used for the processing of reversals.
● 03 Reversed This status is used for lots for which all business transactions are reversed. Reversed lots are
no longer considered by the Price Gain Calculator.
● 04 Not Reversed Completely: This status is used for lots where the inflow has been reversed but that
contain outflows that have not yet been reversed. Lots that are not completely reversed are only
considered for the processing of reversals.
● 05 Inactive: This status is used for lots that have become obsolete as a result of a rollback (corrections).
Inactive lots are no longer considered by the Price Gain Calculator.
Behavior for a Position Change

The reference values for determining the lot selection method are:
● FIFO, LIFO: The lots are selected in the sequence in which they were created. Here the posting date and the
date and time in the operational system are relevant.
● LOFO, HIFO: Price per unit for lot
● Maximum Profit / Minimum Profit: Book value per unit for lot. To make it possible to compare the lots, the
OCI components (fair value and LCM adjustment) and the accrued interest in the book value are not taken
into account.
When a position is changed, the system updates the lot result on the posting date of the business transaction
for every lot changed in accordance with the lot selection method. The lot result is updated as follows:
● The adjustment to the quantity /nominal for the lot is calculated by adding the quantity /nominal value of
the part of the position change that is allocated to the lot (taking the plus/minus sign of the business
transaction into account).
● The adjustment of the lot acquisition value is calculated as follows:
○ For an inflow: By adding the (partial) position amount of the position change (taking the plus/minus
sign of the business transaction into account). In this case a new lot is generated.
○ For an outflow: By multiplying the quantity/nominal value after the change with the existing price per
unit for the lot, for every reduced lot.
● The price (per unit) of the lot is calculated by scaling the acquisition value of the lot to the unit in the lot.
For an outflow, the price gain is calculated for every reduced lot as the difference between the following:
● Price of the position change

● Quantity/nominal value of the position change allocated to the lot multiplied by the existing price per unit
of the lot
The price gain for an inflow is 0.
A price gain result refers to the original position change and the affected lot. In this way the price gain results
make the assignment of position changes to lots visible.
Smart Accounting
 Note
Position changes in the past using method Maximum Profit / Minimum Profit:
● In an open period: If a business transaction in the past is posted, a rollback is not executed
automatically. Therefore, schedule the process steps for end-of day and period-end processing
manually for every day to keep the book value up-to-date.
● For a closed period: Automatic processing is not supported.
Example: Lot Selection Method FIFO

● On January 21, 10 units of security X are purchased in securities account Y at a total price of EUR 1,000. Lot
1 is created.
● On February 10, 30 units of security X are purchased in securities account Y at a total price of EUR 3,300.
Lot 2 is created.
● On February 20, 50 units of security X are purchased in securities account Y at a total price of EUR 6,500.
Lot 3 is created.
● On March 10, 20 units of security X are sold from securities account Y at a price of EUR 2,500. A price gain
of EUR 250 is created for lot 1 and EUR 150 for lot 2.
Type of Po Quantity

sition (Position Acquisition Quantity Price per
Date Change Change) Lot ID Value (Lot) (Lot) Unit for Lot Price Gain Lot Status
January 21 Inflow 10 1 EUR 1,000 10 EUR 100 Active
February 10 Inflow 30 2 EUR 3,300 30 EUR 110 Active
February 20 Inflow 50 3 EUR 6,500 50 EUR 130 Active
March 20 Outflow 10 1 EUR 0 ( = 0 EUR 250 ( = Completely

EUR 1,000 EUR used
– EUR 2,500/20*1
10*(1,000/ 0) – EUR
10)) 10*(1,000/
10))
March 20 Outflow 10 2 EUR 2,200 20 EUR 110 EUR 150 ( = Active

( = EUR EUR
3,300 – 2,500/20*1
EUR 0) – EUR
10*(3,300/ 10*(3,300/
30)) 30))
1.6.2.3.4.1.3 External Import of Price Gain
In Customizing for Bank Analyzer under Smart Accounting Process Steps for Financial Instruments
Register Methods Determine Price Gain You can define the methods for importing price gain.
Smart Accounting
 Note
The SAP standard value /BA1/5080 must not be imported for characteristic /BA1/C55SRCSYS for the
source system.
The methodology for the import cannot be used for Lot Accounting. Therefore, the fields relating to lots in
result category 005 are not relevant.
Note the following:
● You need to import a price gain (results category 005) that is not equal to 0 with a key date that is the
same as the posting date of the business transaction for every position-changing business transaction
(including reversals). If no price gain is entered, the system interprets this as 0.
● If you correct price gains that have been imported incorrectly and have already been posted, you must then
reset end-of-day processing (business transaction) (transaction /BA1/BR_PCSTAT_RESET) to ensure that
the corrected prices gains are posted.
Related Information
1.6.2.4 End-of-Day Processing (Contract)
Using a contract-based approach, end-of-day processing reacts to scenarios (such as business transactions,
master data changes or analytical decisions) registered by the Register process step in the following ways:
1. Business transaction in foreign currency

End-of-day processing executes the Move and Transform process step for FX-relevant business
transactions posted by the Register process step.
For more information, see Use Case 1 in the Move and Transform documentation.
2. Master data change
For a master data change that changes the subledger coding block for the contract or securities position,
end-of-day processing closes the period for the contract or securities position for all accounting systems
(assigned to the legal entity). It does so by executing appropriate period-end process steps using the
subledger coding block before the master data change. As a result, the system assigns the determined
contributions to the P&L to the subledger coding block before the master data change. Afterwards, the
Classify process step reclassifies the position balances to the updated subledger coding block.
For a master data change in a closed period, end-of-day processing does not close the period but simply
executes the Classify process step at the start of the first day of the first open period after the master data
change.
 Example
At the end of every month the system updates the position components. During the period (for
example, on March 15), there is an indirect change to the profit center due to a change in the contract
manager. The system needs to assign the calculated amounts for the profit and loss statement that
have arisen up to and including March 15 to the old profit center. The new profit center then receives all
Smart Accounting
amounts that arise as of March 16. To enable this, the system executes the process steps of period-end
processing in end-of-day processing for the relevant contract only.
3. Analytical decision
For an analytical decision (due to a change in analytical status) for a contract or securities position, end-of-
day processing closes the period for the accounting system of the analytical decision for the contract or
securities position using the subledger coding block before the analytical status change. As a result, the
system assigns the P&L contributions determined when the period was closed to the subledger coding
block before the analytical status change.
You execute end-of-day processing for the leading accounting system (of the relevant legal entity). If the
accounting system of the analytical decision is different from the leading accounting system, the system
executes only the Accrue process step for the contract or securities position on the date of the analytical
decision. End-of-day processing for the accounting system of the analytical decision executes the
remaining period-end process steps required for closing the period. In the Classify process step, it then
reclassifies the position balances to the updated subledger coding block after the analytical status change.
For an analytical decision in a closed period, end-of-day processing does not close the period but simply
executes the Classify process step at the start of the first day of the first open period after the analytical
decision.
4. Updating executed period-end process steps
If a scenario (such as a business transaction, master data change or analytical decision) registered by the
Register process step is before a contract-related, period-end process step (that has already been
executed in end-of-day processing or period-end processing), the system executes the process step again
in end-of-day processing. The system also updates the Move and Transform process step.
The reference value relevant for a registered business transaction is the posting date of the Register
subledger document. This means the system re-executes all the period-end process steps for the relevant
contract or securities position that were executed on a key date later than the posting date of the Register
subledger document. The reference value relevant for a master data change or an analytical decision is the
business record date of the change if it is in an open period. Otherwise, it is the first day of the next open
period after the change.
 Note
The system does not update cross-contract period-end processing automatically. We recommend that you
execute cross-contract period-end processing again before you close a period.
Prerequisites
You have run business-transaction-based end-of-day processing.
For processing changes to the subledger coding block, you need to provide target values for updating position
components beforehand.
Activities
Subledger Accounting Financial Instruments Day Processing End-of-Day Processing (Contract) .
Smart Accounting
Related Information

Register [page 63]
1.6.2.5 Impairment Attribute Determination (IAD)
In the Impairment Attribute Determination (IAD) process, you define the impairment status and accrual status.
Prerequisites
Smart Accounting Subledger Coding Block Analytical Statuses :
● Under Define Accrual Status, you define the threshold values in days past due for determining the accrual
status.
● Under Define Impairment Status, you first define impairment statuses and specify which of the statuses
are start values. In further steps, assign the impairment statuses to accounting systems and define the
derivation of the statuses by days past due and master rating.
Activities
Determine Impairment Attributes
Subledger Accounting Financial Instruments Day Processing Determine Impairment Attributes .
Determine Impairment Attributes Periodically
You can also determine impairment attributes for the total position or a subposition periodically.
Subledger Accounting Financial Instruments Preparatory Processing Determine Accounting Status
Determine Impairment Attributes Periodically .
You need to use periodic processing if you are determining the impairment attributes using a relative criterion.
To do so, choose the BAdI in Customizing for Bank Analyzer under Processes and Methods Smart
Accounting Technical Settings Business Add-Ins (BAdIs) BAdI: Determination of Impairment Status at
Subportfolio Level .
Smart Accounting
Process
The process is started for a key date. The accrual status and the impairment status are redetermined for
contracts for which delinquency bands and/or master ratings have been imported up to this date.
Determine accrual status
The process determines the accrual status for each accounting system based on the defined threshold value in
days past due.
Determine impairment status
The process determines the impairment status for each accounting system. The criteria for this are the due
dates (based on threshold logic) and the master rating. For the master raring, the status can be determined
using either absolute or relative criteria (in other words, a downgrade in rating in relation to the initial rating). If
there are both days past due and a master rating during an impairment status determination, the system uses
the lower quality status as the result.
Result
The IAD process writes the impairment status and accrual status as the result. They are saved only if there has
been a change. The IAD process also informs the Register process of an analytical decision (through the status
change) by storing the underlying contract or the underlying securities position in the Register worklist.
Special Features
Retroactive change
If rating information or delinquency information is adjusted retroactively, the IAD process updates the status
values it has generated. All status values with a key date that is later than the key date of the imported values
are redetermined.
Status change in closed periods
The IAD process determines statuses without taking posting periods into account. Even if the posting period is
closed, retroactive changes to impairment statuses or accrual statuses are written for key dates. The resulting
posting documents that are created by end-of-day processing are carried forward to the next open period in
the posting date dimension. The document date preserves the information about the status change.
Determination of initial master rating
To enable it to determine the impairment status based on relative changes to the master rating, the system
saves the initial master rating. The system does this for contracts when a master rating is first imported, and
for securities positions when the first inflow occurs on a securities account.
Smart Accounting
Embedding in processing
The IAD process is not integrated into the Smart AFI process controller. The worklist for the process is created
at the contract and securities granularity level, and is updated when master ratings or delinquency information
(delinquency bands) are imported for the relevant contracts and securities. You can run the process daily or
periodically according to your requirements. After the IAD process, you need to execute a Register run for the
source system /BA1/IAD so that the status changes generated by the IAD process lead to the required
accounting reactions in the latest end-of-day processing on the key date.
Overwriting the impairment status
You can overwrite the impairment status. To do so, choose the BAdI in Customizing for Bank Analyzer under
Processes and Methods Smart Accounting Technical Settings Business Add-Ins (BAdIs) BAdI:
Overwrite Impairment Status .
Related Information
Register [page 63]
1.6.3 Period-End Processing
done.
Period-End Processing (Contract)
Contract-based period-end processing allows you to execute the following process steps:
1. Accrue
2. Defer
3. Write Down
4. Release
5. Value TC
6. Move and Transform
Smart Accounting
7. Value FX
8. Classify
You can execute only a subset of the process steps for different time periods by choosing the corresponding
period closing variants when you execute period-end processing. The process step sequence prescribed in the
accounting process model and the dependencies must be adhered to.
Period-end processing (cross-contract)
Cross-contract period-end processing executes the Value FX step for subledger accounts that are managed at
cross-contract granularity level (dimensions of financial statement entities).
Subledger accounts that are managed at cross-contract granularity level are suspense accounts. These are
created in double-entry bookkeeping when operational flow transactions are documented in accounting
between several contracts and/or several source systems.
 Example
In operational system A (loan processing), USD 10,000 is paid out on loan X on posting date March 30
(business transaction 1).
In operational system B (account processing), this USD 10,000 is credited to checking account Y on
posting date April 1 (business transaction 2).
● The functional currency is EUR.

● Both business transactions have the same value date.
● Due to operational inaccuracies, there is a difference in posting dates between the two business
transactions.
● The balance sheet key date is March 31.
The following documents are created independently of each other as a result:
Document 1
Business transaction March 30 D Loan X USD 10,000

1
March 30 C Suspense account USD -10,000
Document 2
Business transaction April 1 D Suspense account USD 10,000

2
April 1 C Checking account Y USD -10,000
On March 31, the suspense account has a credit balance of USD 10,000. This balance is transferred to the
foreign currency valuation (Value FX) process step on March 31 with the exchange rate valid on March 31.
Smart Accounting
Prerequisites
● Period-end processing (contract-based)

You have executed end-of-day processing for business transaction and contract up to and including the
posting date for period-end processing that you want to execute.
● Period-end processing (cross-contract)
You have executed contract-based period-end processing for all source systems that provide amounts on
subledger accounts that are updated in cross-contract period-end processing.
Activities
To execute contract-based period-end processing, on the SAP Easy Access screen, choose Bank Analyzer
Processes and Methods Smart Accounting Subledger Accounting Financial Instruments Period-End
Processing Period-End Processing (Contract) .
To execute cross-contract period-end processing, on the SAP Easy Access screen, choose Bank Analyzer
Processing Period-End Processing (Cross-Contract) .
Enter the following parameters when you execute the process:
● Legal entity
● Accounting system
● Source system (only for contract-based processing)
● Posting date
● Period closing variant
● Special period
You need to enter a special period only if you execute period-end processing on the last day of a fiscal year
and your fiscal year variant has special periods.
Related Information

Accrue [page 97]
Defer [page 99]
Release [page 115]
Value TC [page 125]
Value FX [page 144]
Classify [page 146]
Smart Accounting
1.6.3.1 Accrue
The Accrue process step documents changes to accruals.
The system updates the accounting balance of accruals (subledger account groups 100201 and 100211) for a
specified posting date at the granularity level of the individual contract. For securities it updates it at the
granularity level of securities position or lot. The system generates subledger documents specifically for the
relevant accounting standard. The balance of an accrual belongs to the contract-managing system and must
be imported from it.
The process step is executed only for the leading accounting system.
Prerequisites
● You have viewed the subledger accounts for the Accrue process step in Customizing for Bank Analyzer
under Processes and Methods Smart Accounting Process Steps for Financial Instruments Accrue
Subledger Chart of Accounts .
● You have viewed the combination of subledger accounts provided by SAP for postings in the Accrue
process step, have edited these, or added your own combinations in Customizing for Bank Analyzer under
Processes and Methods Smart Accounting Process Steps for Financial Instruments Accrue
Account Assignment . If required, you have made more detailed settings for the assignment of accounts
for expense and income by specifying change reasons.
If you are importing several accrual items (/BA1/C55ACCAT) for the same contract you have assigned
these to one or more subledger accounts.
● In Customizing for Bank Analyzer, under Processes and Methods Smart Accounting Technical
Settings Define Results Storage , you have defined where accrual results (“010”) and accrued interest
(“015”) are stored in the Results Data Layer (RDL).
● You have imported the relevant accrual items using the Data Load Layer, and stored them in the Results
Data Layer.
Process
To update the accounting balance of an accrual, the system determines the balance from the subledger
documents on the relevant subledger accounts (actual value) and compares this to the imported target
balance (target value). The difference is documented as a subledger document.
 Note
If you do not import a target value, the system uses “0” as the target balance.
Smart Accounting
Background
An accrual is the assignment of future expense or income to the appropriate period in which it is recognized.
Reporting income and expense in the correct accounting period is one of the main tasks of accounting.
The following example illustrates how the accruals for a time deposit with the following parameters develop:
● Interest payment at maturity

● Term: 1 year
● 100 MU paid into time deposit
● Interest rate 12 % p.a.
● Accruals = 1% p.m. = 1 MU per month
Based on this data, the accruals develop as illustrated in the figure below (at the end of the term they are
cleared by the payment of the interest amount to the customer):
At the end of the one-year term, the amortized costs are 112 MU because monthly interest of 1 MU has been
posted as accruals.
Related Information

SAP Note 1958115
Change Reasons [page 53]
Smart Accounting
1.6.3.2 Defer
The Defer process step documents changes to deferral items for each contract, securities position or lot.
The changes have been posted to the subledger account groups 100301 -Deferrals Income and 100311 -
Deferrals Expense beforehand in the Register process step.
The Defer process step also includes accounting for contracts that have been set to non-accrual (see Non-
Accrual [page 109]).
One of the key tasks of accounting is to report revenues and expenses in the correct accounting period. The
Defer process step is an analytical process step with GAAP-dependent results that are documented as delta
GAAP documents. The deferrals are calculated by the deferral calculator.
Prerequisites
Financial Instruments Defer Account Assignment Assign Subledger Accounts , you have viewed or
edited the combinations of subledger accounts for postings in the process step Defer provided by SAP, or have
added your own combinations. If required, you have made more detailed settings for the assignment of
accounts for expense and income by specifying change reasons.
Process
1. To update the accounting balance of a deferral, the system uses the subledger documents in the relevant
subledger accounts to determine the current balance before it executes the Defer process step for each
deferral.
2. The deferral calculator provides the target value of the deferral. For more information, see Calculation of
Deferrals [page 100].
3. The system calculates the difference between the accounting balance (actual value) and the target value in
transaction currency. The difference is documented as a subledger document. The system creates a
document only if there has been a change since the last deferral date/time.
For a cash-flow-based deferral, the system distributes the time effects and one-time effects in proportion
to the balances on the relevant subledger accounts. For more information, see Distribution to Subledger
Accounts [page 106].
 Note
You can view the subledger accounts for the Defer process step in Customizing for Bank Analyzer, under
Processes and Methods Smart Accounting Process Steps for Financial Instruments Defer
Smart Accounting
Related Information

Lot Accounting [page 71]
1.6.3.2.1 Calculation of Deferrals
In the calculation of deferrals, target values are provided for documenting the Defer process step in accounting.
The calculation is carried out by the deferral calculator.
Process
1. The deferral calculator checks the lifecycle segment of the contract or security. When the lifecycle
segment Contract End (40) is reached, the deferral calculator returns the target value zero.
2. In Customizing, the deferral calculator determines the deferral method to be used based on the accounting
system. The following methods are available:
○ Import of deferrals
○ Contract-based deferrals
○ Cash-flow-based deferrals
○ Business-transaction-based deferrals
 Note
If no suitable method has been defined for the import of deferrals, the deferral calculator reverts to a
suitable contract-based deferral method. If no suitable contract-based deferral method has been
defined either, the deferral calculator searches for a suitable cash-flow-based deferral method. If a
suitable cash-flow-based deferral method is also missing, the deferral calculator uses a suitable
business-transaction-based deferral method.
Result
The deferral calculator calculates the new deferral amount and provides the result to the Defer process step.
When discounting cash flows using the effective interest rate, the deferral calculator also transfers the totals of
one-time effects and of effects from payments that have a value date before and a due date after the evaluation
key date.
Smart Accounting
Related Information
Defer [page 99]

Cash-Flow-Based Deferrals [page 101]
Business-Transaction-Based Deferrals [page 108]
1.6.3.2.1.1 Cash-Flow-Based Deferrals
For cash-flow-based deferrals, the deferral calculator applies the effective interest rate method to calculate the
target value of the deferral based on the amortized cost.
The following cash flow categories are supported for this:
● Contractual cash flow

● Behavioral cash flow
● Credit-risk-adjusted cash flow
Prerequisites
You are aware of the following standard settings in Customizing for Bank Analyzer under Processes and
Methods Smart Accounting Process Steps for Financial Instruments Defer Methods Deferrals , and
have made your own settings if required:
● Under Definition Define Methods for Cash Flow-Based Deferral Methods , you can make the following
settings:
○ Which validity ranges (minimum and/or maximum interest rates) are permitted for the effective
interest rate
○ The underlying cash flow category
○ Whether, apart from a significant modification, only a rollover, also a condition change or any cash flow
change triggers a recalculation of the effective interest rate
○ Whether a different interest calendar is used than the one used in the contract
○ Whether a different day count convention is used than the one used in the contract
○ Whether zero distribution is suppressed. In other words, whether the amortized cost is still calculated
if no deferral is required (for example, if a financial instrument is issued without premium/discount)
○ Whether time effects and one-time effects are separated
○ Whether, for performance reasons, only the posting date is considered as the discounting date and not
the value date of the cash flow in addition. (If the posting date and the value date are identical or if a
value date can not be imported from the feeder system, for example.)
○ Whether amounts from documents that have been posted directly to the profit and loss statement are
also to be used for the calculation of the effective interest rate for securities.
Note that in this case, you need to add the characteristic /BA1/C35TRXTYP (transaction type) as
business transaction characteristic to the subledger coding block.
Smart Accounting
● Under Derivation Derive Cash-Flow-Based Deferral Methods , you can define the derivation of
deferral methods according to accounting system. You can use all the master data characteristics of the
subledger coding block for the derivation (for example, product segment, holding category, production
control and lifecycle segment).
For more information, see the documentation in the Customizing activities in the system.
Process
1. The deferral calculator uses the Customizing settings for the effective interest calculation described above
to call the method for discounting cash flows using the effective interest rate (see Discounting Cash Flows
Using the Effective Interest Rate [page 104]) .
2. The method returns the following values:
○ The effective-interest-rate-based net present value
The effective-interest-rate-based net present value corresponds to the amortized cost.
○ The total one-time effects arising from cash flow changes for each change reason
○ The total effects from payments with a value date that is before the evaluation key date but a due date
that is after the evaluation key date.
3. The deferral calculator calculates the target value of the cash-flow-based deferral for contracts from the
amortized cost, the unpaid principal balance (UPB) and the accruals. For securities, the deferral calculator
calculates the difference between the amortized cost, the acquisition value adjusted for price gains or
losses, and the accruals.
 Note
Any references made below to “receivables/payables” or “UPB” in the context of securities refer to the
acquisition value adjusted for price gains or losses.
The calculation of the target value described can be expressed in the following formula:
Figure 2: Calculation of the deferral amount
DEF = amount of the cash-flow-based deferral item

AC = amortized cost
UPB = unpaid principal balance
AI = amount of accrual item
4. The deferral calculator transfers the target value of the cash-flow-based deferral and the total of the effects
mentioned above to the Defer process step.
Smart Accounting
Background
The figure below shows the book value components for UPB, accrual and deferral (negative here) in relation to
the amortized cost.
 Note
You want to report a loan contract at amortized cost in the balance sheet. For the contract, you charge a
discount that is due at the start of the contract and reduces the disbursement amount. Therefore, a
deferral over the fixed interest rate period is needed for the discount so that the deferral item amount is
zero at the end of the fixed period. The function for cash flow discounting calculates the effective interest
rate based on future cash flows (interest, fees and repayment) and on the reduced disbursement amount.
Based on the effective interest rate, the system determines the amortized cost and calculates the target
value of the deferral item.
Related Information
Defer [page 99]
Smart Accounting
1.6.3.2.1.1.1 Discounting Cash Flows Using the Effective
Interest Rate
The discounting of cash flows using the effective interest rate (EIR) is relevant for the calculation of deferrals
and valuation remnants. The system determines the following key figures:
● Net present value

● Effective interest rate
● Total of one-time effects (catch-up adjustment, modification), and the time effects for each change reason
● Defer: Total effects from payments with a value date that is before but a due date that is after the
evaluation key date
Relevant Quantity of Payments
The quantity of payments for a contract or securities position that are relevant for discounting usually
comprises payments that are expected in the future (cash flow) from an evaluation key date perspective. The
individual expected payments are gradually replaced on their respective due dates by business transactions
from actual payments.
Depending on the setting in Customizing, the posting date or the value date in the Defer process step is
relevant as the discounting date for the determination of the effective interest rate. In the Release process step
the posting date is always relevant.
If the value date is relevant for the determination of the effective interest rate, payments (business
transactions) that are in the past from an evaluation date perspective are also included in the discounting. At
least one of the following conditions must be met:
● The initial effective interest rate must have been determined.

● There is a business transaction with a value date in the past.
● A backdated cash flow is imported.
The system includes only payments with a value date that is later than or the same as the start of the current
reporting period.
 Note
In the context of discounting of cash flows with the effective interest rate, the term “cash flow” also
includes business transactions to which the conditions listed above apply.
 Note
In the case of contractual and behavioral cash flow categories, on every evaluation key date the system
checks whether the imported cash flow matches the balance of the posted unpaid principal balance (UPB).
If the check fails, the system distributes the current balance of the deferral or valuation remnant across the
fixed interest rate period of the contract using the straight-line method.
Smart Accounting
Net Present Value
The net present value (NPV) of a cash flow is determined by discounting the cash flow with the effective
interest rate (reff) to the evaluation key date (t). For the determination of the net present value in day
processing and period-end processing, the evaluation key date is included in the calculation.
Figure 3: Calculation of Present Value Based on Effective Interest Rate (Continuous Compounding)
 Note
The interest calculation method is crucial for the calculation of the time period between t and time point ti
of cash flow CF i (which is after the evaluation key date).
Effective Interest Rate
The initial effective interest rate is calculated using the following conditional equation at time point t0 of the
first payment:
Figure 4: Conditional Equation for Initial Effective Interest Rate
If the cash flows changes at time t1, the system either calculates the one-time effect (catch-up adjustment
CUA) or the effective interest rate is recalculated, depending on the settings in Customizing.
The one-time effect is calculated as the difference in the present values of the old cash flow and the new cash
flow while retaining the effective interest rate.
Figure 5: Calculation of the One-Time Effect
The following conditional equation is used for the recalculation of the effective interest rate:
Figure 6: Conditional Equation for Effective Interest Rate Recalculation
Prerequisites
Settings Define Results Storage , you have set up the results storage for the following Smart Accounting
result categories:
○ 200 (Statement About Contract Modification)
○ 250 (Contractual Cash Flow)
○ 251 (Behavioral Cash Flow)
Smart Accounting
○ 252 (Credit-Risk-Adjusted Cash Flow)
● You have ensured that cash flows are imported for contract creation and for every cash flow change (for
example, due to a condition change, rollover or unscheduled payment or disbursement).
Process
1. The system reads the imported cash flows and checks for the contract or securities position whether an
effective interest rate has already been determined for an earlier cash flow version and saved as an interim
result. For securities, the system scales the imported cash flow according to the securities position.
○ If no effective interest rate has been calculated before, the system calculates the initial effective
interest rate.
○ If an effective interest rate was already calculated before, the system determines which modification
type is the basis for the cash flow change. If there is a smaller change (non-significant modification),
the system determines which event triggered the cash flow change:
○ If both the valid-from date and the valid-to date for the cash flow have moved, the system
assumes that it is a rollover.
○ If only the valid-from date for the cash flow has moved, the system assumes that it is a condition
change.
○ If the date information remains the same, the system assumes that it is another cash flow change
(for example, a special repayment).
For a larger change (significant modification) and a rollover, the system always recalculates the
effective interest rate. For a condition change or other cash flow change, the system determines
(based on your Customizing settings) whether the effective interest rate needs to be recalculated.
If the effective interest rate does not need to be recalculated, the system uses the effective interest
rate stored as an interim result. If the effective interest rate needs to be recalculated, the system
carries out the following activities:
○ The system calculates the new effective interest rate. It takes into account the day count
convention defined in Customizing, if relevant, and the interest calendar to be used.
○ If you have assigned a validity range (minimum and/or maximum interest rate) in Customizing for
the calculation of the effective interest rate, the system checks whether the effective interest rate
calculated is within this validity range. If this is not the case, the system executes amortization
across the fixed interest rate period using the straight-line method, and issues a warning in the
process log.
2. If you have made the appropriate settings in Customizing, the system calculates the total of the one-time
effects.
3. The system calculates the total effects from payments with a value date or posting date that is before but a
due date that is after the evaluation key date.
4. The system determines the net present value by discounting the cash flow using the effective interest rate.
1.6.3.2.1.1.2 Distribution to Subledger Accounts
The system distributes the effects to the relevant subledger accounts in proportion to the balances. If the
balances on the relevant subledger accounts are zero, the system posts the effects to the subledger accounts
predefined by SAP in the relevant subledger account group.
Smart Accounting
Time effect
Let us assume that balance D1 of deferrals or valuation remnants at time t1 is distributed across the two
accounts A and B with the balances A1 and B1; where A1 and B1 are not equal to zero:
The new target balance D2 at time t2 > t1 is to be distributed between the two accounts again:
This is achieved using the following distribution:
Where:
To ensure that the individual balances approach zero at the end of the fixed period, the balances are first scaled
proportionately to the remaining write-down period. In other words, they are multiplied by the following factor:
One-time effect
If there is a one-time effect, the system first distributes this proportionately to the amounts to A1 and B1, and
then distributes the difference remaining (the time effect) with a time factor and proportionately to the
amounts.
Effect from payments with a value date before but a due date after the
evaluation key date
The following applies to the Defer process step: If there is an effect from payments with a value date before but
a due date after the evaluation key date, the system distributes the effect proportionately to the amounts
Smart Accounting
before it distributes the one-time effect. Based on this result, the system then distributes any one-time effects.
It then distributes the time effect.
1.6.3.2.1.2 Business-Transaction-Based Deferrals
For business-transaction-based deferrals, the deferral calculator uses the straight-line method to calculate the
target value of the deferral item at the granularity level of the individual business transaction. The deferral
calculator aggregates the target value at contract level, and transfers the aggregated target value to the Defer
process step.
You have the following options for determining the deferral period:
● From the business transaction

The deferral period is imported from the feeder system by the business transaction: The system uses the
value date of the business transaction as the start date and the date from the Calculate To characteristic
(/BA1/C11CALCT) as the end date.
● From Contract (start and end of term or fixed interest period)
The system reads the deferral period from the contract master data (in other words, from the start and
end of the fixed interest period or the contract term).
● Accounting-Based
Since it is not imported or provided from elsewhere, you define the deferral period according to your
requirements in accounting by specifying a length and time unit (for example, 1 year).
The start date and end date are each included in the calculation. This means that in end-of-day processing and
period-end processing deferral for one day already has to be carried out on the first day of the calculation
period.
The system uses the following formula to calculate business-transaction-based deferrals:
DEF = deferral amount
k = key date
s = start date
e = end date
Prerequisites
You are aware of the standard settings in Customizing for Bank Analyzer under Processes and Methods
Smart Accounting Process Steps for Financial Instruments Defer , and have made your own settings if
required:
● Under Methods Deferrals Definition Define Business-Transaction-Based Deferral Methods , you

can define custom methods with periods that have an accounting origin.
Smart Accounting
● Under Methods Deferrals Derivation Derive Business-Transaction-Based Deferral Methods , you
make settings for the derivation of the deferral methods.
● Under Account Assignment Assign Subledger Accounts , you can make more detailed settings for the
offsetting postings to expense and income accounts and, if necessary, edit the combination of subledger
accounts provided by SAP or add your own combinations.
 Note
The following example illustrates how the business-transaction-based deferrals for a checking account with
the following parameters develop:
● Fee of 12 monetary units (MU) paid when account is opened

● Distribution of the fee over 1 year
● Deferral = 1 MU per month
Based on this data, the deferral develops as illustrated in the figure below:
The prepaid fees are broken down pro rata over the remaining term so that the deferrals are reduced from
12 MU to 0 MU.
1.6.3.2.2 Non-Accrual
If it is no longer likely that a contract partner will meet their contractual obligations, you can identify contracts
and securities positions for non-accrual processing. This means that value date income continues to be
collected or invoiced from an operational perspective, but does not need to be reported as income.
 Note
The non-accrual state is purely an accounting status, and is used solely to control the profit and loss
statement. From an operational system perspective, receivables due can continue to be recognized as
debit entries in spite of delinquency.
Smart Accounting
In Smart AFI, the non-accrual state is determined by the analytical Accrual Status. Under Smart Accounting
for Financial Instruments Subledger Coding Block Analytical Status Define Accrual Status , you can
assign each accounting system a threshold value for the accrual status in days past due.
Since the accrual status is set based on accounting system, the non-accrual method cannot be applied until
the first GAAP-dependent process step runs; in other words, the Defer process step. The non-accrual
methodology of the Defer process step offsets value date income items generated in the Register, Accrue and
Defer process steps by transferring them to the corresponding offset accounts.
 Note
For the sake of simplicity, the deferral methods of the Defer process step are also not affected by this status
in the system. The non-accrual method also clears the value date income that has arisen there.
 Example
● A borrower has been in arrears with the payment of a loan installment for more than 90 days. For the
accounting principle IFRS 9, there is now an objective indicator that the customer will also not pay
further loan installments.
From an operational perspective, the customer is invoiced with all further loan installments and
charged with interest on arrears if applicable. However, from a financial reporting perspective these
interest debit entries should not be recognized in profit or loss because it cannot be expected that
these open items will be paid. In financial reporting, this is referred to as applying the non-accrual
method.
● On September 14, a debit entry of EUR 10 is made for interest on a loan, and is capitalized against the
receivable. The contract has been in default for 65 days, meaning that under US GAAP it is treated as
non-accruing, while under IFRS it has not yet reached this status. In the Register process step, the
debit entries are first transferred to accounting for all accounting systems.
Process Step D/C Subledger Account Amount Accounting Sys

tems
Register D Receivables/Paya EUR 10 All

bles (Not Due)
C Income Interest EUR -10
Note that the Register process step runs for all accounting systems (central GAAP) and therefore has
no specific knowledge about GAAP-specific decisions. For US GAAP, this value date income is now
offset in the Defer process step.
Process Step D/C Subledger Account Amount Accounting Sys

tems
Defer D Income Interest EUR 10 US GAAP
C Offset Interest In EUR -10

come
For the value date non-accrual method, the system uses the subledger account group 100391 Offset
(Income) Under Non-Accruing. The accounts in this subledger account group are balance sheet
Smart Accounting
accounts. This means that rather than an increase in a value date income, they represent a reduction in
a balance sheet asset. You can decide whether the financial statement subsegment of the book value
or a due item is reduced.
Prerequisites
You have assigned an income account to an offset account in Customizing under Smart Accounting for
Financial Instruments Charts of Accounts Subledger Chart of Accounts Profit and Loss Statement
Assign Income Accounts and Offset Accounts . You can assign one offset account from subledger account
group 400101 to every income account from the subledger account group 100391. This enables you to
determine which offset account you want to post the value date income to.
Methodology
You define the non-accrual methods under Smart Accounting for Financial Instruments Process Steps
Defer Methodology Non-Accrual Definition of Non-Accrual Methods Define Non-Accrual Methods .
You define the rules for deriving non-accrual methods according to the relevant accounting standard under
Smart Accounting for Financial Instruments Process Steps Defer Methodology Non-Accrual
Derivation of Non-Accrual Methods Derive Non-Accrual Methods .
In the non-accrual methods, you can define the following properties for each offset account:
● Analysis period for the income postings relevant for non-accrual processing.
● Limit for the balance of the offset account (for example, an upper limit of zero and if required the balance of
the assigned reference account).
We provide the following methods with the following properties:
Method Period Offset Account Limit
1011000 Cost Recovery Method Non-accrual period None
1011001 Cash Method Reporting period Reference account balance
Cost Recovery Method

In the cost recovery method, all value date income for the current fiscal year with the accrual status Non-
Accruing is transferred to the respective offset account assigned to the income account. This means that in the
non-accrual state, no value date income is recorded in the profit and loss statement, and the balance sheet
asset is reduced.
Cash Method
In the cash method, value date income for the current fiscal year (reporting period) is transferred to the offset
account assigned to the corresponding income account. The system limits the balance of the offset account
Smart Accounting
using the balance of a reference account from the subledger account group 100801 (Receivables/Payables
(Due)). As a result, only value date income for which there is an outstanding receivable is transferred to the
offset account. Value date income for which there are no more open receivables, remains in the profit and loss
statement (unlike in the cost recovery method).
 Example
On April 1, a loan of EUR 10,000 is disbursed. Each month, EUR 50 interest is due. The borrower does not
pay the incurred interest receivable, and by June 30 is more than 90 days in arrears. However, from a
financial reporting perspective it is not accurate to continue to recognize this interest debit entry of EUR
150 in profit and loss because it cannot be assumed that these open interest receivables will be paid.
Since the borrower has been in arrears for more than 90 days, the accrual status changes from Accruing to
Non-Accruing based on the settings made in Customizing. As a result, the position components are
reclassified to the new status value Non-Accruing in the Classify process step. The contract is now in the
non-accrual state.
How the system then handles interest income 1 depends on which non-accrual method you have defined in
Customizing. The table below compares the cost recovery method and the cash method.
Cost Recovery Method Cash Method
Customizing settings: Customizing settings:
● Period: Non-Accrual Period ● Period: Reporting Period

● Offset limit: none ● Offset limit: Balance of Reference Subledger Account
In the next Defer step after the accrual status changes to Non-Accruing and before the debit posting for the next inter
est receivable, interest income is affected in the following way:
EUR 150 is reclassified from the account Income: Interest The system reconciles the Income: Interest account with
to the account Offset Interest Income. The interest income the Receivables (Due): Interest account.
posted to date remains in the profit and loss statement.
Since no payments have been received, EUR 150 is reclas
sified from the Income: Interest account to the Offset
Interest Income account.
In the following three months, EUR 50 interest is due each month. In the non-accrual state, this means that by Septem
ber 30 interest income of a further EUR 150 has been collected and an open interest receivable of a further EUR 150
has been built up.
The customer pays EUR 100.
In the next Defer step and before the debit posting for the next interest receivable, interest income is affected as fol
lows:
Smart Accounting
Cost Recovery Method Cash Method
The payment by the customer is not taken into account in The reconciliation of the Income: Interest account and the
this method. This means the EUR 150 collected in the non- Receivables (Due): Interest account means that as a result
accrual state is posted from the Income: Interest account of the payment of EUR 100 the receivables due are re
to the Offset Interest Income account. duced to EUR 200.
The target balance of the Offset Interest Income account is

limited by the balance of the account Receivables (Due):
Interest at EUR 200. As a result, a further EUR 50 is reclas
sified from the Income: Interest account to the Offset
Interest Income account, while EUR 100 remains on the
account according to the payment made.
1For simplicity’s sake, only interest receivables are taken into consideration in this example. Other
receivables and payments related to them have not been taken into account.
Behavior While Status is Accruing
When the status is Accruing, the target balance of the offset accounts is zero. This ensures that if the accrual
status switches from Non-Accruing back to Accruing, previously accumulated amounts on offset accounts are
recognized through profit and loss in any subsequent period-end processing due to their non-accruing status.
The amounts are recognized by posting against the same revenue account that was used to post against the
offset account.
Behavior with Foreign Currency
If foreign currency is used, the P&L accounts and the preliminary P&L accounts are taken into account for the
non-accrual method.
The postings are first made between the preliminary P&L accounts and the assigned offset accounts. The Move
and Transform [page 138] process step then posts the income from the preliminary P&L accounts to the P&L
accounts.
Related Information
Smart Accounting
1.6.3.3 Write Down
The Write Down process step documents changes to the nominal write-down at individual contract level.
The system reads the target balance for the nominal write-down amount from the Results Data Layer (RDL).
A nominal write-down is an analytical write-down on the long-term receivables without an operational waiver of
debt repayments. This means that for reporting purposes the long-term receivables are reduced but not the
operational receivables due from customers.
The Write Down process step is an analytical process step with GAAP-dependent results that are documented
as delta GAAP documents.
Prerequisites
● In Smart AFI, you have defined where nominal write-downs are stored in the RDL. In Customizing for Bank
Analyzer under Processes and Methods Smart Accounting Technical Settings Define Results
Storage , you have assigned the results data area and the corresponding result types to the Smart AFI
result category 030 (Nominal Write-Down).
● You have imported the nominal write-down of the relevant contract using the Data Load Layer and stored it
in the RDL.
● In Customizing for Bank Analyzer under Processes and Methods Smart Accounting Process Steps for
Financial Instruments Write Down Account Assignment Assign Subledger Accounts , you have
viewed or edited the combinations of subledger accounts for postings in the process step Write Down
provided by SAP, or have added your own combinations. If required, you have made more detailed settings
for the assignment of accounts for expense and income by specifying change reasons.
Process
To update the nominal write-down, the system determines the previous day's balance for the nominal write-
down from the posting documents on the subledger account 10040201 (subledger account group 100402).
The system determines the delta between the posting date-based balance (actual value) and the target value
(provided by importing it to the RDL) in position currency, and records this as an accounting document. If the
delta is negative, the result is expense; otherwise the result is income. The system creates a document only if
there has been a change compared to the last time a calculation took place.
 Note
Due to the two-dimensional versioning of the results storage, the nominal write-down for a contract applies
until a new target balance is imported. If you want to reset a write-down, you therefore need to explicitly
import zero.
Smart Accounting
Related Information
1.6.3.4 Release
The Release process step documents changes to the amortized valuation cost.
These changes have been posted to the subledger account group 100502 (Valuation Remnants (Income)) or
100512 (Valuation Remnants (Expense)) beforehand by a reclassification in the Classify process step. In the
Release process step, the non-accrual method is also applied to contracts.
One of the key tasks of accounting is to report revenues and expenses in the correct accounting period. The
Release process step is an analytical process step with GAAP-dependent results that are documented as delta
GAAP documents. The valuation remnants are calculated by the release calculator.
Prerequisites
In Customizing for Bank Analyzer, under Processes and Methods Smart Accounting Process Steps for
Financial Instruments Release Account Assignment you can view the combinations of subledger
accounts provided by SAP for postings in the Release process step. You can edit these or add your own
combinations. If required, you can make more detailed settings for the assignment of accounts for expense and
income by specifying change reasons.
Process
1. To update the accounting balance of valuation remnants, the system uses the subledger documents in the
relevant subledger accounts to determine the current balance before it executes the Release process step
for each valuation remnant.
2. The release calculator provides the target values for the valuation remnants.
3. The system calculates the difference between the accounting balance (actual value) and the target value in
transaction currency. The difference is documented as a subledger document. The system only creates a
document if there has been a change since the last calculation.
For a cash-flow-based calculation of valuation remnants, the system distributes the time effects and one-
time effects in proportion to the balances on the subledger account for valuation remnants within the
assigned subledger account group.
 Note
You can view the subledger accounts for the Release process step in Customizing for Bank Analyzer, under
Processes and Methods Smart Accounting Process Steps for Financial Instruments Release
Smart Accounting
Related Information
Release of Valuation Remnants [page 116]

Distribution to Subledger Accounts [page 123]
Non-Accrual [page 124]
1.6.3.4.1 Release of Valuation Remnants
During the release of valuation remnants, target values are provided for documenting the Release process step
in accounting.
The calculation is carried out by the release calculator:
1. The release calculator checks the lifecycle segment of the contract or securities position. When the
lifecycle segment Contract End (40) is reached, the release calculator returns the target value zero.
2. The release calculator determines the method to be used to release the valuation remnants in
Customizing, depending on the accounting system. The following methodologies are available:
○ Import of amortized valuation cost
○ Contract-based release of valuation remnants
○ Cash-flow-based release of valuation remnants
Result
The release calculator calculates the new amount and provides the result to the Release process step. When
discounting cash flows using the effective interest rate, the release calculator also transfers the totals of one-
time effects.
Related Information

Cash-Flow-Based Release of Valuation Remnants [page 117]
Smart Accounting
1.6.3.4.1.1 Cash-Flow-Based Release of Valuation Remnants
For the cash-flow-based release of valuation remnants, the release calculator applies the effective interest rate
method to calculate the target value of the valuation remnants based on the amortized valuation cost.
Prerequisites
You are aware of the following standard settings in Customizing for Bank Analyzer under Processes and
Methods Smart Accounting Process Steps for Financial Instruments Release Methods Release of
Valuation Remnants , and have made your own settings if required:
● In the Customizing activity Define Methods for Cash Flow-Based Release of Valuation Remnants, you can
define the following:
○ Whether only a rollover or also a condition change or any cash flow change triggers a recalculation of
the effective interest rate.
○ Whether a different day count convention is used than the one used in the contract
○ Whether a different interest calendar is used than the one used in the contract
○ Whether time effects and one-time effects are separated
○ Which validity ranges (minimum and/or maximum interest rates) are permitted for the effective
interest rate
 Note
In the Release process step, zero distribution is always suppressed. This means the system performs a
calculation only if valuations have been transferred to valuation remnants in the Classify step.
● In the Customizing activity Derive Methods for Release of Valuation Remnants you make settings for the
derivation of the methods according to accounting system. You can use all the master data characteristics
of the subledger coding block for the derivation (for example, product segment, holding category,
production control and lifecycle segment).
Process
1. The release calculator uses the Customizing settings for the effective interest rate described above to call
the method for discounting cash flows using the effective interest rate.
2. The method returns the following values:
○ The effective-interest-rate-based net present value
This value is the amortized valuation cost.
○ The total one-time effects arising from cash flow changes
3. The release calculator calculates the target value of the cash-flow-based valuation remnants for contracts
as the difference between the balances of amortized valuation cost and the balances of receivables/
payables (UPB), accruals and deferrals, and valuation remnants.
Smart Accounting
 Note
Any references made below to receivables/payables or UPB in the context of securities refer to the
acquisition value adjusted for price gains or losses.
The calculation of the target value described can be expressed in the following formula:
VC = UPB + DEF + AI + VR = AC + VR
Abbreviation Description
VC Amortized valuation cost
UPB Unpaid principal balance
DEF Amount of the cash-flow-based deferral item
AI Amount of accrual item
VR Valuation remnants
AC Amortized cost
4. The release calculator transfers the target value of the cash-flow-based valuation remnants and the total of
the effects mentioned above to the Release process step.
Amortized valuation cost
The concept of amortized valuation cost is required if a change in an analytical status that influences valuation
(for example, holding category) means that you no longer want to continue to use a valuation approach. At the
same time, you want to keep the book value that is valid at the time of the change, and you want to switch to
valuation at amortized cost or amortized valuation cost.
The system calculates the amortized valuation cost by discounting the contractual cash flow to the book value
at the time of the reclassification. The effective interest rate calculated here is kept for use in further
processing.
Smart Accounting
The figure below shows the book value components for UPB, accrual and deferral (negative here) in relation to
the amortized cost, and the valuation remnants in relation to the amortized valuation cost:
 Example
A contract is recognized at fair value through profit or loss. The legal receivable is EUR 100 at time t0, while
the fair value is EUR 95. The fair value is the result of discounting the future cash flows with the risk-free
yield curve at time t0 at 5%. From an accounting perspective, this produces the following balances:
Subledger Account
Balance
10010101 Receivables/Payables (Not Due) EUR 100
10075201 Fair value adjustment EUR -5
 Note
For simplicity’s sake, this example assumes that all other book value components (accruals and
deferrals, write-down) are 0.00.
At the end of the day, the contract is reclassified to the Amortized Cost valuation approach, and the current
book value is kept. In other words there is an outflow of EUR –95 from the Fair Value valuation approach
and an inflow to the Amortized Cost valuation approach.
At time t0, this book value represents the initial amortized valuation cost that is to be recognized in profit or
loss over the remaining term of the contract. The interest rate used for this in the example is the risk-free
yield curve of 5%. The balances after reclassification are as follows:
Subledger Account
Balance
Smart Accounting
Subledger Account
Balance
10050215 Val. Remnants: Fair Value Adj. Income EUR -5
The old fair value adjustment has been transferred to valuation remnants for fair value adjustment, and the
underlying interest rate has been fixed. The amortized valuation costs now define the book value and are
amortized using the effective interest rate in the Release process step when period-end processing is run.
The system uses the discounting of the underlying cash flow and the fixed interest rate for this
amortization.
At the next period end, this would result in a target balance of EUR 95.39 on amortized valuation cost if the
discounted cash flow method is used.
This would result in the following posting record:
10050215 Val. Remnants: Fair Value Debit EUR 0.39

Adj. Income
40010206 Income: Interest (Realized) Credit EUR -0.39
This results in the following balances:
Subledger Account
Balance
10050215 Val. Remnants: Fair Value Adj. Income EUR -4.61
Related Information
Discounting Cash Flows Using the Effective Interest Rate [page 120]
1.6.3.4.1.1.1 Discounting Cash Flows Using the Effective

Interest Rate
The discounting of cash flows using the effective interest rate (EIR) is relevant for the calculation of deferrals
and valuation remnants. The system determines the following key figures:
● Net present value

● Effective interest rate
● Total of one-time effects (catch-up adjustment, modification), and the time effects for each change reason
● Defer: Total effects from payments with a value date that is before but a due date that is after the
evaluation key date
Smart Accounting
Relevant Quantity of Payments
The quantity of payments for a contract or securities position that are relevant for discounting usually
comprises payments that are expected in the future (cash flow) from an evaluation key date perspective. The
individual expected payments are gradually replaced on their respective due dates by business transactions
from actual payments.
Depending on the setting in Customizing, the posting date or the value date in the Defer process step is
relevant as the discounting date for the determination of the effective interest rate. In the Release process step
the posting date is always relevant.
If the value date is relevant for the determination of the effective interest rate, payments (business
transactions) that are in the past from an evaluation date perspective are also included in the discounting. At
least one of the following conditions must be met:
● The initial effective interest rate must have been determined.

● There is a business transaction with a value date in the past.
● A backdated cash flow is imported.
The system includes only payments with a value date that is later than or the same as the start of the current
reporting period.
 Note
In the context of discounting of cash flows with the effective interest rate, the term “cash flow” also
includes business transactions to which the conditions listed above apply.
 Note
In the case of contractual and behavioral cash flow categories, on every evaluation key date the system
checks whether the imported cash flow matches the balance of the posted unpaid principal balance (UPB).
If the check fails, the system distributes the current balance of the deferral or valuation remnant across the
fixed interest rate period of the contract using the straight-line method.
Net Present Value
The net present value (NPV) of a cash flow is determined by discounting the cash flow with the effective
interest rate (reff) to the evaluation key date (t). For the determination of the net present value in day
processing and period-end processing, the evaluation key date is included in the calculation.
Figure 7: Calculation of Present Value Based on Effective Interest Rate (Continuous Compounding)
 Note
The interest calculation method is crucial for the calculation of the time period between t and time point ti
of cash flow CF i (which is after the evaluation key date).
Smart Accounting
Effective Interest Rate
The initial effective interest rate is calculated using the following conditional equation at time point t0 of the
first payment:
Figure 8: Conditional Equation for Initial Effective Interest Rate
If the cash flows changes at time t1, the system either calculates the one-time effect (catch-up adjustment
CUA) or the effective interest rate is recalculated, depending on the settings in Customizing.
The one-time effect is calculated as the difference in the present values of the old cash flow and the new cash
flow while retaining the effective interest rate.
Figure 9: Calculation of the One-Time Effect
The following conditional equation is used for the recalculation of the effective interest rate:
Figure 10: Conditional Equation for Effective Interest Rate Recalculation
Prerequisites
result categories:
○ 200 (Statement About Contract Modification)
○ 250 (Contractual Cash Flow)
○ 251 (Behavioral Cash Flow)
○ 252 (Credit-Risk-Adjusted Cash Flow)
● You have ensured that cash flows are imported for contract creation and for every cash flow change (for
example, due to a condition change, rollover or unscheduled payment or disbursement).
Process
1. The system reads the imported cash flows and checks for the contract or securities position whether an
effective interest rate has already been determined for an earlier cash flow version and saved as an interim
result. For securities, the system scales the imported cash flow according to the securities position.
○ If no effective interest rate has been calculated before, the system calculates the initial effective
interest rate.
○ If an effective interest rate was already calculated before, the system determines which modification
type is the basis for the cash flow change. If there is a smaller change (non-significant modification),
the system determines which event triggered the cash flow change:
○ If both the valid-from date and the valid-to date for the cash flow have moved, the system
assumes that it is a rollover.
Smart Accounting
○ If only the valid-from date for the cash flow has moved, the system assumes that it is a condition
change.
○ If the date information remains the same, the system assumes that it is another cash flow change
(for example, a special repayment).
For a larger change (significant modification) and a rollover, the system always recalculates the
effective interest rate. For a condition change or other cash flow change, the system determines
(based on your Customizing settings) whether the effective interest rate needs to be recalculated.
If the effective interest rate does not need to be recalculated, the system uses the effective interest
rate stored as an interim result. If the effective interest rate needs to be recalculated, the system
carries out the following activities:
○ The system calculates the new effective interest rate. It takes into account the day count
convention defined in Customizing, if relevant, and the interest calendar to be used.
○ If you have assigned a validity range (minimum and/or maximum interest rate) in Customizing for
the calculation of the effective interest rate, the system checks whether the effective interest rate
calculated is within this validity range. If this is not the case, the system executes amortization
across the fixed interest rate period using the straight-line method, and issues a warning in the
process log.
2. If you have made the appropriate settings in Customizing, the system calculates the total of the one-time
effects.
3. The system calculates the total effects from payments with a value date or posting date that is before but a
due date that is after the evaluation key date.
4. The system determines the net present value by discounting the cash flow using the effective interest rate.
1.6.3.4.1.1.2 Distribution to Subledger Accounts

The system distributes the effects to the relevant subledger accounts in proportion to the balances. If the
balances on the relevant subledger accounts are zero, the system posts the effects to the subledger accounts
predefined by SAP in the relevant subledger account group.
Time effect
Let us assume that balance D1 of deferrals or valuation remnants at time t1 is distributed across the two
accounts A and B with the balances A1 and B1; where A1 and B1 are not equal to zero:
The new target balance D2 at time t2 > t1 is to be distributed between the two accounts again:
This is achieved using the following distribution:
Smart Accounting
Where:
To ensure that the individual balances approach zero at the end of the fixed period, the balances are first scaled
proportionately to the remaining write-down period. In other words, they are multiplied by the following factor:
One-time effect
If there is a one-time effect, the system first distributes this proportionately to the amounts to A1 and B1, and
then distributes the difference remaining (the time effect) with a time factor and proportionately to the
amounts.
Effect from payments with a value date before but a due date after the
evaluation key date
The following applies to the Defer process step: If there is an effect from payments with a value date before but
a due date after the evaluation key date, the system distributes the effect proportionately to the amounts
before it distributes the one-time effect. Based on this result, the system then distributes any one-time effects.
It then distributes the time effect.
1.6.3.4.2 Non-Accrual
If it is no longer likely that a contract partner will meet their contractual obligations, you can set contracts and
securities positions to Non-Accrual.
You can use the following method for non-accrual for the process step Release.
Method Period Offset Account Limit
2011000 Cost Recovery Method Non-Accrual None
For more information see the documentation for non-accrual for the Defer process step.
Smart Accounting
Related Information
Non-Accrual [page 109]
1.6.3.5 Value TC
The Value TC process step documents changes to the valuation of a position.
This applies to the following values:
● Credit risk
● Interest rate risk
● Fair value
● Target value after economic write-down
The Value TC process step is an analytical process step with GAAP-dependent results that are documented as
delta GAAP documents.
Interest Rate Risk
The target value Interest Rate Risk (Hedged) can be imported for the portion of a position relating to the hedged
interest rate risk. Changes to the target value are documented in the balance sheet subledger account
10063200 (Interest Rate Risk Adjustment (Hedged)).
Credit Risk
The system determines target values for different credit risk categories. Changes to these target values are
documented in the following balance sheet subledger accounts:
Credit Risk Category Subledger Account Description of Subledger Account
Credit Risk from Book Value 10061201 Credit Risk Adjustment
Credit Risk from Free Line 20090201 Provision: Risk Adjustment (Free Line)
Credit Risk from Receivables (Due) 10085201 Credit Risk Adj. (Receivables (Due))
Own Credit Risk from Book Value 10062201 Own Credit Risk Adjustment
The target values are determined by the impairment calculator. For more information, see the application
documentation linked below.
Smart Accounting
Fair Value
The book value for a position that is subject to the accounting methodology "fair value through profit and loss"
or "fair value directly in equity" is adjusted to the fair value.
The book value for a position that is subject to the accounting methodology "LCM through profit and loss" or
"LCM directly in equity” is adjusted to the fair value, if this is smaller.
To this end, the fair value calculator determines the fair value. For more information, see the application
documentation linked below.
The residual position component Fair Value Adjustment or LCM Adjustment documents the values in
accounting. These values are the result of the fair value minus the balances on the book value components
before fair value adjustment or LCM adjustment. The corresponding balance sheet subledger account is
10075201 (Fair Value Adjustment) or 10070201 (LCM Adjustment).
Target Value After Economic Write-Down
The book value for a contract that is subject to the accounting methodology "Amortized Cost" and that is at the
same time "Partially Economically Written Down" or "Fully Written Down” is adjusted to the fair value of the
collateral to be used. The Fair Value of Collateral needs to be imported as the target value for this.
The residual position component Write-Down Adjustment documents the values in accounting. This
component is the result of the fair value of the collateral minus the balances on the book value components
before the write-down adjustment. The corresponding balance sheet subledger account is 10071201 (Write-
Down Adjustment).
Account Assignment
The offsetting account for a valuation change documented in a balance sheet subledger account can be
defined depending on the plus/minus sign of the change amount to be posted and on the accounting
methodology.
This can specifically help you to control whether any income or expense that occurs is recognized through
profit and loss or directly in equity.
Related Information
Determining Credit Risk Adjustment [page 127]

Determination of Fair Value [page 134]
Determining the Target Value After Economic Write-Down [page 137]
Smart Accounting
1.6.3.5.1 Determining Credit Risk Adjustment
The impairment calculator provides target values for documenting credit risk in the Value TC process step in
accounting.
The determination of the credit risk involves assessing the risk that arises from a deterioration in the credit
standing of the counterparty or from the counterparty defaulting.
The following credit risk categories and methodologies for determining credit risk are supported for Smart
Accounting for Financial Instruments (Smart AFI):
Credit Risk Cate

Methodology
gory
Import of credit Contract-based One-year ex Lifetime expected Expected cash

risk determination of pected loss loss flow
credit risk
Credit risk from X X X X X

book value
Credit risk from X X X

free line
Credit risk from X X X

short-term receiv
ables
Own credit risk X X

from book value
If the calculation of the lifetime expected loss fails, the system tries to calculate the one-year expected loss.
Significance
The system uses threshold values to determine which contracts are significant in terms of determining credit
risk. You can define threshold values for the unpaid principal balance (UPB) or for the free line. The higher of
these two values is decisive for determining the significance. To determine the credit risk for significant
contracts, you can use a different method than for determining credit risk for contracts that are not significant.
Scenarios
When determining credit risk adjustment you can differentiate between different credit risk scenarios, for
example between an upside, downside and base scenario.
For each scenario you need to import the corresponding probability of default, loss rates and credit conversion
factors for the calculation of risk provision. You can assign each credit risk scenario to one or more scenario
groups but you must define a probability of occurrence for each scenario. The sum of the occurrence
probabilities in a scenario group must be 1.
Smart Accounting
The result of the Credit Risk Adjustment is the weighted average based on the occurrence probability,
calculated from the risk adjustment results from each scenario. Both the scenario-specific results and the
weighted average are stored in the Results Data Layer (RDL). The system uses the weighted average for the
documentation in accounting and you can use the scenario-specific impairment results for reporting purposes.
Prerequisites
Accounting Process Steps for Financial Instruments Value TC Methods Adjustment for Risks
Credit Risk :
○ Under Define Significant Contracts, you define the threshold value for determining the significance of
contracts.
○ Under Subportfolios you create your own subportfolio IDs for each subportfolio category and define
the derivation.
○ Under Scenarios you can define credit risk scenarios and credit risk scenario groups, and their
derivation.
○ You can view the methods for the respective methodology and if required create custom methods and
define how these are derived.
● Analytical statuses (impairment status and accrual status) are available in the Results Data Layer (RDL),
which are used to derive the method. You can either determine these statuses using the /BA1/BR_IAD
(Determine Impairment Attributes) process or import them using the Data Load Layer.
● When you determine the credit risk for the balance-sheet part of a contract, the current book value before
valuation must be available. This value is determined by the Smart AFI process steps that precede the
Value TC process step.
Result
The impairment calculator provides the new credit risk amount for the Value TC process step.
Related Information

Methodology for One-Year Expected Loss [page 129]
Methodology for Lifetime Expected Loss [page 130]
Expected Cash Flow Methodology [page 133]
Smart Accounting
1.6.3.5.1.1 Methodology for One-Year Expected Loss
You use this methodology to enter the expected losses for payment defaults within the next 12 months. The
following formula is used as the basis for determining credit risk adjustment:
One-Year EL = EAD x LGD x PD
Exposure at default (EAD) is the expected amount of receivables at the time of default. It includes current
amounts receivable and the expected future utilization by the borrower for the off-balance-sheet part of the
receivable. The exposure at default is defined differently depending on the risk provision category:
● For Counterparty Risk from Book Value, it is the book value before risk provision on the key date of the
credit risk determination.
● For Counterparty Risk from Free Line, it is the free line (for example, for checking accounts, the external
credit line minus the utilization) multiplied by the credit conversion factor on the key date of the credit risk
determination.
● For Counterparty Risk from Short-Term Receivables, it is the balance of short-term receivables on the key
date of the credit risk determination.
Loss Given Default (LGD) is the loss given default based on the exposure at default.
Probability of Default (PD) is the default probability of a counterparty in relation to a given time unit; in this case
for a period of one year as of the calculation key date.
Prerequisites
The probability of default (PD) and loss given default (LGD) have been imported for each time bucket, either on
the basis of contracts or at portfolio level. If these risk parameters are not available at contract level, the
system uses the parameters at portfolio level.
 Note
The loss given default (LGD) for securities always refers to the underlying nominal value, therefore these
amounts must be scaled to the actual acquisition cost/amortized cost (the book value before risk
provision). In the case of securities, an expectation of the counterparty risk is factored into the purchase
price and this should not be taken into consideration twice.
The loss rate is scaled at position level using the following formula:
LGDPOS Loss given default (position)
Nom Nominal amount
LGDFI Loss given default (financial instrument)
BV Book value
The prerequisite for this is that the nominal amount and the book value of the financial instrument are also
available in addition to the imported LGD FI. If the system cannot read the nominal amount from the
Smart Accounting
balances, it determines the total nominal amount from the nominal amount per unit (from the instrument
data) and the number of units (from the balances).
Example
Time t 0:
A security with nominal value EUR 100 is purchased at a price of EUR 40 and carried at amortized cost.
Time t 1:
● The amortized costs are EUR 41.

● The LGD is 75% of the nominal value, so a loss of EUR -75 is expected for a security with a nominal
value of EUR 100. Therefore the recoverable amount is EUR 25 per EUR 100 nominal value.
The impairment (IMP) at time t1 is calculated in the one-year expected loss methodology as follows:
IMP = –1 x (EUR 41 x LGDPOS)
LGDPOS = 1 – (100 x (1 – 0.75) / 41) = 39 %
IMP = EUR –16
When you calculate the impairment for the off-balance-sheet part of the contract, you have imported the credit
conversion factor (CCF) as a percentage to the Results Data Layer (RDL).
See also the prerequisites under Adjustment for Credit Risk.
Related Information
1.6.3.5.1.2 Methodology for Lifetime Expected Loss
You use this methodology to enter all the losses expected over the entire term of the contract. A default can
occur at any time during the term of the contract.
The following formula is used as the basis for determining credit risk adjustment:
The formula refers to a predefined maturity band
t0 < t1 < ... < tn
with a time bucket structure that does not overlap and can be configured
tk-1 ≤ t < tk; (k = 1, ..., n).
Smart Accounting
This time bucket structure applies to all transactions in the application area of the formula. t0 is the valuation
key date. Please ensure that you select a sufficiently high value for tn so that no cash flows occur after this
point in time. If cash flows do still occur after tn, the system discounts them to the time tn.
PDk is defined as the marginal probability that the borrower will default in the kth time bucket [tk-1,tk). The
marginal PDk in the kth time bucket is, in turn, the difference in the cumulated probability of default between
the periods [0.tk) und [0.tk-1).
When data is imported, you therefore need to ensure that the time structure of the cumulated probability of
default is available for the predefined time bucket structure of the maturity band. You also need to import the
loss given default (LGDk) according to the time bucket structure from the maturity band.
The method determines the loss given default for each time bucket as the product of LGDk and PDk. The
exposure at default (EADk) is the amount likely to default in the kth time bucket. The system uses the loss given
default and the EADk to determine the expected loss amount per time bucket. The credit risk according to the
Lifetime Expected Loss approach is the total of the expected loss amounts across all time buckets that were
previously discounted to time t0 with the effective interest rate. The system uses the effective interest rate from
the amortized cost calculation for this.
For cash-flow-based transactions, the impairment calculator can calculate the EADk for each time bucket as
the net present value of the future cash flows. The impairment calculator reads the cash flows from the Results
Data Layer (RDL), where you have previously imported them. Which cash flows the system reads from the RDL
depends on the settings you have made for the cash flow category in the method definition in Customizing. If
you have not defined a cash flow category, the system uses cash flow category 250 (“Contractual Cash Flow”)
by default. Otherwise, it uses the cash flow category that has been defined, for example, 251 (“Behavioral Cash
Flow”).
 Note
The exposure at default of the first time bucket is the book value before risk provision.
Prerequisites
The probability of default (PD) and loss given default (LGD) have been imported for each time bucket, either on
the basis of contracts or at portfolio level. If these risk parameters are not available at contract level, the
system uses the parameters at portfolio level.
 Note
The loss given default (LGD) for securities always refers to the underlying nominal value, therefore these
amounts must be scaled to the actual acquisition cost/amortized cost (the book value before risk
provision). In the case of securities, an expectation of the counterparty risk is factored into the purchase
price and this should not be taken into consideration twice.
The loss rate is scaled at position level using the following formula:
Smart Accounting
LGDPOS Loss given default (position)
Nom Nominal amount
LGDFI Loss given default (financial instrument)
BV Book value
The prerequisite for this is that the nominal amount and the book value of the financial instrument are also
available in addition to the imported LGD FI. If the system cannot read the nominal amount from the
balances, it determines the total nominal amount from the nominal amount per unit (from the instrument
data) and the number of units (from the balances).
Example
Time t 0:
A security with nominal value EUR 100 is purchased at a price of EUR 40 and carried at amortized cost.
Time t 1:
● The amortized costs are EUR 41.

● The LGD is 75% of the nominal value, so a loss of EUR -75 is expected for a security with a nominal
value of EUR 100. Therefore the recoverable amount is EUR 25 per EUR 100 nominal value.
The impairment (IMP) at time t1 is calculated in the lifetime expected loss methodology as follows:
IMP = –1 x (EUR 41 x LGDPOS)
LGDPOS = 1 – (100 x (1 – 0.75) / 41) = 39 %
IMP = EUR –16
To discount the expected losses for each time bucket, the system needs the contractual effective interest rate.
For products that are measured at amortized cost, the system reads the effective interest rate from the results
of the Release process step and if this is not possible, from the results of the Defer process step. If there is no
effective interest rate available here either, the system attempts to read it from the calculation base data for the
Release process step and then from the calculation base data for the Defer process step.
If the system is unable to determine the effective interest rate, it applies the methodology for One-Year
Expected Loss instead of the Lifetime Expected Loss methodology.
See also the prerequisites under Determining Credit Risk Adjustment.
Related Information
Smart Accounting
1.6.3.5.1.3 Expected Cash Flow Methodology
This methodology uses an expected cash flow that has been re-estimated (usually due to a default occurring)
to determine the credit risk adjustment. This cash flow comprises only future capital flows arising from the
liquidation of underlying collateral for the contract.
Background
For contracts or securities for which it is assumed that there will no longer be any future capital flows from a
debtor to fulfil their contractual obligations, it also no longer makes sense from an accounting perspective to
use this cash flow (and the resulting book value) for determining the credit risk adjustment. From an
accounting perspective, these contracts can be identified by the fact that they have the impairment status 3
(Default).
In these cases, you can use a risk-adjusted expected cash flow that contains only future capital flows from the
liquidation of explicit underlying collateral for the contract or from implicit collateral.
In practice, an estimate of this kind of credit risk-adjusted expected cash flow usually only takes place if the
bank considers the underlying contract to be a significant receivable.
To determine the credit risk adjustment, when the method is changed to this approach, the system uses the
contractual effective interest rate that had been used until then for determining the amortized cost (book value
before risk provision).
This ensures that by changing to the credit-risk-adjusted expected cash flow a one-off difference (net present
value of credit-risk-adjusted ECF and net present value of contractual cash flow) can be recognized directly
through profit and loss. However, in any further valuations, the system applies the effective interest rate, which
is still valid (unwinding).
 Note
If the contract is reported at amortized cost in the balance sheet at the time of the method change, the
system uses this effective interest rate.
If no effective interest rate is available (for example, because the contract has until now been reported
nominally), you can import an effective interest rate.
Calculation
The following formula is used as the basis for determining credit risk adjustment:
Smart Accounting
In this methodology, the credit risk adjustment (IMP) is calculated as the difference between the balance of the
book value components for the determination of risk provision (BBVCIMP) and the net present value of the
expected cash flow (ECF) that is discounted on the key date (t) using the effective interest rate (EIR):
This methodology is applied to risk provision category 01 (Counterparty Risk from Book Value) if a transaction
or impairment case has the impairment status 104 (POCI) or impairment status 103 (Stage 3 [Default]) and is
significant.
The system does not support the determination of the credit-risk-adjusted cash flow for the off-balance sheet
part of contracts.
Prerequisites
You have imported the expected cash flow for a contract with cash flow category 252 (Credit-Risk-Adjusted
Cash Flow) to the Data Load Layer (DLL).
To discount the expected cash flow, the contractual effective interest rate is required. For products that are
measured at amortized cost, the system determines the effective interest rate as follows: If there is no effective
interest rate in the calculation base data for credit risk determination, the system reads the interest rate from
the results of the Release process step. If this is also not possible, it reads it from the results of the Defer
process step. You can import the effective interest rate to the target values of the Defer process step.
See also the prerequisites under Adjustment for Credit Risk.
Related Information
1.6.3.5.2 Determination of Fair Value
The fair value calculator provides target values that are used to document fair value in accounting for contracts
and securities positions in the Value TC process step.
In Customizing, the fair value calculator identifies which method to use to determine the fair value depending
on the accounting system. The following methodologies are available:
● Import
● Contract-based determination
● Mark-to-market determination (for securities only)
● Cash-flow-based determination
Smart Accounting
Prerequisites
You have made the following settings in Customizing for Bank Analyzer under Smart Accounting Process
Steps for Financial Instruments Value TC Methods Fair Value :
● You have viewed the methods for the relevant methodology and created custom methods if required.
● You have defined derivation rules.
Result
The fair value calculator provides the new fair value for the Value TC process step.
Related Information
Methodologies for Determining Target Values [page 50]

Mark-to-Market Determination [page 135]
Cash-Flow-Based Determination [page 136]
1.6.3.5.2.1 Mark-to-Market Determination
In the mark-to-market determination of fair value, the fair value calculator scales the market prices according
to the securities position.
Prerequisites
● You have completed the Customizing activities under Prices for Financial Instruments and have created
read strategies in the Customizing activity Edit Customizing for Security Prices in Customizing under
Financial Services Foundation Market Data .
● You have imported market prices in the market data (BS_FND_MKD). You can import the market prices by
legal entity both without accrued interest (clean price) and with accrued interest (dirty price). In order to
do so, you must have set the search sequence in the read strategy accordingly using the Price Including/
Excluding Accrued Interest indicator in the Customizing activity Edit Customizing for Security Prices. If you
import the market prices without accrued interest, you need to import the accrued interest additionally
using the Smart AFI results category 015 (Accrued Interest) in the Results Data Layer.
Legal Entity Define Legal Entities read strategies assigned. Depending on the read strategy, the fair
value calculator reads only the imported market prices or the imported market prices with the imported
Smart Accounting
accrued interest. The fair value calculator calculates the market price with interest accrual from the market
price and the accrued interest.
Related Information
1.6.3.5.2.2 Cash-Flow-Based Determination
To determine the fair value based on cash flows (mark-to-model determination), the fair value calculator
calculates the target value by discounting cash flows based on the market interest rates of the relevant yield
curve. For securities, the system scales the imported cash flow according to the securities position.
For the cash-flow-based determination of the fair value, the due date is relevant.
Figure 11: Cash-flow-based determination of the fair value
Key
FFV= full fair value
CF (cash flow)i = cash flow on date ti
DFi = discounting factor on date ti from given yield curve
Smart Accounting
Prerequisites
In Customizing for market data (BS-FND-MKD) under Interest Rates Edit Reference Interest Rates and Yield
Curves , you have defined yield curve types and imported interest rates for the reference interest rates.
You are aware of the settings provided by SAP in Customizing for Bank Analyzer under Smart Accounting
Process Steps for Financial Instruments Value TC Methods Fair Value , and have made your own settings
as required. You have also selected a cash flow category (contractual, behavioral or credit-risk-adjusted) and
entered a yield curve type.
Related Information
1.6.3.5.3 Determining the Target Value After Economic

Write-Down
If a contract is in the liquidation phase of the deposited collateral due to a paying contract partner defaulting,
some accounting principles require that the book value of the balance sheet item is written down to the fair
value of the collateral.
We provide the following subledger account that records the difference between the previous book value and
the fair value of the deposited collateral:
10071201 Write-Down Adjustment
Prerequisites
A contract can only be written down to the fair value of the underlying collateral if it is legally already in the
liquidation phase. In other words, there are no more accounting valuation components that result from
contractual agreements.
The write-down status of the contract is “04 - Partially Economically Written Down”.
The valuation approach for the contract is “Acquisition Cost/Amortized Cost”.
 Note
If the write-down status of the contract is “03 - Fully Written Down”, the system writes off the book value to
the target balance 0.
Smart Accounting
Interaction with other components
● Other residual valuation components (fair value adjustment, LCM adjustment):

The system writes down to the fair value of the collateral only in the valuation approach “Acquisition Cost/
Amortized Cost”. This means from both a business perspective and a technical perspective that you cannot
record further residual valuation components at the same time with a balance that is not equal to zero.
● Nominal write-down:
Depending on the accounting principle, only one write-down approach can be applied to a contract. In
other words, it is written down either nominally or economically.
Calculation
The system calculates the write-down adjustment as follows:
Write-down adjustment = fair value of the collateral – book value before economic write-down
The book value before economic write-down is defined by all the book value components, with the exception of
the residual book value components.
 Note
A contract is in the liquidation phase, the outstanding debt is EUR 100, all other accounting components
have a value of EUR 0. The imported fair value of the underlying collateral is EUR 25.
This results in the following balances:
Position Account Description Balance
10071201 Write-Down Adjustment EUR -75
The target value after economic write-down, and thus the new book value, is EUR 25.
1.6.3.6 Move and Transform
The process step Move and Transform covers two use cases:
● The Move and Transform (Business Transaction) [page 139] process step involves the same-day fixing of
foreign currency amounts for business transactions based on the exchange rates valid at the end of the
day.
● The Move and Transform (Contract) [page 143] process step involves the periodic fixing of the calculated
results.
Smart Accounting
Prerequisites
● You can display the settings for this process step in Customizing for Bank Analyzer, under Processes and
Methods Smart Accounting Process Steps for Financial Instruments Move and Transform .
● Make settings for the period closing variants in Customizing for Bank Analyzer, under Processes and
Methods Smart Accounting Process Steps for Financial Instruments Basic Settings Define Period
Closing Variants .
Related Information
Register [page 63]

Move and Transform (Contract) [page 143]
1.6.3.6.1 Move and Transform (Business Transaction)
The Move and Transform (Business Transaction) process step involves the same-day fixing of foreign currency
amounts for business transactions based on the exchange rates valid at the end of the day.
The system processes the data during end-of-day processing. The following cases are possible:
1. The Register process step registers business transactions that contribute to the profit and loss statement,
and that have a transaction currency that differs from the functional currency. You want the system to fix
these contributions on the same day. Since the exchange rate valid at the end of the day is not yet known
during the Register run, the system posts these contributions to the preliminary P&L. After the exchange
rates have been imported, end-of-day processing fixes the foreign currency amounts with the required
exchange rate and posts the amount to the P&L.
2. The Register process step registers business transactions with payments in a transaction currency that
differs from the contract currency (payment currency change). Since the exchange rate valid at the end of
the day is not yet known during the Register run, the system posts the amounts in foreign currency to a
preliminary currency position. After the day's mid-market rates have been imported, end-of-day
processing fixes the required exchange rate and creates the currency position.
The following examples illustrate the posting logic. The functional currency is EUR.
 Example
P&L
Business transaction Contract currency 100 USD
Transaction currency 100 USD
Smart Accounting
Exchange Rates
Exchange rate on January 21 (start of USD 1.00 EUR 0.80

day)
Exchange rate on January 21 (end of USD 1.00 EUR 0.90

day)
Process Step D/C Subledger Ac Transaction Cur Functional Cur

count rency rency
January 21 (day Register D Unpaid Principal USD 100 EUR 80

processing) Balance (UPB)
January 21 (day Register C Unremitted Inter USD -100 EUR -80

processing) est Income
January 21 (end of Move and D Unremitted Inter USD 100 EUR 90

day) Transform est Income
January 21 (end of Move and C Currency Position USD -100 EUR -90
day) Transform Income State
ment
January 21 (end of Move and C Interest Income EUR -90 EUR -90
day) Transform
January 21 (end of Move and D Equivalent Value EUR 90 EUR 90

day) Transform USD
In this example, it is assumed that the posting record derived for the business transaction in the Register
process step contains the subledger accounts Unpaid Principal Balance (UPB) and Interest Income. Since
the subledger account Interest Income is a P&L account, and since the transaction amount differs from the
functional currency, the system replaces the subledger account Interest Income in the Register process
step with the corresponding preliminary subledger account Unremitted Interest Income. In the Move and
Transform process step, the system makes a transfer posting from the preliminary currency positions to
the currency positions. The system also creates the equivalent values.
 Example
Change of payment currency
For the payment currency change, it is assumed that the posting record derived for the business
transaction in the Register process step contains the subledger accounts Unpaid Principal Balance (UPB)
and In-Transit. Since the transaction currency differs from the contract currency (payment currency
change), the Register process step also creates preliminary currency positions. In the Move and Transform
process step, the system makes a transfer posting from the preliminary currency positions to the currency
positions. The system also creates the equivalent values.
Smart Accounting
In Customizing, under Bank Analyzer Processes and Methods Smart Accounting Process Steps for
Financial Instruments Basic Settings Define Accounting System , you can specify the currency
exchange methodology for each accounting system. You can choose between the leading currency
approach and the implicit fee.
Transaction currency 66 GBP
Exchange Rates

day)
GBP 1.00 EUR 1.20

day)
GBP 1.00 EUR 1.30
Leading currency
In this approach, the system determines the leading currency from the contract currency and transaction
currency in the business transaction, and translates only the leading currency amount into the equivalent
value in functional currency. It then also uses this equivalent value as the equivalent value for the amount in
the non-leading currency.

count rency rency

January 21 (day Register C Preliminary Cur USD -100 EUR -80

processing) rency Position
January 21 (day Register C In-Transit GBP -66 EUR -79.20

processing)
January 21 (day Register D Preliminary Cur GBP 66 EUR 79.20

January 21 (end of Move and D Preliminary Cur USD 100 EUR 90

day) Transform rency Position
day) Transform Balance Sheet
January 21 (end of Move and C Preliminary Cur GBP -66 EUR -90
Smart Accounting
count rency rency
January 21 (end of Move and D Currency Position GBP 66 EUR 90


day) Transform USD
January 21 (end of Move and C Equivalent Value EUR -90 EUR -90
day) Transform GBP
Implicit fee
In this approach, the system does not determine a leading currency. It translates each currency separately.
This results in a difference, which the system records as an implicit fee.

count rency rency



processing)

January 21 (end Move and D Preliminary Cur USD 100 EUR 90

of day) Transform rency Position
January 21 (end Move and C Currency Position USD -100 EUR -90
of day) Transform Balance Sheet
January 21 (end Move and C Preliminary Cur GBP -66 EUR -85.80
January 21 (end Move and D Currency Position GBP 66 EUR 85.80

January 21 (end Move and D Equivalent Value EUR 90 EUR 90

of day) Transform USD
January 21 (end Move and C Equivalent Value EUR -85.80 EUR -85.80
of day) Transform GBP
Smart Accounting
count rency rency
January 21 (end Move and C Implicit Fee EUR -4.20 EUR -4.20
of day) Transform
1.6.3.6.2 Move and Transform (Contract)
In the Move and Transform process step, the system periodically fixes the calculated results.
The system processes the data in period-end processing if there is profit or loss in a foreign currency; in other
words, if the transaction currency (TC) is not the same as the functional currency (FC). You can reset the fixing
of unrealized profits from period-end processing during period-opening processing.
For more information about resetting postings from the Move and Transform process step, see Period-Opening
Processing [page 157].
The following example explains the posting logic. The functional currency is EUR.
 Example
Period-end processing
Exchange Rates
September 30 USD 1.00 EUR 0.90

count rency rency
September 30 Accrue D Accruals: Interest USD 100 EUR 90
September 30 Accrue C Income: Unreal USD -100 EUR -90

ized Interest (Pre
liminary)
September 30 Move and D Income: Unreal USD 100 EUR 90

Transform ized Interest (Pre
liminary)
September 30 Move and C Currency Position USD -100 EUR -90

Transform Income State
ment
September 30 Move and C Income: Interest EUR -90 EUR -90

Transform (Unrealized)
Smart Accounting
count rency rency
September 30 Move and D Equivalent Value EUR 90 EUR 90

Transform USD
In this example, the Accrue process step posts to the subledger account Income: Unrealized Interest
(Preliminary). It is assumed that there has been no further posting on this subledger account, meaning that
the balance is USD 100. In the Move and Transform process step, the system makes a transfer posting with
this balance from the preliminary subledger account Income: Unrealized Interest (Preliminary) to the
subledger account Income: Interest (Unrealized) based on the exchange rates valid at the end of the day.
The system also creates the currency position and the corresponding equivalent value.
1.6.3.7 Value FX
The Value FX process step revalues the amounts in functional currency and all other local currencies using the
valid exchange rate on the balance sheet key date. It also collects the delta for the existing balance in the
foreign exchange result.
To adjust the functional currency, the system uses all the subledger account balances held in a currency other
than the functional currency. To adjust the local currency, the system uses all the subledger accounts in the
balance sheet.
The Value FX process step is available both at the contract granularity level and at the cross-contract
granularity level (dimensions of financial statement entities).
At the contract granularity level, it is executed in end-of-day processing and period-end processing. Only
contract-based subledger documents are included in the balances used in the process step.
At the cross-contract granularity level, it is executed in cross-contract period-end processing. Only cross-
contract subledger documents are included in the balances used in the process step.
Prerequisites
You can display the settings for the Value FX process step in Customizing for Bank Analyzer under Processes
and Methods Smart Accounting Process Steps for Financial Instruments Value FX .
 Note
This example illustrates the foreign currency valuation of balance sheet items (monetary asset revaluation
(MAR)) and of currency positions:
Exchange Rates
January 29 (end of day) USD 1.00 EUR 0.80
Smart Accounting
Exchange Rates
The system runs the following valuations: (At the end of the period, the exchange rate changes to EUR 1.00,
meaning that the system needs to make adjustments to the balance sheet item.)
Process Step Process Step Posting Re Subledger Ac Transaction Functional
Details cord count Currency Currency
January 30 Register D Unpaid Princi USD 100 EUR 80

(day process pal Balance
ing) (UPB)
January 30 Register C Unremitted In USD -100 EUR -80

(day process terest Income
ing)
January 30 Move and Move D Unremitted In USD 100 EUR 90

(end of day) Transform terest Income
January 30 Move and Move C Currency Posi USD -100 EUR -90
(end of day) Transform tion Income
Statement
January 30 Move and Transform C Interest In EUR -90 EUR -90
(end of day) Transform come
January 30 Move and Transform D Equivalent EUR 90 EUR 90

(end of day) Transform Value USD
January 31 (pe Value FX Balance sheet D Unpaid Princi USD 0 EUR 20

riod end) item adjust pal Balance
ment (UPB)
January 31 (pe Value FX Balance sheet C Currency Gain USD 0 EUR -20
riod end) item adjust
ment
January 31 (pe Value FX Balance sheet C Unremitted In USD 0 EUR -10
riod end) item adjust terest Income
ment
January 31 (pe Value FX Balance sheet D Currency Gain USD 0 EUR 10

ment
Smart Accounting
January 31 (pe Value FX Currency posi C Currency Posi USD 0 EUR -10
riod end) (Cross- tion adjust tion Income
Contract) ment Statement
January 31 (pe Value FX Currency posi D Currency Gain USD 0 EUR 10

riod end) (Cross- tion adjust
Contract) ment
January 31 (pe Value FX Equivalent D Equivalent EUR 10 EUR 10

riod end) (Cross- value adjust Value USD
Contract) ment
January 31 (pe Value FX Equivalent C Currency Gain EUR -10 EUR -10
riod end) (Cross- value adjust
Contract) ment
At the end of the period, there is a balance on the UPB account and on the unremitted interest income
account that is relevant for the foreign currency valuation of balance sheet items.
From an overall balance sheet perspective, the foreign exchange result from the adjustment of the
equivalent value is the only relevant result. The results of the monetary asset revaluation (MAR) and of the
currency positions are of an explanatory nature and add up to zero (apart from rounding effects).
Related Information
Register [page 63]

1.6.3.8 Classify
If one or more subledger coding block characteristics changes, the Classify process step ensures that the
balances of balance sheet subledger accounts of the granularity level Contract or Securities Position are
reclassified from the old subledger coding block to the new subledger coding block.
In the subledger coding block, this affects changes to the following characteristics:
● Contract characteristics
● Securities characteristics
● Business partner characteristics
● Characteristics derived from contract characteristics, securities characteristics and business partner
characteristics
● Derived characteristics for the organization
Smart Accounting
● Analytical status
Classify - End-of-Day Processing
If changes to contract characteristics, securities characteristics, business partner characteristics or the

analytical status are registered in the Register process step, the system executes the Classify step for the date
of the change (in an open period) in end-of-day processing.
Changes to derived characteristics only result in the Classify step being executed in end-of-day processing if
the change has been caused by a change to contract characteristics, securities characteristics or business
partner characteristics that has already been registered. All other changes are not considered until the next
period-end processing.
 Note
If you change the legal entity, please refer to the information in Change of Legal Entity [page 261]
Classify - Period-End Processing.
In period-end processing, the system reclassifies to a new subledger coding block if the asset/liability status of
an analytical status changes. The status is determined based on the book value in functional currency.
 Note
If a dimension of a financial statement entity changes in the subledger coding block, the system reclassifies
using a cross-contract reclassification account. This ensures a closed debit/credit loop for each dimension
of financial statement entities.
Prerequisites
● You can display the settings for the Classify process step in Customizing for Bank Analyzer under
Processes and Methods Smart Accounting Process Steps for Financial Instruments Classify .
● In Customizing for Bank Analyzer, you define the default value for the asset/liability status and the periodic
redetermination of the asset/liability status under Processes and Methods Smart Accounting
Subledger Coding Block Analytical Status Define Asset/Liability Status .
 Note
On March 30, the balance-sheet subledger account Receivables/Payables has a debit balance of EUR 100,
which is assigned to the subledger dimension Organizational Unit Y:
Subledger Account D/C Balance in Transaction Organizational Unit

Currency
Receivables/payables D EUR 100 Y
Smart Accounting
The change in organizational unit for the contract causes this dimension to change to Z and a
reclassification of the balance with the following posting:
Subledger Account D/C Amount in Transaction Organizational Unit

Currency
Receivables/payables C EUR -100 Y
Receivables/payables D EUR 100 Z
If the change in organizational unit from Y to Z leads to a change in profit center from A to B and if the profit
center is a dimension of a financial statement entity, the following postings are made:
Subledger Account D/C Amount in Transac Organizational Unit Profit Center

tion Currency
Receivables/payables C EUR -100 Y A
Reclassification ac D EUR 100 A

count
Reclassification ac C EUR -100 B

count
Receivables/payables D EUR 100 Z B
Related Information

Different Target Account for Changes to the Analytical Status [page 148]
1.6.3.8.1 Different Target Account for Changes to the

Analytical Status
If the market conformity status, the impairment status or the holding category changes, you can determine a
different target account for the reclassification posting. You do this in Customizing under Bank Analyzer
Processes and Methods Smart Accounting for Financial Instruments Process Steps Classify Account
Assignment Assign Different Carryforward Accounts (When Status Changes) .
 Note
If the contracts have a credit balance in the subledger account group Receivables/Payables (Not Due) or, in
the case of securities, in the subledger account groups Receivables/Payables (Not Due) and Acquisition Val.
Smart Accounting
(Securities) Adjustment, you choose the Target Account (Expense). In all other cases choose Target Account
(Income).
 Note
If the market conformity status and the holding category are both changed on the same day, you determine
the target account as if only the holding category had changed.
 Note
A bank holds securities for trading purposes. A corresponding securities position is assigned to the holding
category Held for Trading (HFT). The balance of the securities position on Acquisition Value and Acquisition
Value Adjustment is a debit balance and the balance-sheet subledger account Fair Value Adjustment has a
credit balance of EUR 20 on March 30.
Balance in Transaction
Subledger Account D/C Currency Holding Category
Fair Value Adjustment C EUR -20 HFT
The bank decides on a different business model and no longer wants to hold the securities for trading
purposes but to keep them on the portfolio permanently. This means that the analytical status of the
Holding Category changes from Held for Trading (HFT) to Amortized Cost (ACO) and the balance is
reclassified from Fair Value Adjustment to the target account Valuation Remnants FVA Income:
Amount in Transaction
Subledger Account D/C Currency Holding Category
Fair Value Adjustment D EUR 20 HFT
Valuation Remnants: FVA In C EUR -20 ACO

come
1.6.3.9 Adjust
In the Adjust process step, you can first manually make preliminary entries for contract-related or cross-
contract value adjustments to balances, and then post them using a release workflow. You can reset the
manual postings during period-opening processing, if necessary.
 Example
Manual postings can be required if data from the feeder system (for example, interest settlement) is not
imported in time for period-end processing.
The Adjust process step is an analytical process step with GAAP-dependent results that are documented as
preliminary delta GAAP documents.
The system documents the manual postings in the following subledger accounts, by default:
Smart Accounting
● Subledger account 10095201 (subledger account group 100952, analytical)
● Subledger account 11800401 (subledger account group 118004, interpreted)
However, you can create any number of custom subledger accounts for the subledger account groups listed.
You can create a subledger account for manual postings for every individual book value component, for
example. In the general ledger transfer and the balance sheet display you can consider documents for
subledger accounts for manual postings and documents for regular subledger accounts together for the
corresponding book value components.
You can make manual postings within regular posting periods, or, if you are using a fiscal year variant with
special periods, at the end of the year in special periods.
Released manual adjustments are included automatically from the next posting date when the following
process steps are run:
● Value FX
● Classify
● Carry Forward
 Note
If you want to make a backdated manual posting, you need to run the process steps listed above again as
required during period-end processing or year-end processing.
Manual postings are not taken into account in the other process steps for period-end processing.
Entry
Prerequisites
Legal Entity Define Legal Entities under Basic Settings, you have defined and assigned number ranges
for manual postings.
● In Customizing for Bank Analyzer under Processes and Methods Smart Accounting Technical
Settings Define Results Storage , you have set up the results storage for the Smart Accounting result
category 905 (Preliminary Subledger Document).
● On the SAP Easy Access screen under Bank Analyzer Processes and Methods Smart Accounting
Subledger Accounting for Financial Instruments or Insurance Contracts, under Period-End Processing
Open and Close Posting Periods you have opened the relevant posting period for manual postings in each
case.
Procedure
1. To make a preliminary entry for a manual adjustment, on the SAP Easy Access screen, choose Bank
Analyzer Processes and Methods Smart Accounting for Financial Instruments or Insurance Contracts,
Period-End Processing Manual Posting (Contract) or Manual Posting (Cross-Contract). The initial
screen appears.
2. Enter at least the legal entity, an accounting system, and the posting date.
Smart Accounting
3. Choose Execute. The system displays a detail screen.
4. Enter a posting date for the reset so that you are able to reset the manual posting later in period-opening
processing. The posting date for the reset must be at least one day after the current posting date.
5. Enter at least a profit and loss account, an equity account or a subledger account for manual value
adjustments for debit and credit items from the subledger account groups listed above.
6. Enter the posting amount in transaction currency for each debit and credit item. You can also distribute the
posting amount over more than one account. The system converts the amounts into different currencies.
7. To have the system determine the corresponding general ledger accounts and enter these automatically,
choose Derive G/L accounts.
8. To generate preliminary currency positions and equivalent value positions for postings to the profit and
loss statement and to run the Move and Transform process step, choose Move and Transform.
9. Save your entries. The system performs consistency checks for your entries. Before you can make a
preliminary entry for a manual adjustment, the balance of debit and credit must be zero, for example, and
the debit/credit indicator must be assigned correctly. The system then generates a preliminary document
and stores it in the Results Data Layer (RDL) with the Smart Accounting result category 905.
10. The system starts a release workflow.
Release
Prerequisites
● Workflow Template
In Customizing for Bank Analyzer, under Processes and Methods Smart Accounting either Process
Steps for Financial Instruments or Process Steps for Insurance Contracts under Adjust Derive Workflow
for Release of Manual Postings , you have determined whether the release is completed in one step
(principle of dual control), two steps (principle of triple control) or three steps (principle of quadruple
control). SAP provides a workflow framework (WS02400012) and three subworkflow templates
(WS02400011, WS02400014, WS02400015). You have defined which of the subworkflow templates from
the workflow framework the system is to derive at runtime. This derivation depends on the legal entity and,
optionally, on the characteristics of the document header and the total of the debit amounts in functional
currency.
● Event Linking
On the SAP Easy Access screen, under Business Workflow Administration Event Manager Type
linkages (transaction: SWETYPV) you have entered the event linkage for the following event with the
following values:
Object category CL
Object type /BA1/CL_AL_BR_ADJ_DOC_REL_WF
Event SEND_TO_RELEASE
Receiver type WS02400012
Receiver function module SWW_WI_CREATE_VIA_EVENT_IBF
Smart Accounting
For more information, see .
Workflow
The releaser can display the preliminary document for manual value adjustment in the SAP Business
Workplace (SBWP) and release or reject it. It is not possible to change the data of the preliminary document.
As soon as the release is completed, the system generates a final document with a new document number and
stores this in the RDL with the Smart Accounting result category 900 (Subledger Document). The final
document contains a reference to the preliminary document.
 Note
If the posting date is in a period that is already closed, the system uses the first date of the next open
period as the posting date.
Reset
1. To reset the released manual postings, on the SAP Easy Access screen, choose Bank Analyzer
Processes and Methods Smart Accounting for Financial Instruments or Insurance Contracts, Period-
Opening Processing Reset Manual Posting .
2. Specify at least the legal entity and the evaluation key date. For more selection critieria, choose Dynamic
Selections .
3. Choose Execute. The system selects all of the released manual postings where the reset date (which you
specified when you made the preliminary entry) is before or the same as the evaluation key date.
4. The system inverts the amounts of the manual postings and uses the reset date (which you specified when
you made the preliminary entry) as the posting date. The system also generates a reset document with a
new document number and stores this in the RDL with Smart Accounting result category 900. The reset
document contains a reference to the final document for the manual posting.
Related Information
1.6.3.10 Close
You can use the Close process step to open and close posting periods (including special periods) for each legal
entity.
Prerequisites
If you use the Financial Accounting (FI) component, make sure that you have defined the relevant periods there.
Smart Accounting
In Customizing for Bank Analyzer under Processes and Methods Smart Accounting Basic Settings , you
have defined at least one fiscal year variant, one accounting system and one legal entity in the following
Customizing activities:
● Define Fiscal Year Variant

● Define Accounting Systems
● Define Legal Entities
Context
You can open and close posting periods for intraday processing (Process Steps Register and Capture (for
insurance contracts), for period-end processing, and for the Adjust process step (manual adjustments)
separately. This enables you to ensure that after a period is closed for intraday processing, operational flow
transactions and master data changes no longer affect period-end processing. In the same way, after the
period for the period-end processing has been closed, the adjustments made in the individual process steps in
period-end processing no longer affect the manual adjustments.
Procedure
Subledger Accounting . Then, under Financial Instruments or Insurance Contracts, choose Period-End
Processing Open and Close Posting Periods .
2. Choose a legal entity.
3. To open periods, specify one time period each for the following processes/process steps by entering a
lower limit for the period with fiscal year and an upper limit for the period with fiscal year:
○ Intraday processing
○ Period-end processing
○ Manual adjustments
4. Note the following:

○ Your settings for the fiscal year and the number of periods must be aligned with the settings you make
in the Customizing activity Define Fiscal Year Variant.
○ Intraday processing can be used within the posting periods. Period-end processing and manual
adjustments can be used within the posting periods and/or the special periods.
5. To close a period, change the lower limit for the period, and if required the corresponding fiscal year, so that
the year you want to close is no longer in the period.
 Caution
You should reopen closed periods in exceptional cases only.
Smart Accounting
Results
Once a period is closed, no further postings are possible in the period. This means that the accounting-relevant
documentation is carried forward to the first posting date of the next open period. The value date is not
affected by this shift. For traceability and reconciliation purposes, the original posting date from the operational
business transaction remains as the document date in the document when operational flow transactions and
master data changes are registered.
 Note
Initial situation: The posting periods 04-2016 through 12-2016 are open for registering, while the periods
03-2016 through 12-2016 are open for period-end processing. Due to an error in the operational system, a
business transaction with posting date and value date 2016-03-27 is imported with a delay.
Consequence: The Register process step documents the transaction with posting date 2016-04-01,
document date 2016-03-27 and value date 2016-03-27. If any currency translations are required, the
exchange rates valid on 2016-04-01 are also used. Balances up to 2016-03-31 are included in period-end
processing, which is executed on 2016-03-31. This means that the retroactively entered business
transaction is not included in the period 03-2016.
Special case period 00: Period 00 cannot be opened or closed by the Close process step because only the
Carry Forward process step posts to this period.
1.6.4 Year-End Processing
Year-end processing comprises period-end processing for special periods (Adjust process step) and the
balance carryforward function (Carry Forward process step):
● You use the Adjust process step to make automated adjustments at the end of the fiscal year in special
periods.
● You use the Carry Forward process step to carry the annual balance sheet forward to the new fiscal year
(period “00”).
Note that neither the Carry Forward process step nor the Adjust process step automatically react to
adjustments. Since the preceding posting periods must already be closed there is no need for an automated
adjustment function in the system here. You can use the Carry Forward process step to manually make a
selective correction.
Prerequisites
Before you can use period-end processing for a special period, you must have closed the corresponding
preceding period (or special period).
Smart Accounting
Activities
To execute period-end processing for special periods, on the SAP Easy Access screen, choose Bank Analyzer
Processing Period-End Processing (Contract) or Period-End Processing (Cross-Contract). Enter the special
period you want to process.
To execute the balance carryforward function, on the SAP Easy Access screen, choose Bank Analyzer
Processes and Methods Smart Accounting Subledger Accounting Financial Instruments Year-End
Processing Balance Carryforward (Contract) or Balance Carryforward (Cross-Contract).
Related Information

1.6.4.1 Carry Forward
In the Carry Forward process step, you carry the year-end balance forward to the year-opening balance.
The Carry Forward process step carries balances of balance-sheet subledger accounts for the closed fiscal year
(including special periods) forward to the first day of the following fiscal year (period 00), and posts this
against retained earnings.
The process step is executed for each accounting principle, with the main GAAP carrying forward operational
(central GAAP) and analytical (delta GAAP) subledger account balances. For non-leading accounting principles,
the Carry Forward process step includes only balances for analytical subledger accounts. Carry Forward is
divided into a contract-based and a cross-contract process step. The granularity of the cross-contract
subledger accounts is based on the financial statement entities. Year-end closing (including the creation of a
year-opening balance sheet) is carried out separately in both the subledger and in the general ledger. This
means that the subledger documents of the year-opening period 00 are not taken into account by the general
ledger connection.
The figure below shows the balance carryforward function in Smart Accounting. (Note that this is a simplified
representation that does not include special periods, for example).
Smart Accounting
Figure 12: Balance Carryforward
Prerequisites
You can display the settings for the Carry Forward process step in Customizing for Bank Analyzer under
Processes and Methods Smart Accounting Process Steps for Financial Instruments Carry Forward .
Special Features
● In the balance carryforward process, the currency position Profit and Loss Statement is carried forward to
the currency position Reserve.
● Year-opening positions in foreign currency (transaction currency ≠ functional currency) are carried forward
against Preliminary Retained Earnings.
● If there are postings with value dates in the future on the subledger accounts on the last day of the old
fiscal year, the balance carryforwards are carried out such that these value dates are preserved.
● You can execute the Carry Forward process step more than once for a fiscal year. If there have been
changes to the year-opening position, the postings from the previous execution are inverted.
● The Carry Forward process step does not react automatically to retroactive changes. If the balances
change on the last day of the fiscal year after the Carry Forward process step has been executed, you need
to execute the process again. Only the initial positions that have been changed are re-documented in
accounting. Documents that have already been written are inverted, and new documents are written for
the initial positions that have changed.
After these changes, you can execute the contract-related process selectively for changed contracts. You
then need to execute the corresponding cross-contract process so that the balance carryforward is also
updated for cross-contract positions.
Smart Accounting
● We recommend that you execute the Carry Forward process step as soon as all regular periods of the fiscal
year are completed. The Carry Forward process step is a prerequisite for Smart Accounting processing in
the new fiscal year. You should execute the Carry Forward process step again after completion of all special
periods.
1.6.5 Period-Opening Processing
Period-opening processing resets documents that were created during period-end processing or end-of-day
processing (contract) on the previous day.
The following processes are involved:

● Defer [page 99]
You can also reset manual adjustments. For more information, see Adjust [page 149].
You can use the reset of period-end process steps for the following purposes:
1. To report the recognition in profit and loss of the adjustment of valuation postings by comparing with a
valid reference value at a designated point in time:
Your choice of reference value combined with the execution of period-opening processing, for example,
gives you the following options for displaying recognition in profit and loss:
Reference Value and Time Display of Recognition in Profit and Execution of Period-Opening Proc
Loss essing
Last adjustment posting Permanent None
Initial recognition in balance sheet Life-to-date Daily
Last adjustment posting in prior pe Period-to-date Daily, except at the end of periods
riod
Last adjustment posting in preceding Quarter-to-date Daily, except at the end of quarters
quarter
First adjustment posting of current Life-to-date Daily, except at the end of years
year
Smart Accounting
2. Fixing of foreign exchange rates for unrealized profit and loss amounts in a foreign currency at designated
points in time:
Frequency of Exchange Rate Fixing Execution of Period-Opening Processing
Daily None
For each period Daily, except at the end of periods
Quarterly Daily, except at the end of quarters
Annually Daily, except at the end of years
Period-Opening Processing (Contract)

You use the period closing variant to specify for which process steps reset postings are created. The
characteristic values of the subledger coding block valid at the start of the reset day are included in the reset
document.
Period-Opening Processing (Cross-Contract)

The resetting of documents from period-end processing (cross-contract) applies only to the Value FX process
step run by period-opening processing (cross-contract).
Reset Manual Adjustment

You use this to reset manual adjustments.
Activities
For contract-related changes, on the SAP Easy Access screen, choose Bank Analyzer Processes and
Methods Smart Accounting Subledger Accounting Financial Instruments Period-Opening Processing
Period-Opening Processing (Contract) .
For cross-contract period-opening tasks, on the SAP Easy Access screen, choose Bank Analyzer Processes
and Methods Smart Accounting Subledger Accounting Financial Instruments Period-Opening
Processing Period-Opening Processing (Cross-Contract) .
For resetting manual adjustments, on the SAP Easy Access screen, choose Bank Analyzer Processes and
Methods Smart Accounting Subledger Accounting Financial Instruments Period-Opening Processing
Reset Manual Adjustments .
 Note
You want the accounting contributions to the profit and loss statement to be finally fixed only at the end of
the quarter. However, reports still need to be created at the end of each month
Postings at the end of the period (February 28)
a) On February 28, the accruals are USD 10; the exchange rate on this date is 0.8.
Smart Accounting
Based on these parameters, the Accrue process step creates the following posting:
a) Posting Date Subledger Ac Debit/Credit Amount in Trans Amount in Func

count (D/C) action Currency tional Currency
February 28 Accruals: Interest D USD 10 EUR 8
Income: Unreal C USD -10 EUR -8

ized Interest (Pre
liminary)
b) Since March 28 is a balance sheet key date, the unremitted interest income needs to be transferred to
interest income (Move and Transform process step):
b) Posting Date Subledger Ac Debit/Credit Amount in Trans Amount in Func

February 28 Income: Unreal D USD 10 EUR 8

ized Interest (Pre
liminary)
Currency Position C USD -10 EUR -8

Income State
ment
Equivalent Value D EUR 8 EUR 8

USD
Income: Interest C EUR -8 EUR -8

(Unrealized)
c) Due to a business decision that there is to be no final fixing within a quarter, the system resets this
posting during the period-opening process on March 1:
c) Posting Date Subledger Ac Debit/Credit Amount in Trans Amount in Func

March 1 Income: Unreal D USD -10 EUR -8

ized Interest (Pre
liminary)
Currency Position C USD 10 EUR 8

Income State
ment
Equivalent Value D EUR -8 EUR -8

USD
Income: Interest C EUR 8 EUR 8

(Unrealized)
Postings at the end of the quarter on March 31
Smart Accounting
d) At the end of the next period, there is a delta of USD 1 (target balance USD 11) on Accruals; the exchange
rate on March 31 is 0.9:
d) Posting Date Subledger Ac Debit/Credit Amount in Trans Amount in Func

March 31 Accruals: Interest D USD 1 EUR 0.9
Income: Unreal C USD -1 EUR -0.9

ized Interest (Pre
liminary)
e) Before the Move and Transform process step is executed, there is a balance of USD -11 on Income:
Unrealized Interest (Preliminary). This is now fixed with the exchange rate on March 31 (0.9) in the net
interest income:
e) Posting Date Subledger Ac Debit/Credit Amount in Trans Amount in Func

February 28 Income: Unreal D USD 11 EUR 9.90

ized Interest (Pre
liminary)
Currency Position C USD -11 EUR -9.90

Income State
ment
Equivalent Value D EUR 9.90 EUR 9.90

USD
Income: Interest C EUR -9.90 EUR -9.90

(Unrealized)
This results in an interest income of EUR 9.90 on March 31, and no foreign exchange result. Due to the
business decision outlined above, the system no longer performs a reset on April 1.
Result in the event of a different business decision
If the business decision was to execute the final fixing at the end of each month, you would not execute the
reset (c) and there would be a shift between the interest income and the foreign exchange result:
Key Date Amount in Foreign Currency Contribution to Net Interest Income

in EUR
February 28 USD -10 EUR -8
March 31 USD -1 EUR -0.90
Net interest income for the fiscal year EUR -8.90
The difference of EUR -1 in comparison to the quarterly fixing is added to the foreign exchange result.
Smart Accounting
Related Information
Accrue [page 97]

Defer [page 99]
Release [page 115]
Value TC [page 125]
Value FX [page 144]
1.6.6 Preparatory Processing
Before you execute day processing at the end of the period you have the option of predetermining the
accounting status. Before you execute period-end processing you can also predetermine the target values.
Determine Accounting Status
For more information, see the section Determine Impairment Attributes Periodically under Impairment
Attribute Determination (IAD) [page 92].
For more information about the determination of the asset/liability status for financial contracts, see
Determine Target Values
You have the following options on the SAP Easy Access screen, under Bank Analyzer Processes and
Methods Smart Accounting Subledger Accounting Financial Instruments Preparatory Processing
Determine Target Values :
● Determine Amortized Cost

● Determine Amortized Valuation Cost
● Determine Adjustment for Credit Risk
● Determine Fair Value
You can use the predetermination of target values for validation purposes or within a release process, for
example. The system calls the calculators used during period-end processing. No postings are made, however
the target values are stored in the Results Data Layer using the following Smart AFI result categories:
● 020 Deferrals
● 025 Amortized Cost
● 035 Amortized Valuation Costs
Smart Accounting
● 050 Credit Risk Adjustment
● 075 Fair Value
Make sure that you execute the process steps in the sequence specified below. Use the same parameters in
each case and use period-closing variants.
1. Execute the process steps for day processing

2. Execute period-end processing with the period-closing variant for the process step Accrue
3. Predetermine the target value for amortized cost (if required)
4. Execute period-end processing with the period closing variants for the process steps Defer and Write Down
5. Predetermine the target value for amortized valuation cost (if required)
6. Execute period-end processing with the period closing variant for the process step Release
7. Predetermine the target value for credit risk adjustment (if required)
8. Predetermine the target value for fair value (if required)
9. Execute period-end processing with the period closing variants for the following process steps Value TC,
Move and Transform, Value FX, Classify and Carry Forward
Related Information
Calculation of Deferrals [page 100]

Release of Valuation Remnants [page 116]
Determination of Fair Value [page 134]
1.6.7 Tools
1.6.7.1 Include Contracts in Day Processing Again
The correction report Include Contracts in Day Processing Again allows you to reprocess contracts and
securities positions that have already been successfully processed in day processing and in period-end
processing.
Reprocessing can be required in the following cases:
● The configuration has been changed and you now want to use it for business transactions and positions
that have already been processed.
● At the time of initial processing target values (such as accruals or risk provision amounts ) had not been
imported or were imported incorrectly.
You can use the Reset Status Values checkbox to restrict reprocessing to the process steps of period-end
processing or, in addition, to reprocess the documents entered in the Register process step.
 Note
If you select the checkbox, the system also runs the Classify process step at the start of the day. This
reclassifies the balance sheet before processing, if required, to ensure a consistent starting point.
Smart Accounting
Activities
To execute the report, on the SAP Easy Access screen, choose Bank Analyzer Processes and Methods
Smart Accounting Subledger Accounting Financial Instruments Tools Include Contracts in Day
Processing Again .
The report selects all of the contracts that meet the dynamic selection and the selection parameters that you
specified on the report screen. For each contract selected, the report determines the processing status of the
contract or the combination of contract and financial instrument again and updates the processing status for
the specified posting date on the database accordingly.
If the Reset Status Values checkbox has been selected, the system sets status 01 (new). If it has not been
selected, it sets status 02 (to be consolidated).
When the report is executed the selected contracts are processed in end-of-day processing again, even if there
is no external event (such as a backdated master data change).
 Note
If the processing status new (01) is set, you must execute the Register process step again before end-of-day
processing, so that the business transactions are also registered again as of the chosen posting date.
1.6.7.2 Exclude Business Transactions from Reprocessing
The correction report Exclude Registered Business Transactions from Processing allows you to exclude business
transactions from being processed again by the Register process step.
Accessing the registration table in this way is advisable in the following cases:
● A business transaction has been included in the Register process step for the sake of completeness,
however it is incorrect, even though the configuration has been corrected or necessary information (such
as exchange rates) has been provided subsequently.
The business transactions have the processing status 01 (“Suspense Account Posting”).
Consequence: As a result, this business transaction can only be posted to a suspense account.
● A business transaction has been imported in a form that does not allow for the creation of a posting record
with debit/credit parity.
 Example
A business transaction has been imported by mistake, in which the amounts in the payment currency
and position currency are in the same currency but the individual amounts differ.
These business transactions have processing status 10 (Reregister).
Consequence: In this case accounting documents cannot be generated for the business transaction.
This needs to be considered during reconciliation.
The report can only be run in online mode which means that the user must confirm the deletion. This restricts
the maximum number of data records that can be deleted.
Smart Accounting
To run the report, on the SAP Easy Access screen, choose Bank Analyzer Processes and Methods Smart
Accounting Subledger Accounting Financial Instruments Tools or Bank Analyzer Processes and
Methods Smart Accounting Subledger Accounting Insurance Contracts Tools .
Call the Exclude Business Transactions from Reprocessing transaction.
1.6.7.3 Clean Up General Ledger Document Management
You can use the Clean Up General Ledger Document Management report to remove data records from status
management for the general ledger connection and so limit the size of the status management table.
You can only delete data records under the following conditions:
● The status data for the general ledger account documents from the Results Data Layer (RDL) belongs to a
fiscal year that has already closed.
● The RDL general ledger account documents related to the status data have already been sent to the
general ledger successfully or the failed attempt to send documents has been confirmed in the
Postprocessing Office with the status Sending Canceled.
● The report deletes the status data only if the corresponding RDL general ledger documents have already
been deleted using SAP Information Lifecycle Management.
Call the Clean Up General Ledger Document Management transaction.
1.6.7.4 Destroy Process Controller Data
The Destroy Process Controller Data report allows you to delete data records from the Process Controller’s
status management (for example, for data protection reasons or to reduce the data volume).
Prerequisites
You can delete data records under the following conditions:
● You can only delete entries from closed periods if there are no earlier open periods.
● The contract has already expired. You can determine when a contract is considered expired from the end of
the contract term in the Source Data layer (SDL).
● The contract is active but there is another entry in the Process Controller on a later date than the posting
date in the destruction report.
Smart Accounting
Context
To delete, you use the data destruction object /BA1/RBR_PROC_CTRL and proceed as follows:
Procedure
Subledger Accounting Financial Instruments Tools or Bank Analyzer Processes and Methods
Smart Accounting Subledger Accounting Insurance Contracts Tools . Call the Destroy Process
Controller Data transaction.
2. Choose the Destroy pushbutton.
3. On the selection screen, choose an existing variant or create a new variant. The system processes variants
based on the report /BA1/RBR_PROC_CTRL_DES. In a variant, you can limit deletion to various Process
Controller contract attributes:
○ Accounting system, legal entity and posting date are mandatory.
○ You can also define whether only expired contracts or all active contracts are deleted.
4. Enter a start date and spool parameters (background printing parameters).
5. Finally, choose F8 or the Schedule Job pushbutton to schedule the destruction run.
Results
When the run is completed, you can view the logs either in the data destruction object or in the CVPM process
monitor for the process /BA1/RBR_PROC_CTRL_DESTRUCT.
 Note
Do not execute the process /BA1/RBR_PROC_CTRL_DESTRUCT directly because the connection to the
data destruction run can be lost.
1.6.7.5 Invert Period-End Processing
You can reset contract-related and cross-contract period-end processing.
To do so, on the SAP Easy Access screen , choose Bank Analyzer Processes and Methods Smart
Accounting Subledger Accounting Financial Instruments Tools :
● Invert Period-End Processing (Contract-Based) or

● Invert Period-End Processing (Cross-Contract)
Both transactions generate inversion documents, which reset the effects of period-end processing.
Smart Accounting
1.6.7.6 Start Smart Accounting Process Monitor
In the Smart Accounting process monitor you can analyze runs for analytical processes in Smart Accounting
for Financial Instruments and Insurance Contracts.
This process monitor has the same functions as the process monitor in the Calculation and Valuation Process
Manager (CVPM) but provides selection parameters that are specific to Smart Accounting, such as the legal
entity and accounting system.
Under Additional Parameters, you can use keywords to restrict your search - for example, the ID of a source
system.
To start the Smart Accounting Process Monitor, on the SAP Easy Access screen, choose Bank Analyzer
Processes and Methods Smart Accounting Subledger Accounting Financial Instruments or Bank
Analyzer Processes and Methods Smart Accounting Subledger Accounting Insurance Contracts :
Call the Start Smart Accounting Process Monitor transaction.
For more information about the prerequisites and features of both process monitors, see the documentation
for the CVPM process monitor.
Related Information
1.7 Processes for Insurance Contracts
The application menu for Smart Accounting groups the processes that need to be run according to the time of
processing.
Smart Accounting
● #unique_3/unique_3_Connect_42_subsection-im1 [page 167]
Hover over each box for a description. Click the box for more information.
Day processing
Day processing comprises the activities that are usually executed once or multiple times a day. The steps are
as follows:

● Capture (Central GAAP) [page 189]
Smart Accounting
Period-end processing updates position components to fulfill a balance sheet reporting requirement.
done.
The process steps are as follows:

● Capture (Delta GAAP) [page 201]
● Unwind and Release [page 202]
● Recognize Profit [page 212]
● Classify [page 224]
● Adjust [page 149]
● Close [page 152]
Year-end processing
● Adjust [page 149]:

You use the Adjust process step to make automated or manual adjustments at the end of the fiscal year in
special periods.
● Carry Forward [page 233]:
You use the Carry Forward process step to carry the annual balance sheet forward to the new fiscal year
(period 00).
Period-opening processing
Period-Opening Processing [page 234] resets documents that were created during period-end processing or
You can also reset manual adjustments.
Preparatory processing
In the Recognize Profit process step, as a preparatory step, you can determine the accounting status and
calculate deferred profit.
Smart Accounting
Related Information
Day Processing [page 182]

Year-End Processing [page 232]
1.7.1 Results Data
1.7.1.1 Methodologies for Determining Target Values
In Smart Accounting, the calculation of a target value for a subledger account and the account assignment
(including determination of the difference amount) are separated. You can use different methodologies to
calculate the target values for subledger accounts depending on the accounting process step. These
methodologies can be grouped according to the pattern described below.
Depending on the semantics of the subledger account, the system either determines target values for this
subledger account (for example, target value of an accrual item), change reasons and the related (cumulated)
deltas, or it determines target values that are used in accounting to determine the target values for subledger
accounts (for example, amortized cost or fair value).
 Note
The system calculates target values in position currency.
Table 12: Assignment of Process Steps and Methodologies

Subledger-Account-
Bus.-Transaction-
Cash-Flow-
Parametric
Contract-
-Based
Import
Factor
Based
Based
Based
Based
Process Step
Register
Capture x
Accrue x (x)
Capture x x
(Delta GAAP)
Smart Accounting
Subledger-Account-
Bus.-Transaction-
Cash-Flow-
Parametric
Contract-
-Based
Import
Factor
Based
Based
Based
Based
Process Step
Unwind and
Release
Risk Adjust
ment
Interest Rate x x x x
Risk
Inflation Risk x x x x
Credit Risk x x x x
Liquidity Risk x x x x
Other Risks x x x x
Prudence x x x x
Principle
Value TC
Risk Adjust See above

ment
Margins
Cost-of-Capi x x x x
tal Margin
Recognize x x x x
Profit
Import methodology
For each process step, you can import accounting target values that have already been calculated outside of
Smart Accounting. For more information, see Importing Results and Granularity [page 175].
Smart Accounting
Contract-based methodologies
In Smart Accounting, contract-based methodologies are methodologies that require no further input
parameters other than the contractual information (for example, lifecycle segment).
You can use the following methods in the process steps:
● Realization
If you apply the realization method, the system clears an existing balance completely.
● Freeze
If you apply the freeze method, the system keeps an existing balance (it is “frozen”).
 Note
The system executes the realization method automatically if a contract or securities position has the
lifecycle segment 40 (Contract End).
Parametric methodologies
Parametric methodologies group all methods that require various reference parameters for calculation (for
example, market prices or probability of default). These parameters are applied to a partial book value or to the
balance of a given subledger account (taking scaling into account where required).
Specific use cases for this include the following:
● The one-year expected loss methodology for determining the credit risk adjustment (book value x PD x
LGD)
● The mark-to-market methodology for determining the fair value (amount x market price)
Cash-flow-based methodologies
Cash-flow-based methodologies group all methods that determine accounting target values based on a cash
flow.
The key parameters for this approach are as follows:
● Selection of the relevant cash flow (contractual cash flow, behavioral cash flow, credit-risk-adjusted cash
flow)
● Depending on the target value to be calculated, the interest rate or yield curve used for discounting is
either implicitly defined by the system (for example, effective interest rate for determining amortized cost)
or you need to explicitly enter it (for example, yield curve for determining fair value).
Smart Accounting
Subledger-account-based methodologies
These methodologies calculate target values on subledger accounts by evaluating the balances of the
subledger account concerned and of further reference subledger accounts (taking time limits and amount-
based limits into account if required).
Business-transaction-based methodologies
These methodologies are used only for process steps that carry out their interpretation after business
transactions have occurred. The methodologies either amortize business-transaction-based amounts over a
period of time or determine accounting price gain effects, taking lot selections into account.
1.7.1.1.1 Change Reasons
Change reasons explain the change in the balance of a subledger account or subledger account group between
two evaluation dates on a balance sheet key date or between two balance sheet key dates.
Change reasons are used mainly to create a detailed change analysis. In other words, they explain how and why
the value of a balance sheet reporting item has changed over a given period.
Change reasons can be divided into categories according to the following pattern:
Change Reason Category ID Description
Initial Recognition 100 Initial Recognition
101 Initial Recognition (Reclassification)
105 Initial Recognition (Contract Bounda

ries)
Time Recognition 200 Unwinding/Amortization
Experience Recognition 405 Expected Flow Transaction (Expected

Cash Flow)
505 Experience Variance (Model-Driven)
506 Experience Variance (Contract-Based)
Update Recognition 600 Assumption Change (Underwriting

Risks)
601 Assumption Change (Investment Risks)
605 Methodology Change
300 Subsequent Measurement
825 Subsequent Measurement (Local Cur

rency)
Derecognition 800 Derecognition
Smart Accounting
Change Reason Category ID Description
801 Derecognition (Reclassification)
Previous Recognition 001 Balance Carryforward
Prerequisites
In Customizing for the relevant process step under Bank Analyzer Processes and Methods Smart
Accounting Process Steps for Insurance Contracts [Name of Process Step] Account Assignment , you
can view the combinations of subledger accounts provided by SAP for postings in the relevant process step.
You can edit these or add your own combinations.
Initial Recognition / Derecognition
The Initial Recognition category is used to define the initial recognition of an asset or liability in a balance sheet
item. The Derecognition category describes the removal of an asset or liability from the balance sheet.
The initial recognition in a balance sheet item can be attributed to the following three use cases:
Origin ID Change Reason Description
Contract management/proc 100 Initial Recognition Is the result of the purchase

essing or inflow of an asset or a lia
bility.
Accounting 101 Initial Recognition (Reclassi Is the result of the inflow of

fication) an existing asset or a liability
during a change of balance
sheet reporting item.
105 Initial Recognition (Contract In insurance accounting, this

Boundaries) is the result of the delayed in
itial recognition of expected
cash inflows and cash out
flows based on cash flow fil-
tering.
For derecognition, the contract boundaries use case is not relevant:
Contract management/proc 800 Derecognition Is a result of the sale or end

essing of an asset or a liability.
Accounting 801 Derecognition (Reclassifica- Is the result of the outflow of

tion) an existing asset or liability
during a change of balance
sheet reporting item.
Smart Accounting
Time Recognition
Amortization describes the deterministic change to a target value due only to the time expired under constant
conditions (period-based):
Origin ID Change Reason
Accounting 200 Unwinding / Amortization
Experience Recognition
Experience Recognition groups all change reasons that describe the change in value of a balance sheet item
due to the occurrence of events (empirical values):
Actuarial services 405 Expected Flow Transaction Expected payment, transition

(Expected Cash Flow) to "Due" or transition to "Re
ported" of claims, premiums
or other payment categories
Actuarial services 505 Experience Variance (Model- Adjustment of the model to

Driven) create a best estimate cash
flow based on empirical val
ues.
Customer behavior 506 Experience Variance (Con Adjustment of the best esti
tract-Based) mate cash flow due to the dif
ference between the actual
cash inflows/outflows, transi
tions to “Due” or transitions
to “Reported” from the ex
pected cash inflows/
outflows, transitions to “Due”
or transitions to “Reported”.
Update Recognition
Update Recognition groups all change reasons that describe the change in value of a balance sheet item due to
the occurrence of events that either change the volume of a risk or the price for an existing risk:
Actuarial services 600 Assumption Change (Under Re-estimation of the volume

writing Risk) of a best estimate cash flow
based on the re-estimation of
the underlying underwriting
risk
Smart Accounting
601 Assumption Change (Invest Re-estimation of the volume

ment Risks) of a best estimate cash flow
based on the re-estimation of
the underlying investment
risk
605 Methodology Change Re-estimation of the volume

of a best estimate cash flow
based on a new projection
method
Accounting 300 Subsequent Measurement Is the result of using the cur

rent market price (for exam
ple, market yield curve)
825 Subsequent Measurement Is the result of using current

(Local Currency) exchange rates for the valua
tion of an existing balance
sheet item
Previous Recognition
Previous Recognition describes the transfer of balance sheet items from previous fiscal years to the new fiscal
year (balance carryforward).
Related Information
1.7.1.2 Importing Results and Granularity
You can import results data for Smart Accounting using the Data Load Layer (DLL).
You can import results data for Smart Accounting using the Data Load Layer (DLL). You can find the import
methods in Customizing for the relevant Smart Accounting process step under Methodology.
Prerequisites
● You have created RDL result types.

● You have created RDL result views for Smart Accounting results that are stored in a semantic cluster table.
Smart Accounting
Activities
Use the of the Data Load Layer (DLL).
Results That Can Be Imported
Smart Accounting Re

RDL Result Type (De sults Category (De
scription) RDL Result Category scription) Import Granularity
_S_SLPD (Subledger HFSPD 900 (Subledger Docu Not possible Subledger coding
Document) ment) block
_S_GLPD (General HFSPD 950 (Classification Not possible General ledger coding
Ledger Document) Status/Holding Cate block
gory)
_S_SCT_STS (Analyti HKAAS 080 (Classification Possible Contract or securities

cal Statuses) Status/Holding Cate position
gory)
081 (Impairment Sta Possible1 Contract or securities

tus) position / lot
082 (Write-Down Sta Mandatory Contract or securities

tus) position
083 (Accrual Status) Possible1 Contract or securities

position
084 (Asset/Liability Not possible Contract or securities

Status) position
085 (Market Conform Mandatory Contract or securities

ity Status) position
086 (Fair Value Level) Possible Contract or securities

position
087 (Term Segment) Possible Contract or securities

position
_S_SCT_STE HKEAS 090 (Onerousness Possible Profit recognition port
(Analytical Statuses Status) folio,

(Expectation-Based))
actuarial portfolio,
contract
Smart Accounting
Smart Accounting Re
_S_SCT_TVE Target HKETV 100 (Provision (Receiv Possible Actuarial portfolio,

Values (Expectation- ables/Payables)) contract
Based)
102 (BECF Adjustment Possible Actuarial portfolio,
(Locked-In Assump contract
tions))
104 (BECF Offset Possible Actuarial portfolio,

Amount (Contract contract
Boundaries))

Amount (New Busi contract
ness))

Amount (Lifecycle)) contract

Amount (Inflation)) contract
116 (Amortized Possible Actuarial portfolio,

Present Value (Risk- contract
Free))
117 (Amortized Present Possible Actuarial portfolio,

Value (Inflation-Adj.)) contract

Present Value (Cred.- contract
Rsk.Adj.))

Present Value (Liq. contract
Risk-Adj.))

Present Value (Risk- contract
Adjusted))

Present Value (Pru contract
dence-Adj.))
130 (Present Value Possible Actuarial portfolio,

(Risk-Free)) contract
Smart Accounting
Smart Accounting Re
131 (Present Value (In Possible Actuarial portfolio,

flation-Adjusted)) contract

(Credit-Risk-Ad contract
justed))

(Liquidity-Risk-Ad contract
justed))

(Risk-Adjusted)) contract

(Prudence-Adjusted)) contract
140 (Cost-of-Capital Possible Actuarial portfolio,

Margin) contract
150 (Deferred Profit) Possible Profit recognition port

folio, actuarial portfo
lio, contract
151 (Loss Component) Possible Profit recognition port

folio, actuarial portfo
lio, contract
152 (Premium Defi- Possible Profit recognition port

ciency Reserve) folio, actuarial portfo
lio, contract
_S_SCT_TVL (Target HKTVL (for Smart Ac 005 (Price Gain/Loss) Possible Business transaction/
Values) counting result catego securities position2
ries 010 and 015 also
HKTVR) 010 (Accrual) Mandatory Contract
015 (Accrued Interest) Mandatory Securities
020 (Deferrals) Possible Contract or securities

position / lot
025 (Amortized Cost) Possible Contract or securities

position / lot
035 (Amortized Valua Possible Contract or securities

tion Costs) position / lot
Smart Accounting
Smart Accounting Re
050 (Credit Risk Ad Possible Contract or securities

justment) position / lot
051 (Interest Rate Risk Possible Contract or securities

Adjustment) position / lot
070 (Fair Value of Col Mandatory Contract or securities

lateral) position / lot
075 (Fair Value) Possible Contract or securities

position / lot
200 (Statement About Mandatory Contract or securities

Contract Modification) position / lot
800 (Free Line) Possible Contract
901 (Maturity Group Possible Contract or securities

ing) position / lot
S_CF (Cash Flow) HKCFR 250 (Contractual Cash Mandatory Contract or securities
Flow) position
251 (Behavioral Cash Mandatory Contract or securities

Flow) position
252 (Credit-Risk-Ad Mandatory Contract or securities

justed Cash Flow) position
S_BECF (Best Estimate HKRIC 253 (Best Estimate Mandatory Actuarial portfolio,
contract
Cash Flow) Cash Flow)
254 (Best Estimate Mandatory Actuarial portfolio,

contract
Cash Flow (Locked-
In))
_S_SCT_PGD (Price HKPGD 300 (Lot) Not possible Securities position/lot

Gain Determination)
_S_SCT_IMP (Impair HKIMT 030 (Write-Down Mandatory Contract or securities

ment) (Nominal)) position
450 (Delinquency) Mandatory Contract
451 (Master Rating) Mandatory Contract or securities

position
Smart Accounting
Smart Accounting Re
452 (Probability of De Mandatory Contract or securities

fault) position
453 (Probability of De Mandatory Subportfolio

fault (Subportfolio))
454 (Loss Given De Mandatory Contract or securities

fault (Contract)) position
455 (Loss Given De Mandatory Subportfolio

fault (Subportfolio))
456 (Credit Conver Mandatory Subportfolio

sion Factor (Contract))
457 (Credit Conversion Mandatory Subportfolio

Factor (Subportfolio))
458 (Impairment Proc Not possible Contract or securities

essing Mode) position
_S_SCR (Capital Re HKRCR 530 (Predicted Sol Possible Actuarial portfolio,
quirement) vency Capital) contract
_S_RT_PAD (PAD HKCFA 531 (Rates (Prudence Possible Actuarial portfolio,

Rates) Adjustment)) contract
_S_SCT_PRG (Defer HKEPR 550 (Distribution Rate) Possible Actuarial portfolio,

red Profit) contract
551 (Interest Rate) Possible Actuarial portfolio,

contract
S_EPS (Profit Recogni HKEPS 552 (Profit Recognition Mandatory Actuarial portfolio,
tion Pattern) Pattern) contract
_S_SCT_PFA (Con HKAPA 600 (Contract Portfo Mandatory Portfolio, contract or

securities position
tract Portfolio Assign lio Assignment)
ment)
_S_SCT_PFD (Portfolio HKAPD 601 (Portfolio Defini- Mandatory Portfolio

Definition) tion: Accounting Sys
tems)
602 (Portfolio Defini- Mandatory Portfolio

tion: Deferred Profit)
Smart Accounting
Smart Accounting Re

tion: Actuarial Portf.)

tion: Asset/Liability
Determination)
_S_PSLPD (Prelimi HFSPD 905 (Preliminary Sub Not possible Contract or securities
nary Subledger Docu ledger Document) position
ment)
Legend for the Import column:
● Not possible: The system is not designed to allow imports and does not support this.
● Possible: The system allows imports. Alternatively, the results can also be created by Smart Accounting
processes. If results are imported, the system applies these imported results and does not overwrite them
with Smart Accounting processes.
● Mandatory: An import is essential if the result is important. No Smart Accounting processes are provided
to create these results.
Legend for the Granularity column:
Results are expected in Smart Accounting or created by Smart AFI either at the granularity level Financial
Contract (or loan, referred to as “Contract” below), Security or Securities Position (combination of a security
and a securities account contract).
You can also manage information referring to securities positions at the granularity level Lot. In selected areas,
Smart AFI allows you to define specific portfolios so that the relevant results can be managed at the granularity
level (Portfolio) or (Subportfolio).
1 Note that the status can either be imported or determined by the Determine Impairment Attributes process
(Impairment Attribute Determination = IAD). The IAD can override impairment and deferral statuses that are
imported from external sources. You can prevent this by using results category 458 to set the impairment
processing mode manually.
2Price gains/losses are determined at the Business Transaction granularity level. The securities position is
managed in the results in addition to the business transaction.
Special Features
Semantic cluster tables
The following results storage locations are semantic cluster tables:
● Smart AFI: Analytical Status (_S_SCT_STAT)

● Smart AFI: Target Values (_S_SCT_TVAL)
Smart Accounting
● Smart AFI: Price Gain Determination (_S_SCT_PGD)
● Smart AFI: Impairment (_S_SCT_IMP)
Semantic cluster tables can contain several Smart Accounting result categories that have semantic aspects in
common and are read together in a Smart Accounting process. The Smart Accounting result categories that
are stored together in a semantic cluster table are imported separately according to Smart Accounting result
category. To import the results categories, you need the RDL results views with a structure that matches the
structure of the Smart Accounting result category in each case. These RDL result views are provided in the
Business Content.
Related Information
1.7.2 Day Processing
Related Information

Register [page 183]
End-of-Day Processing (Contract) [page 195]
1.7.2.1 Set Posting Date
You use this transaction to define a posting date up to which the Smart Accounting processes create posting
documents for the specified source systems. For example, the Register process step processes business
transactions only up to this posting date.
Context
Before you register business transactions and master data changes, you need to set a posting date for each
source system. This date defines the latest posting date or the latest business record date for business
transactions and master data changes that are transferred.
The posting date is set as leading in the relevant operational system (source system) (opening of a posting
day). By applying this date, accounting can determine whether a newly registered business transaction might
Smart Accounting
be a correction (posting date (business transaction) < posting date (source system)) or whether this can be
ruled out (posting date (business transaction) = posting date (source system)).
It is also possible to not report the posting date in accounting until a posting date has been completely
processed (in the subledger and if required in the general ledger), and required end-of-day and period-end
processing has been executed. Therefore, the posting date for each source system must always be earlier than
or equal to the posting date in the operational system. The “earlier than” results only from the requirement
outlined previously.
Procedure
Subledger Accounting Insurance Contracts Day Processing Set Posting Date .
2. Enter the latest posting date required and the source systems.
3. Choose Execute.
1.7.2.2 Register
You use the Register process step to document in accounting all business transactions imported since it was
last executed and all business transactions not completely or correctly processed in a previous register run.
In addition, the system receives master data changes and analytical decisions, and marks the relevant
contracts for end-of-day processing. Prerequisite for this is that the source system is relevant for Smart
Accounting.
You can schedule the Register process step to run as often as required during a day.
 Note
If you start Register runs for different source systems, you need to take various dependencies into account.
For more information, see Dependencies Between Source Systems [page 188].
Prerequisites
Accounting Process Steps for Insurance Contracts Register .
Basic Settings Define Source Systems , you have made sure that the source system is relevant for
Smart Accounting.
● You have set the posting date. For more information, see Set Posting Date [page 62].
Smart Accounting
Activities
Subledger Accounting Insurance Contracts Day Processing Register .
1.7.2.2.1 Register Business Transactions
The Register process step transfers operational flow transactions (mapped in the SDL as business
transactions) to Smart Accounting, and documents these as subledger documents.
The system only transfers business transactions to Smart Accounting for which the following conditions apply:
● The posting date of the business transaction is before or the same as the posting date defined for Smart
Accounting.
● The business transaction class of the business transaction is relevant for Smart Accounting.
Prerequisites
In Customizing for Bank Analyzer under Processes and Methods Smart Accounting Technical Settings
Define Relevant Business Transaction Classes , you have made sure that the business transaction class is
Process
Register Business Transactions

When the system registers a business transaction, it creates a central GAAP document for each business
transaction item. For more information, see Central GAAP Approach [page 25].
The system specifies which subledger account groups are permitted for creating a subledger document in the
Register process step. It determines the corresponding posting records with the specific subledger accounts
from the business transaction data and the business transaction item. In this way, the system reduces detailed
operational information to a few analytical consequences.
For more information, see Customizing for Bank Analyzer under Processes and Methods Smart Accounting
Process Steps for Insurance Contracts Register Account Assignment .
The system determines the subledger coding block [page 31] based on the following data:
● Business transaction header and item

● The first version (valid at the start of the subledger document posting date) of the following:
○ The referenced contract
○ The corresponding business partner
Smart Accounting
○ The corresponding analytical status
The system flags the contract affected by the business transaction item for end-of-day processing on the
posting date of the created subledger document.
Business Transaction in Foreign Currency

If the transaction currency or the position currency in the business transaction item differs from the functional
currency, the transaction is a foreign-currency-relevant scenario. The system translates the amounts in foreign
currency using the exchange rate available in the system on the posting date of the business transaction and at
the time of registration.
The following foreign currency constellations are possible:
1. Position currency and transaction currency in the business transaction item are the same but differ from
the functional currency.
○ Both subledger accounts of the derived posting record belong to the financial statement segment
Balance Sheet: Assets and Liabilities.
○ P&L in foreign currency: At least one of the subledger accounts of the derived posting record belongs
to the financial statement segment Profit and Loss Statement.
2. Change of payment currency: Position currency and transaction currency in the business transaction item
are different.
In case 1, the subledger document of the Register process step creates preliminary currency positions. In case
2, the document also creates a preliminary equivalent value position, if required.
In end-of-day processing (business transaction), the Move and Transform process step fixes the exchange rate
and posts the amounts to the following accounts:
● P&L
● Currency Position
● Equivalent Value Position
For more information, see the posting examples under Move and Transform [page 216].
Reversal Business Transaction

Smart Accounting only registers reversal business transactions that carry the business transaction items to be
reversed. You need to define that these kinds of reversal business transactions are reversal business
transactions by value. To do so, you first need to have made the appropriate setting in Customizing for the
business transaction class.
For more information, see Customizing for Bank Analyzer under Source Data Layer Primary Objects Flow
Data Business Transactions Edit Business Transaction Classes .
For documentation purposes, the reversal business transaction can optionally contain the reference to the
reversed business transaction.
The posting date of the reversal business transaction and the posting date of the reversed business transaction
can differ.
The registration of a reversal business transaction follows the same logic as the registration of a business
transaction with the following differences:
● In the document, the system inverts the amount in transaction currency (in other words, it multiplies it by
-1) while keeping the debit/credit indicator. (The amounts with a reference to other currencies are
determined based on the amount in transaction currency according to the usual schema.)
Smart Accounting
● The reversal indicator is set in the document, and if available, the reference to the reversed business
transaction.
Business Transaction in a Closed Period

If the posting date for a business transaction to be registered is in a closed period, the Register process step
shifts the posting date of the subledger document to be created to the first day of the first open period for each
business transaction item. The posting date of the business transaction remains in the document date of the
subledger document from the Register process step for documentation purposes. In all other scenarios, the
system creates subledger documents using the procedure as previously described.
For more information about opening and closing periods, see Close [page 152].
Error Situations (Suspense Accounting)

Business transactions that the Register process step is unable to document correctly remain in the worklist for
this process step until they have been processed correctly.
For more information, see Suspense Accounting [page 243].
Related Information
1.7.2.2.2 Register Master Data Changes
The Register process step registers master data changes to contract and business partner data (mapped in the
SDL as a new master data version) or in the portfolio created (mapped in the RDL).
The system only transfers the master data changes to Smart Accounting when the business date of the change
is before or the same as the posting date set for Smart Accounting.
When a master data change is registered, the system marks the contracts or portfolios affected by the change
for end-of-day processing (contract) on the business date of the change.
For more information, see Master Data Change in End-of-Day Processing (Contract) [page 195].
1.7.2.2.3 Register Analytical Decisions
An analytical decision results from a change in an analytical status.
The analytical statuses are as follows:
● Accrual status
● Impairment status
Smart Accounting
● Holding category
● Fair value level
● Asset/liability status
● Term segment
The change in analytical status is imported and, in the case of the onerousness status, term segment and the
fair value level, it can also happen automatically. The asset/liability status is determined by the system.
An analytical decision is dependent on the accounting principle (represented by the accounting system).
The Register process step only transfers the analytical decisions to Smart Accounting for which the business
date of the decision is before or the same as the posting date set for Smart Accounting.
The system flags the contract, securities position or portfolio affected by the analytical decision for end-of-day
processing for the accounting system of the analytical decision and for the leading accounting system on the
business date of the change.
For more information, see the Analytical Decision section under End-of-Day Processing (Contract) [page 195].
1.7.2.2.4 Reregister Business Transactions
If you want the system to register a business transaction, a master data change or an analytical decision with a
posting date or business record date that is before the current posting date defined for Smart Accounting, this
is referred to as a correction.
When the system registers a master data change or an analytical decision due to a correction, it flags already
registered business transaction items for the affected contracts to be registered again. This applies more
specifically to business transaction items for which the posting date of the corresponding Register subledger
document is after the date of the correction and at the same time in an open period.
Reregistering business transaction items only has consequences if the master data change or the analytical
decision change the subledger coding block. For each affected business transaction item, the system creates
an inversion document for the existing subledger document, and creates a subledger document for the
business transaction item again.
The system then marks the affected contracts for end-of-day processing on the date of the correction.
For more information, see the Updating Executed Period-End Process Steps section under End-of-Day
Processing (Contract) [page 195].
Related Information
Dependencies Between Source Systems [page 188]

Exclude Business Transactions from Reprocessing [page 163]
Smart Accounting
1.7.2.2.5 Dependencies Between Source Systems
If you start Register runs in parallel for different source systems, you need to take various dependencies into
account.
The source systems for the following data can all be different:
● Business transactions for contracts or securities positions

● Contract master data
● Portfolio master data
● Master data for the relevant business partners
The Register process step can be executed at the same time in one run for several source systems.
Dependencies in parallel Register runs
If you have started several Register runs in parallel for different source systems, you need to take various
dependencies into account.
If you ignore these dependencies, lock conflicts can occur. These conflicts mean that objects are not processed
and are put on hold for the next Register run.
Lock conflicts for contracts

Table 13: Case 1

2 B Contract master data
Table 14: Case 2
1 A Master data for the contract Register runs 1 and 2 should

or portfolio not be started in parallel.
2 B ● Master data for the con

tract business partner
or
Smart Accounting
Dependencies in reregistration
If you register business transactions again, you need to take the following into account regarding the source
systems:
● Change to master data of a contract

The system reregisters the business transaction items in the same Register run only if you have specified
the source system for the business transactions in addition to the source system for the contract master
data. Otherwise, the system does not register them until the next run with the source system for the
business transactions.
● Change to master data for a business partner of a contract or of an analytical decision:
following: the source system for the contract and the source system for the business transactions in
addition to the source system for the master data of the business partner in the contract, and the source
system for the analytical decision. Otherwise, the system does not register the business transaction items
again until the relevant subsequent runs.
1.7.2.3 Capture (Central GAAP)
You use the Capture process step to document actuarial expectations in accounting in the form of a best
estimate cash flow (BECF).
You use the Capture process step to document actuarial expectations in accounting in the form of a best
estimate cash flow (BECF). The system then separates the cash flow items according to whether the payments
or premiums for the insurance claims are ultimate, incurred, reported, due or settled. This results in the
following BECF lifecycle stages:
1. UBNI (ultimate but not incurred): The insurance contract has been concluded but it has not yet reached its
inception date.
2. IBNR (incurred but not reported): The inception date has been reached but incurred insurance claims have
not yet been reported.
3. RBND (reported but not due): Incurred insurance claims are reported, the claim payments, however, are
not yet due. Premium payments are invoiced.
4. DBNS (due but not settled): Claim payments and premium payments are due but not yet settled.
The system creates central GAAP posting documents from the cash flow items as a result. The capture process
step is run for each source system and can be triggered by events or run periodically.
Prerequisites
● You have imported results. Importing Results and Granularity [page 175]
Accounting Process Steps for Insurance Contracts Capture (Central GAAP) .
● You have run the Set Posting Date [page 62] transaction.
Smart Accounting
Activities
Subledger Accounting Insurance Contracts Day Processing Capture (Central GAAP) .
Related Information
Best Estimate Cash Flow (BECF) [page 190]
1.7.2.3.1 Best Estimate Cash Flow (BECF)
The best estimate cash flow (BECF) contains all the expected payments for a reinsurance or insurance
contract.
The payment categories are:
● Premiums
● Claims
● Commissions
● Expenses
Payments are classified according to the following properties:
● Scheduled (claim payments) / invoiced (premiums)

● Due
● Settled
If a payment is settled, it is no longer part of the BECF.
1.7.2.4 End-of-Day Processing (Business Transaction)
End-of-Day Processing (Business Transaction) generates business transaction-based postings on the basis of
the business transactions registered for a posting date, for all accounting systems in a legal entity.
The Move and Transform (Business Transaction) process step fixes the currency rates for registered FX-relevant
business transactions. This process step is used for transactions on securities positions and contracts.
If a scenario for a securities position (such as a business transaction, master data change or analytical
decision) registered by the Register process step is before the Move and Transform (Business Transaction) step
that has already been executed in End-of-Day Processing (Business Transaction), the system executes the
process step again in End-of-Day Processing (Business Transaction).
For contracts, this only applies if the system registers scenarios that result in a change to the subledger coding
block (such as a master data change, or analytical decision).
Smart Accounting
The reference value relevant for a registered business transaction is the posting date of the Register subledger
document. This means that the system re-runs all the business transaction-related steps for the relevant
contract or securities position that were run on a key date later than the posting date of the Register subledger
document. The reference value relevant for a master data change or an analytical decision is the business
record date of the change if it is in an open period. Otherwise, it is the first day of the next open period after the
change.
Prerequisites
You have executed the Register process step. The foreign exchange rates have been imported (for example, the
day's mid-market rate).
Activities
Subledger Accounting Insurance Contracts Day Processing End-of-Day Processing (Business
Transaction) .
Related Information
1. The Register process step registers business transactions that contribute to the profit and loss statement
Smart Accounting
 Example
P&L
Exchange Rates

day)

day)

count rency rency



ment
day) Transform

day) Transform USD
 Example
Smart Accounting
In Customizing under Bank Analyzer Processes and Methods Smart Accounting Basic Settings
Accounting System Define Accounting System , you can specify the currency exchange methodology for
each accounting system. You can choose between the leading currency approach and the implicit fee.
Exchange Rates

day)
GBP 1.00 EUR 1.20

day)
GBP 1.00 EUR 1.30
Leading currency

count rency rency



processing)


Smart Accounting
count rency rency


day) Transform USD
day) Transform GBP
Implicit fee

count rency rency



processing)



Smart Accounting
count rency rency

of day) Transform
1.7.2.5 End-of-Day Processing (Contract)
In contract-related processing, end-of-day processing reacts to new and changed best estimate cash flows
(BECF) that were registered in the Capture (Central GAAP) process step.
1. Recognizing best estimate cash flows

Provided that you have defined the appropriate change drivers as triggers for end-of-day processing in
Customizing (see Prerequisites ), the system marks the relevant contracts for end-of-day processing on the
same posting date. During end-of-day processing the system runs all process steps from Capture (Delta
GAAP) to Value FX.
If income or expense has been entered in foreign currency, the system then runs the Move and Transform
process step. For more information, see the contract-related Move and Transform documentation.
2. Master data change
For a master data change that changes the subledger coding block for the insurance contract, end-of-day
processing closes the period for the contract for all accounting systems (assigned to the legal entity). It
does so by executing appropriate period-end process steps using the subledger coding block before the
master data change. As a result, the system assigns the determined contributions to the profit and loss
statement (P&L) to the subledger coding block before the master data change. Afterwards, the Classify
process step reclassifies the position balances to the updated subledger coding block.
For a master data change in a closed period, end-of-day processing does not close the period but simply
executes the Classify process step at the start of the first day of the first open period after the master data
change.
 Example
At the end of every month the system updates the position components. During the period (for
example, on March 15), there is an indirect change to the profit center due to a change in the contract
manager. The system needs to assign the calculated amounts for the profit and loss statement that
have arisen up to and including March 15 to the old profit center. The new profit center then receives all
amounts that arise as of March 16. To enable this, the system executes the process steps of period-end
processing in end-of-day processing for the relevant contract only.
3. Analytical decision
For an analytical decision (due to a change in analytical status) for a contract, end-of-day processing closes
the period for the accounting system of the analytical decision for the contract using the subledger coding
Smart Accounting
block before the analytical status change. As a result, the system assigns the P&L contributions
determined when the period was closed to the subledger coding block before the analytical status change.
You first run end-of-day processing for the leading accounting system (of the relevant legal entity).
○ If the accounting system of the analytical decision is the same as the accounting system of the legal
entity, the system executes all of end-of-day processing up to the Recognize Profit step.
○ If the accounting system of the analytical decision is not the same as the leading accounting system of
the legal entity, the system executes only the Accrue and Capture (Central GAAP) steps for the
contract on the date of the analytical decision.
End-of-day processing for the (non-leading) accounting system of the analytical decision executes the
remaining period-end process steps required for closing the period. In the Classify process step, it then
reclassifies the position balances to the updated subledger coding block after the analytical status
change.
For an analytical decision in a closed period, end-of-day processing does not close the period but simply
executes the Classify process step at the start of the first day of the first open period after the analytical
decision.
4. Updating executed period-end process steps (correction scenario)
If a scenario (BECF) registered by the Capture (Central GAAP) process step is before a contract-related,
period-end process step (that has already been executed in end-of-day processing or period-end
processing), the system executes the process step again in end-of-day processing.
The reference value relevant for a registered BECF and an analytical decision is the key date; for a master
data change the business date of the change is relevant. The system derives the posting date from these
reference values. If the period is closed, the system moves the posting date to the first day of the next open
period, but not the date of the subledger document.
The system re-runs all the period-end process steps for the relevant contract that were executed on a key
date later than or the same as the posting date of the Capture subledger document.
 Note
The system does not update cross-contract period-end processing automatically. We recommend that you
execute cross-contract period-end processing again before you close a period.
Prerequisites
● The Capture (Central GAAP) process step has been run on an event-driven basis.
● Business-transaction-based end-of-day processing has been run.
● If you want the registration of new or changed cash flows (BECF) to trigger end-of-day processing, you
need to activate the relevant change drivers in Customizing for Bank Analyzer under Processes and
Methods Smart Accounting Process Steps for Insurance Contracts Basic Settings Define Change
Drivers for End-of-Day Processing .
● For changes to the subledger coding block, the following applies: If you do not want the system to calculate
target values but want to import them, you also need to ensure that you provide target values for updating
position components for the day of the update.
Smart Accounting
Activities
Subledger Accounting Insurance Contracts Day Processing End-of-Day Processing (Contract) .
Related Information

Move and Transform (Contract) [page 220]
1.7.3 Period-End Processing
done.
Period-End Processing (Contract)
Contract-based period-end processing allows you to execute the following process steps:
1. Accrue
2. Capture (Central GAAP) / periodic
3. Capture (Delta GAAP)
4. Unwind and Release
5. Value TC
6. Recognize Profit
7. Move and Transform
8. Value FX
9. Classify
Period-End Processing (Cross-Contract)
Cross-contract period-end processing executes the Value FX step for subledger accounts that are managed at
cross-contract granularity level (dimensions of financial statement entities).
Smart Accounting
Subledger accounts that are managed at cross-contract granularity level are suspense accounts. These are
created in double-entry bookkeeping when operational flow transactions are documented in accounting
between several contracts and/or several source systems.
Prerequisites
● Period-end processing (contract-based)

You have executed end-of-day processing for the business transaction and contract up to and including the
posting date for the period-end processing that you want to execute.
● Period-end processing (cross-contract)
You have executed contract-based period-end processing for all source systems that provide amounts on
subledger accounts that are updated in cross-contract period-end processing.
Activities
To execute contract-based period-end processing, on the SAP Easy Access screen, choose Bank Analyzer
Processes and Methods Smart Accounting Subledger Accounting Insurance Contracts Period-End
Processing Period-End Processing (Contract) .
To execute cross-contract period-end processing, on the SAP Easy Access screen, choose Bank Analyzer
Processing Period-End Processing (Cross-Contract) .
Enter the following parameters when you execute the process:
● Legal entity
● Accounting system
● Source system (only for contract-based processing)
● Posting date
● Period closing variant
● Special period
You need to enter a special period only if you execute period-end processing on the last day of a fiscal year
and your fiscal year variant has special periods.
Related Information

Accrue [page 97]
Capture (Delta GAAP) [page 201]
Unwind and Release [page 202]
Value TC [page 207]
Smart Accounting
Value FX [page 221]
Classify [page 224]
1.7.3.1 Accrue
The Accrue process step documents changes to accruals for financial contracts and changes to individual
claim reserves for insurance contracts.
For insurance contracts, the changes are documented at actuarial granularity level.
The system updates the accounting balance of accruals (subledger account groups 100201 and 100211) for a
specified posting date at the granularity level of the individual contract. For securities it updates it at the
granularity level of securities position or lot. The system generates subledger documents specifically for the
relevant accounting standard. The balance of an accrual belongs to the contract-managing system and must
be imported from it. You also have the option of creating custom methods for this process step.
The process step is only executed for the leading accounting system.
Prerequisites
● You have viewed the methods for the Accrue process step or have created custom methods and have
defined how they are derived in Customizing for Bank Analyzer under Processes and Methods Smart
Accounting Process Steps for Insurance Contracts Accrue Methods .
● You have viewed the subledger accounts for the Accrue process step in Customizing for Bank Analyzer
under Processes and Methods Smart Accounting Process Steps for Insurance Contracts Accrue
● You have viewed the combination of subledger accounts provided by SAP for postings in the Accrue
process step, have edited these, or added your own combinations in Customizing for Bank Analyzer under
Processes and Methods Smart Accounting Process Steps for Insurance Contracts Accrue
Account Assignment . If required, you have made more detailed settings for the assignment of accounts
If you are importing several accrual items (/BA1/C55ACCAT) for the same contract, you have assigned
these to one or more subledger accounts.
Settings Define Results Storage , you have defined where accrual results (“010”) and accrued interest
(“015”) are stored in the Results Data Layer (RDL).
● You have imported the relevant accrual items using the Data Load Layer, and stored them in the Results
Data Layer.
Smart Accounting
Process
To update the accounting balance of an accrual, the system determines the balance from the subledger
documents on the relevant subledger accounts (actual value) and compares this to the imported target
balance (target value). The difference is documented as a subledger document.
 Note
If you do not import a target value, the system uses “0” as the target balance.
Background
An accrual is the assignment of future expense or income to the appropriate period in which it is recognized.
Reporting income and expense in the correct accounting period is one of the main tasks of accounting.
The following example illustrates how the accruals for a time deposit with the following parameters develop:
● Interest payment at maturity

● Term: 1 year
● 100 MU paid into time deposit
● Interest rate 12 % p.a.
● Accruals = 1% p.m. = 1 MU per month
Based on this data, the accruals develop as illustrated in the figure below (at the end of the term they are
cleared by the payment of the interest amount to the customer):
At the end of the one-year term, the total of accrual items and long term receivables is 112 MU because interest
of 12 GE (1 MU per month) has been posted.
Smart Accounting
Related Information

SAP Note 1958115
1.7.3.2 Capture (Delta GAAP)
The Capture (Delta GAAP) process step adjusts a best estimate cash flow (BECF) to meet the requirements of
specific accounting principles (GAAPs). To do so, the system applies GAAP-specific time filters and risk
adjustments to the BECF that was created beforehand in the Capture (Central GAAP) process step. This
adjusted BECF is then used in the subsequent steps as the basis for the cash-flow-based calculation methods.
Prerequisites
The process step Capture (Central GAAP) has been run and best estimate cash flows are available.
You have made settings in Customizing for Bank Analyzer under Processes and Methods Smart Accounting
Process Steps for Insurance Contracts Capture (Delta GAAP) :
● Under Methods you have viewed the methods for the Capture (Delta GAAP) process step, and if necessary
enhanced these or created custom methods.
● Under Capture Groups you have defined combinations of methods for the Capture (Delta GAAP) process
step and how they are commonly derived.
● Under Subledger Chart of Accounts, you have viewed the subledger accounts for the process step Capture
(Delta GAAP), if necessary.
● Under Account Assignment, you have viewed the combinations of subledger accounts for postings in the
Capture (Delta GAAP) process step that are provided by SAP and, if necessary, edited these or added
custom combinations. If required, you have made more detailed settings for the assignment of accounts
Methodologies
You can use the cash flow-based determination method to determine target values in the Capture (Delta
GAAP) process step:
Use an Alternative Cash Flow

The calculation method provided by SAP for the use of an alternative cash flow defines the Smart Accounting
result category for all methods for the Capture (Delta GAAP) process step. This result category groups the
result types for which results are to be stored for each accounting system.
Smart Accounting
The Capture (Delta GAAP) process step uses the current best estimate cash flow (result category 253) by
default. If you derive the method for using an alternative cash flow, the system uses the best estimate cash flow
that is based on the locked-in actuarial assumptions at the time the contract was concluded or on subsequent
changes in actuarial expectations (result category 254).
Filter by Contract Boundaries

The calculation methods provided by SAP filter items out of the best estimate cash flow, based on contract
boundaries. This means you can exclude cash flow items that belong to unconfirmed coverage periods or
coverage periods that have not started.
To enable this, the system evaluates the fields Start of Next Coverage Period and/or Confirmation of Next
Coverage Period in the BECF.
The Use Maximum Due Date checkbox in Customizing defines whether the subsequent coverage period is
visible early in the balance sheet as soon as a premium is set to settled or due in the current coverage period.
The system only evaluates this field for premium payments.
Filter New Business

The calculation methods provided by SAP filter items out of the best estimate cash flow in the following cases:
● An expected contract has not yet been concluded on the evaluation key date.
● A contract has been concluded but premiums have not yet been paid on the evaluation key date.
This allows you to exclude premiums, claims and all other expected payments that relate to contracts that have
not yet been concluded at the time of your evaluation (expected new business). The system evaluates the
Inception of Underlying Contract field in the BECF.
Take Lifecycle Stages into Account

The calculation methods provided by SAP define as of which lifecycle stage a cash flow item appears on the
balance sheet. The system does not register the transition to the new lifecycle stage as initial recognition until a
cash flow item reaches the date defined in the method (for example, due date). In the preceding lifecycle
stages, the system processes the item in the usual way. However, the Recognize Profit process step ensures
that the item does not appear on the balance sheet.
To enable this, the system evaluates the fields Incurred Date, Reported Date, Due Date or Settled Date in the
BECF.
For more information about the lifecycle stages of expected payments, see Best Estimate Cash Flow (BECF)
[page 190].
Inflation Adjustment
The calculation method provided by SAP adjusts the amounts of the best estimate cash flow for inflation. You
define the inflation index used for this in the legal entity. The method applies the inflation index to all the cash
flow items and posts the difference as inflation adjustment.
1.7.3.3 Unwind and Release
The process step Unwind and Release documents adjustments for risks and for prudence. During the cash-
flow-based determination of adjustments to the best estimate cash flow (BECF), the market data that was
Smart Accounting
valid at initial recognition is locked-in and, depending on Customizing settings, is only updated for specific
change reasons.
In the Value TC process step, however, the cash-flow-based determination of adjustments uses the current
market data.
The Unwind and Release process step is an analytical process step with GAAP-dependent results that are
documented as delta GAAP documents.
The calculators for individual risks and the prudence principle provide the target values for the accounting
documentation of adjustments. To do so, the calculators determine the methodology to be used in
Customizing, depending on the accounting system.
Prerequisites
Smart Accounting Process Steps for Insurance Contracts Unwind and Release :
● Under Methods Adjustment for Risks or Adjustment for Prudence you have viewed the methods
provided by SAP for the relevant methodology and have edited the properties, if required. If necessary, you
have added custom methods. You have defined derivation rules under Derive Methods.
● Under Account Assignment Assign Subledger Accounts , you have viewed the combinations of
subledger accounts for postings in the Unwind and Release process step that are provided by SAP and, if
necessary, edited these or added custom combinations.
● Under Technical Settings Define Results Storage you have set up the results storage for the following
Smart Accounting result categories:
○ 116(Amortized Present Value (Risk-Free))
○ 117(Amortized Present Value (Inflation Risk-Adjusted))
○ 118(Amortized Present Value (Credit Risk-Adjusted))
○ 119(Amortized Present Value (Liquidity Risk-Adjusted))
○ 120(Amortized Present Value (Risk-Adjusted))
○ 121(Amortized Present Value (Prudence-Adjusted))
Determination of Adjustment for Risks
The following methodologies are available for determining adjustment for risks:
● Import
● Custom determination
Interest rate risk

Adjustments are documented on the balance sheet subledger account 11100401 (Interest Rate Risk Adjustment
(Locked-In)).
Smart Accounting
Inflation risk
Adjustments are documented on the balance sheet subledger account 11105401 (Inflation Risk Adjustment
(Locked-In)).
Credit risk
Adjustments are documented in the balance sheet subledger account 11110401 (Credit Risk Adjustment
(Locked-In)).
Liquidity risk
Adjustments are documented on the balance sheet subledger account 11115401 (Liquidity Risk Adjustment
(Locked-In)).
Other risks
Adjustments are documented on the balance sheet subledger account 11140401 (Other Risk Adjustment
(Locked-In)).
Determination of Adjustments for Prudence
The following methodologies are available for determining adjustments for prudence:
● Import
Adjustments for prudence are documented on the balance sheet subledger account 11190401 (Prudence
Adjustment (Locked-In)).
Account Assignment
You can define the offsetting account for an adjustment documented on a balance sheet subledger account
more specifically as an expense or income account by specifying payment categories and change reasons.
Related Information
Cash-Flow-Based Determination of Adjustments [page 205]
Smart Accounting
1.7.3.3.1 Cash-Flow-Based Determination of Adjustments
For the cash-flow-based determination of adjustments for risks and for prudence, the system calculates the
target value (net present value) by discounting the best estimate cash flow (BECF) using the discount factor of
the relevant forward yield curve in the market data.
The following data is relevant for creating the forward yield curve in the market data:
● Market data area of legal entity

● Yield curve type (depending on the payment category)
● Validity date
● Horizon date
● Currency
Different yield curve types are used to represent the individual risks and the principle of prudence. You can use
spread curve types and composite yield curve types for this.
Prerequisites
In Customizing for Market Data (BS-FND-MKD) under Interest, you have made settings in the Customizing
activity Edit Reference Interest Rates and Yield Curves, and if required the Customizing activities Edit Spread
Curve Types and Edit Composite Yield Curve Types.
You have taken note of the following settings provided by SAP in Customizing for Bank Analyzer under
Processes and Methods Smart Accounting Processes for Insurance Contracts Unwind and Release or
Value TC under Methods, and have made your own settings or created custom methods if required:
● Under Adjustment for Risks and Adjustment for Prudence in the Customizing activity Define Methods for
Cash-Flow-Based Determination under Properties, you can specify the following for each method:
○ Whether the settings for BECFs that were calculated with variable actuarial rules (Smart Accounting
result category 253) or BECFs that were calculated with locked-in actuarial rules (Smart Accounting
result category 254) apply
○ Whether the system uses the incurred date, reported date, due date or settled date as the discounting
date
○ For the Value TC process step, whether the system uses the current posting date, the start of the
current posting period or the start of the current fiscal year as the validity date in the market data
For each method under Properties Yield Curves you can define for each payment category which
yield curve type is used for determining the discount factor in the market data or whether no discounting is
applied (Do Not Discount checkbox).
 Note
If you do not enter a payment category, your settings apply to all payment categories for which you
have not made a specific entry.
In the Unwind and Release process step under Properties Change Reasons , you can also define for
each method which of the following change reasons triggers a change in the validity date used in the
market data:
Smart Accounting
○ 505 (Experience Variance (Model-Driven))
○ 506 (Experience Variance (Contract-Based))
○ 600 (Assumption Change (Underwriting Risks))
○ 601 (Assumption Change (Investment Risk))
○ 605 (Methodology Change)
● In Customizing for Bank Analyzer under Processes and Methods Results Data Layer Basic Settings
Edit Results Data Area and Edit Data Structures in Results Data Area, you have defined the results storage
for BECFs.
result categories:
○ 253 (Best Estimate Cash Flow)
○ 254 (Best Estimate Cash Flow (Locked-In))
Process
The procedure for creating the forward yield curve differs for the process steps Unwind and Release and Value
TC as follows:
● Unwind and Release

The system first uses the date of initial recognition (change reasons 100 (Initial Recognition) and 105
(Initial Recognition (Contract Boundaries)) as the validity date. When a BECF change occurs that triggers a
new validity date based on your Customizing settings, the system uses the date of the new BECF version as
the new validity date.
● Value TC
Depending on your Customizing settings, the system always uses either the current posting date, the start
of the current posting period or the start of the current fiscal year as the validity date.
Since the adjustments are made during end-of-day processing, the horizon date is one day after the evaluation
key date (t). The evaluation key date is therefore part of the calculation.
The system uses the forward yield curve and the discounting date (ti) to determine the discount factor for the
relevant due date. Depending on your Customizing settings, the system uses the incurred date, reported date,
due date or settled date as the basis for the discounting date.
The system then calculates the net present value (NPV) by discounting the BECF with the discount factor (DF)
of the forward yield curve using the following formula:
Related Information
Smart Accounting
1.7.3.4 Value TC
The process step value TC documents adjustments for risks and for prudence. Depending on Customizing
settings, the system uses current or periodically updated market data for the cash-flow-based determination
of adjustments to the best estimate cash flow (BECF). In addition, the process step documents the margin for
the regulatory cost of capital.
The Value TC process step is an analytical process step with GAAP-dependent results that are documented as
delta GAAP documents.
The calculators for individual risks, the prudence principle, and the margin provide the target values for the
accounting documentation. To do so, the calculators determine the methodology to be used in Customizing,
depending on the accounting system.
Prerequisites
Smart Accounting Process Steps for Insurance Contracts Value TC :
● Under Methods Adjustment for Risks or Adjustment for Prudence or Margins you have viewed the
methods provided by SAP for the relevant methodology and have edited the properties, if required. If
necessary, you have added custom methods. You have defined derivation rules under Derive Methods.
● Under Account Assignment Assign Subledger Accounts , you have viewed the combinations of
subledger accounts for postings in the Value TC process step that are provided by SAP and, if necessary,
edited these or added custom combinations.
● Under Technical Settings Define Results Storage you have set up the results storage for the following
Smart Accounting result categories:
○ 130(Present Value (Risk-Free))
○ 131(Present Value (Inflation Risk-Adjusted))
○ 132(Present Value (Credit Risk-Adjusted))
○ 133(Present Value (Liquidity Risk-Adjusted))
○ 134(Present Value (Risk -Adjusted))
○ 135(Present Value (Adjusted for Prudence))
○ 140(Cost-of Capital Margin)
Determination of Adjustment for Risks
The following methodologies are available for determining adjustment for risks:
● Import
Smart Accounting
Interest rate risk
Adjustments are documented on the balance sheet subledger account 11200401 (Interest Rate Risk
Adjustment).
Inflation Risk
Adjustments are documented on the balance sheet subledger account 11205401 (Inflation Risk Adjustment).
Credit risk
Adjustments are documented on the balance sheet subledger account 11210401 (Credit Risk Adjustment)
document.
Liquidity risk
Adjustments are documented on the balance sheet subledger account 11215401 (Liquidity Risk Adjustment).
Other risks
Adjustments are documented on the balance sheet subledger account 11240401 (Other Risk Adjustment).
Determination of Adjustments for Prudence
The following methodologies are available for determining adjustments for prudence:
● Import
Adjustments for prudence are documented on the balance sheet subledger account 11290401 (Prudence
Adjustment).
Determination of Margins
The following methodologies are available for determining margins:
● Import
● Cost-of-capital methods
The margin for regulatory cost-of-capital is documented on the balance sheet subledger account 11500401
(Margin (Risk Capital Costs)
Smart Accounting
Account Assignment
You can define the offsetting account for an adjustment documented on a balance sheet subledger account
depending on the valuation approach. This can specifically help you to control whether any income or expense
that occurs is recognized through profit and loss or directly in equity. If required, you can make more detailed
settings for the assignment of accounts for expense and income by specifying payment categories and change
reasons.
Related Information
Cash-Flow-Based Determination of Adjustments [page 205]

Determination of Margins [page 211]
1.7.3.4.1 Cash-Flow-Based Determination of Adjustments
For the cash-flow-based determination of adjustments for risks and for prudence, the system calculates the
target value (net present value) by discounting the best estimate cash flow (BECF) using the discount factor of
the relevant forward yield curve in the market data.
The following data is relevant for creating the forward yield curve in the market data:
● Market data area of legal entity

● Yield curve type (depending on the payment category)
● Validity date
● Horizon date
● Currency
Different yield curve types are used to represent the individual risks and the principle of prudence. You can use
spread curve types and composite yield curve types for this.
Prerequisites
In Customizing for Market Data (BS-FND-MKD) under Interest, you have made settings in the Customizing
activity Edit Reference Interest Rates and Yield Curves, and if required the Customizing activities Edit Spread
Curve Types and Edit Composite Yield Curve Types.
Smart Accounting
You have taken note of the following settings provided by SAP in Customizing for Bank Analyzer under
Processes and Methods Smart Accounting Processes for Insurance Contracts Unwind and Release or
Value TC under Methods, and have made your own settings or created custom methods if required:
● Under Adjustment for Risks and Adjustment for Prudence in the Customizing activity Define Methods for
Cash-Flow-Based Determination under Properties, you can specify the following for each method:
○ Whether the settings for BECFs that were calculated with variable actuarial rules (Smart Accounting
result category 253) or BECFs that were calculated with locked-in actuarial rules (Smart Accounting
result category 254) apply
○ Whether the system uses the incurred date, reported date, due date or settled date as the discounting
date
○ For the Value TC process step, whether the system uses the current posting date, the start of the
current posting period or the start of the current fiscal year as the validity date in the market data
For each method under Properties Yield Curves you can define for each payment category which
yield curve type is used for determining the discount factor in the market data or whether no discounting is
applied (Do Not Discount checkbox).
 Note
If you do not enter a payment category, your settings apply to all payment categories for which you
have not made a specific entry.
In the Unwind and Release process step under Properties Change Reasons , you can also define for
each method which of the following change reasons triggers a change in the validity date used in the
market data:
○ 505 (Experience Variance (Model-Driven))
○ 506 (Experience Variance (Contract-Based))
○ 600 (Assumption Change (Underwriting Risks))
○ 601 (Assumption Change (Investment Risk))
○ 605 (Methodology Change)
● In Customizing for Bank Analyzer under Processes and Methods Results Data Layer Basic Settings
Edit Results Data Area and Edit Data Structures in Results Data Area, you have defined the results storage
for BECFs.
result categories:
○ 253 (Best Estimate Cash Flow)
○ 254 (Best Estimate Cash Flow (Locked-In))
Smart Accounting
Process
The procedure for creating the forward yield curve differs for the process steps Unwind and Release and Value
TC as follows:

The system first uses the date of initial recognition (change reasons 100 (Initial Recognition) and 105
(Initial Recognition (Contract Boundaries)) as the validity date. When a BECF change occurs that triggers a
new validity date based on your Customizing settings, the system uses the date of the new BECF version as
the new validity date.
● Value TC
Depending on your Customizing settings, the system always uses either the current posting date, the start
of the current posting period or the start of the current fiscal year as the validity date.
Since the adjustments are made during end-of-day processing, the horizon date is one day after the evaluation
key date (t). The evaluation key date is therefore part of the calculation.
The system uses the forward yield curve and the discounting date (ti) to determine the discount factor for the
relevant due date. Depending on your Customizing settings, the system uses the incurred date, reported date,
due date or settled date as the basis for the discounting date.
The system then calculates the net present value (NPV) by discounting the BECF with the discount factor (DF)
of the forward yield curve using the following formula:
Related Information
1.7.3.4.2 Determination of Margins
In the Value TC process step, you can determine the margin for the regulatory cost of capital.
Prerequisites
● You have created yield curves for the types SCAP (cost-of-capital) and SGOV (government bond yield curves
(risk-free)) in the market data. In Customizing, choose Financial Services Foundation Market Data
Interest Edit Reference Interest Rates and Yield Curves .
● You have imported a risk capital vector to the Results Data Layer (RDL).
For further prerequisites, see Value TC [page 207].
Smart Accounting
Cost-of-Capital Methods
An insurance company creates underwriting reserves for expected payments to be made to the policyholder in
accordance with the insurance contract.
To meet regulatory requirements, you attribute a risk margin to the best estimate value of these reserves. The
margin can be determined using a cost-of-capital approach. This margin for the regulatory cost of capital is
the present value of the opportunity costs for the equity of the insurance company. The insurance company
incurs opportunity costs (costs for lost interest profit) because it must invest a part of the premium income
received in low-risk investments; it is not permitted to invest at its discretion.
The system calculates the margin for the regulatory cost of capital according to the following formula:
RCrck-1 Risk capital vector
Rrck-1,k Risk cost-of-capital rate
Rk-1,k Interest rate (risk-free)
dt ,k Discount factor (risk-free)
The system multiplies the risk capital vector (the projected solvency capital over the life of the entire cash flow)
with the difference between the following interest rates: the risk cost-of-capital rate (determined from the cost-
of-capital curve) and the interest rate determined from the risk-free yield curve. The result is multiplied by the
discount factor from the risk-free yield curve.
1.7.3.5 Recognize Profit
The Recognize Profit process step documents deferred profit.
The following processes are run:
1. Calculate Deferred Profit: You can calculate deferred profit at portfolio or at contract level.
If you calculate at portfolio level, the system first calculates the deferred profit at individual contract level
and then totals this at portfolio level. A separate calculator run is required. In order to do so, you need to
have run all previous processes for the contract source system successfully.
See also the Methods for Cash-Flow-Based Determination of Deferred Profit section.
Subledger Accounting Insurance Contracts Preparatory Processing Determine Target Values
Calculate Deferred Profit .
2. Define Onerousness Status:
When you calculate deferred profit at portfolio level, the system determines the onerousness status at
portfolio level, based on the deferred profit, and transfers this to contract level.
When you calculate deferred profit at contract level the system uses the deferred profit from the contract.
Smart Accounting
To determine the onerousness status, the system evaluates the loss component for a net profit reserve
(the contractual service margin CSM, for example), and the premium deficiency reserve for a gross profit
reserve (unearned premium reserve and deferred acquisition costs, for example).
Subledger Accounting Insurance Contracts Preparatory Processing Determine Target Values
Calculate Deferred Profit .
3. Document Deferred Profit:
The deferred profit is documented in accounting. The system either creates deferred profit by capitalizing
income or expense (by removing from P&L) or releases the profit reserve (by posting to P&L) .
 Note
If you are using actuarial portfolios in accounting, the system handles these in the same way as contracts
here.
Prerequisites
In Customizing for Bank Analyzer under Smart Accounting Process Steps for Insurance Contracts
Recognize Profit Methods you have defined methods for import and cash-flow based determination and
derived methods for the release of deferred profit.
If you want to calculate and document at portfolio level, you need to have defined a profit recognition portfolio.
The portfolio definition and the assignments of the portfolio to contracts and an accounting system need to be
imported in the RDL.
Methods for cash flow-based determination of deferred profit
The methods for cash flow-based determination of deferred profit are defined in Customizing under Smart
Accounting Process Steps for Insurance Contracts Recognize Profit Methods Define Methods for Cash-
Flow-Based Determination .
● Deferred net profit, portfolio-based (methods 9970000 and 9970001)

Capitalizes and offsets expected profit and expense for premiums, claims, and acquisition costs for a
portfolio of insurance contracts. At initial recognition, the profit amount must be zero. To achieve this, you
create a reserve for the net profit.
○ If the amount of the net profit reserve is positive, the portfolio is not onerous. (In this case, the net
profit reserve corresponds to the contractual service margin (CSM), according to IFRS.)
○ If the amount of the net profit reserve is negative, the portfolio is onerous. (In this case, the net profit
reserve corresponds to a loss component, according to IFRS.)
The system only posts positive net profit reserves in the Recognize Profit step.
Method 9970000 uses the general measurement model (GMM).
Smart Accounting
General Measurement Model
Method 9970001 uses the Variable Fee Approach (VFA).
 Note
You can define in Customizing whether the system is to calculate and document at the granularity level
of portfolio or contract. If you choose portfolio level, the system first calculates interest on a contract
basis, this is then deferred over time and then totaled at portfolio granularity level. You can use the
Profit Recognition Portfolio to do this.
● Deferred gross profit/costs, portfolio-based (method) and contract-based (method) 9970002

9970003
Capitalizes and offsets expected profit and costs and creates reserves, separated according to payment
category.
○ If the sum of all gross profit/costs created is larger than the net amount of future expenditure, the
portfolio or the contract is not onerous.
○ If the amount of future expenditure is larger than the total amount of all the gross profit/costs created,
an additional premium deficiency reserve needs to be created. However, you can specify that a
different reserve is reduced first.
The system posts the gross profit/cost reserves and the premium deficiency amount in the Recognize
Profit step.
Smart Accounting
Simplified Approach (Premium Allocation Approach under IFRS, for example) and Premium Deficiency
Reserve
If you have specified an interest rate, interest is calculated for the deferred profit at the locked-in rate and the
distribution rate is applied. As a result, the reserves are released gradually and are posted to the profit and loss
statement.
Methods for contract-based determination of deferred profit
The methods for contract-based determination of deferred profit are defined in Customizing under Smart
Accounting Process Steps for Insurance Contracts Recognize Profit Methods Define Methods for
Contract-Based Determination .
SAP provides the method Offset UBNI 9911000. The method is run for contracts for which the simplified
valuation approach applies. The method capitalizes the following postings for a contract that are expected but
not yet incurred:
● 840103 Income (Preliminary)

● 840104 Income (Preliminary)
● 850103 Expense (Preliminary)
● 850104 Expense (Preliminary)
● 834104 Income (OCI) (Preliminary)
● 835104 Expense (OCI) (Preliminary)
● 340104 Income (OCI)
● 350104 Expense (OCI)
● 410103 Income
● 410104 Income
Smart Accounting
● 510103 Expense
● 510104 Expense
The system excludes the postings generated by the Move and Transform process step. The system does not
write target values for these reserves.
The postings are made to the subledger account 115904 Offset UBNI keeping the original change reason
and transaction currency.
UBNI Capitalization
In accordance with the simplified valuation approach, future payments may not be shown. Therefore, the UBNI
items, UBNI balance sheet items and UBNI P&L items are capitalized and offset to zero.
The simplified valuation approach only considers the time from incurred onwards, however the system still
documents UBNI amounts to allow for comparisons with other valuation approaches.
Related Information
1.7.3.6 Move and Transform
The process step Move and Transform covers two use cases:
● The Move and Transform (Business Transaction) [page 217] process step involves the same-day fixing of
foreign currency amounts for business transactions based on the exchange rates valid at the end of the
day.
● The Move and Transform (Contract) [page 220] process step involves the periodic fixing of the calculated
results.
Smart Accounting
Prerequisites
● You can display the settings for this process step in Customizing for Bank Analyzer under Processes and
Methods Smart Accounting Process Steps for Insurance Contracts Move and Transform .
● Make settings for the period closing variants in Customizing for Bank Analyzer under Processes and
Methods Smart Accounting Process Steps for Insurance Contracts Basic Settings Define Period
Closing Variants .
1. The Register process step registers business transactions that contribute to the profit and loss statement
 Example
P&L
Exchange Rates

day)

day)
Smart Accounting
count rency rency



ment
day) Transform

day) Transform USD
 Example
In Customizing under Bank Analyzer Processes and Methods Smart Accounting Basic Settings
Accounting System Define Accounting System , you can specify the currency exchange methodology for
each accounting system. You can choose between the leading currency approach and the implicit fee.
Smart Accounting
Exchange Rates

day)
GBP 1.00 EUR 1.20

day)
GBP 1.00 EUR 1.30
Leading currency

count rency rency



processing)




day) Transform USD
day) Transform GBP
Implicit fee
Smart Accounting

count rency rency



processing)




of day) Transform
1.7.3.6.2 Move and Transform (Contract)
In the Move and Transform process step, the system periodically fixes the calculated results.
The system processes the data in period-end processing if there is profit or loss in a foreign currency; in other
words, if the transaction currency (TC) is not the same as the functional currency (FC). You can reset the fixing
of unrealized profits from period-end processing during period-opening processing.
For more information about resetting postings from the Move and Transform process step, see Period-Opening
Processing [page 234].
Smart Accounting
The following example explains the posting logic. The functional currency is EUR.
 Example
Exchange Rates
September 30 USD 1.00 EUR 0.90

count rency rency
September 30 Accrue D Accruals: Interest USD 100 EUR 90
September 30 Accrue C Income: Unreal USD -100 EUR -90

ized Interest (Pre
liminary)
September 30 Move and D Income: Unreal USD 100 EUR 90

Transform ized Interest (Pre
liminary)
September 30 Move and C Currency Position USD -100 EUR -90

Transform Income State
ment
September 30 Move and C Income: Interest EUR -90 EUR -90

Transform (Unrealized)
September 30 Move and D Equivalent Value EUR 90 EUR 90

Transform USD
In this example, the Accrue process step posts to the subledger account Income: Unrealized Interest
(Preliminary). It is assumed that there has been no further posting on this subledger account, meaning that
the balance is USD 100. In the Move and Transform process step, the system makes a transfer posting with
this balance from the preliminary subledger account Income: Unrealized Interest (Preliminary) to the
subledger account Income: Interest (Unrealized) based on the exchange rates valid at the end of the day.
The system also creates the currency position and the corresponding equivalent value.
1.7.3.7 Value FX
The Value FX process step revalues the amounts in functional currency and all other local currencies using the
valid exchange rate on the balance sheet key date. It also collects the delta for the existing balance in the
foreign exchange result.
To adjust the functional currency, the system uses all the subledger account balances held in a currency other
than the functional currency. To adjust the local currency, the system uses all the subledger accounts in the
balance sheet.
Smart Accounting
The Value FX process step is available both at the contract granularity level and at the cross-contract
granularity level (dimensions of financial statement entities).
At the contract granularity level, it is run in end-of-day processing and period-end processing. Only contract-
based subledger documents are included in the balances used in the process step.
At the cross-contract granularity level, it is run in cross-contract period-end processing. Only cross-contract
subledger documents are included in the balances used in the process step.
Prerequisites
You can display the settings for the Value FX process step in Customizing for Bank Analyzer under Processes
and Methods Smart Accounting Process Steps for Insurance Contracts Value FX .
 Note
This example illustrates the foreign currency valuation of balance sheet items (monetary asset revaluation
(MAR)) and of currency positions:
Exchange Rates
The system runs the following valuations: (At the end of the period, the exchange rate changes to EUR 1.00,
meaning that the system needs to make adjustments to the balance sheet item.)
January 30 Register D Unpaid Princi USD 100 EUR 80

(day process pal Balance
ing) (UPB)
January 30 Register C Unremitted In USD -100 EUR -80

(day process terest Income
ing)
January 30 Move and Move D Unremitted In USD 100 EUR 90

(end of day) Transform terest Income
January 30 Move and Move C Currency Posi USD -100 EUR -90
(end of day) Transform tion Income
Statement
Smart Accounting
January 30 Move and Transform C Interest In EUR -90 EUR -90
(end of day) Transform come
January 30 Move and Transform D Equivalent EUR 90 EUR 90

(end of day) Transform Value USD
January 31 (pe Value FX Balance sheet D Unpaid Princi USD 0 EUR 20

riod end) item adjust pal Balance
ment (UPB)
January 31 (pe Value FX Balance sheet C Currency Gain USD 0 EUR -20
ment
January 31 (pe Value FX Balance sheet C Unremitted In USD 0 EUR -10
riod end) item adjust terest Income
ment
January 31 (pe Value FX Balance sheet D Currency Gain USD 0 EUR 10

ment
January 31 (pe Value FX Currency posi C Currency Posi USD 0 EUR -10
riod end) (Cross- tion adjust tion Income
Contract) ment Statement
January 31 (pe Value FX Currency posi D Currency Gain USD 0 EUR 10

riod end) (Cross- tion adjust
Contract) ment
January 31 (pe Value FX Equivalent D Equivalent EUR 10 EUR 10

riod end) (Cross- value adjust Value USD
Contract) ment
January 31 (pe Value FX Equivalent C Currency Gain EUR -10 EUR -10
riod end) (Cross- value adjust
Contract) ment
At the end of the period, there is a balance on the UPB account and on the unremitted interest income
account that is relevant for the foreign currency valuation of balance sheet items.
From an overall balance sheet perspective, the foreign exchange result from the adjustment of the
equivalent value is the only relevant result. The results of the monetary asset revaluation (MAR) and of the
currency positions are of an explanatory nature and add up to zero (apart from rounding effects).
Smart Accounting
Related Information
Register [page 183]

1.7.3.8 Classify
If one or more subledger coding block characteristics changes, the Classify process step ensures that the
balances of balance sheet subledger accounts of the granularity level Contract are reclassified from the old
subledger coding block to the new subledger coding block.
In the subledger coding block, this affects changes to the following characteristics:
● Master data characteristics

● Characteristics derived from master data characteristics
● Analytical statuses
Classify - End-of-Day Processing
If changes to master data characteristics or the analytical status are registered in the Register process step,
the system executes the Classify step for the date of the change (in an open period) in end-of-day processing.
Changes to derived characteristics only result in the Classify step being executed in end-of-day processing if
the change has been caused by a master data change that has already been registered. All other changes are
not considered until the next period-end processing.
 Note
If a dimension of a financial statement entity changes in the subledger coding block, the system reclassifies
using a cross-contract reclassification account. This ensures a closed debit/credit loop for each dimension
of financial statement entities.
If you change the legal entity, please refer to the information in Change of Legal Entity [page 261]
Classify - Period-End Processing:
The Classify process step updates the asset/liability status, provided periodic redetermination is set and the
status has not already been updated for a group of insurance contracts in Preparatory Processing. The change
in asset/liability status leads to a reclassification to the new subledger coding block.
Prerequisites
● You can display the settings for the Classify process step in Customizing for Bank Analyzer under
Processes and Methods Smart Accounting Process Steps for Insurance Contracts Classify .
● In Customizing for Bank Analyzer, you define the default value for the asset/liability status and the periodic
redetermination of the asset/liability status under Processes and Methods Smart Accounting
Subledger Coding Block Analytical Status Define Asset/Liability Status .
Smart Accounting
 Note
On March 30, the balance-sheet subledger account Receivables/Payables has a debit balance of EUR 100,
which is assigned to the subledger dimension Organizational Unit Y:
Subledger Account D/C Balance in Transaction Organizational Unit

Currency
Receivables/Payables D EUR 100 Y
The change in organizational unit for the contract causes this dimension to change to Z and a
reclassification of the balance with the following posting:
Subledger Account D/C Amount in Transaction Organizational Unit

Currency
Receivables/Payables C EUR -100 Y
Receivables/Payables D EUR 100 Z
If the change in organizational unit from Y to Z leads to a change in profit center from A to B and if the profit
center is a dimension of a financial statement entity, the following postings are made:
Subledger Account D/C Amount in Transac Organizational Unit Profit Center

tion Currency
Receivables/Payables C EUR -100 Y A
Reclassification ac D EUR 100 A

count
Reclassification ac C EUR -100 B

count
Receivables/Payables D EUR 100 Z B
Related Information

Smart Accounting
1.7.3.8.1 Determination of Asset/Liability Reclassification
Asset/liability reclassification methods
Under Smart Accounting Processes for Insurance Contracts Classify Methods , you can view and
derive the various methods for asset/liability reclassification.
The system supports different levels of granularity for calculation and documentation:
● The granularity level of the calculation specifies at which granularity level the system reads the book value
for determining the asset/liability status.
● The granularity level of the documentation specifies at which granularity level the asset/liability status is
persisted and, if required, a reclassification posting takes place.
Granularity Level of Calcula Granularity Level of Docu

Method tion mentation in Document Note
0202111 Contract Partial contract The system determines the

asset/liability status based
0202120 Partial contract Partial contract on whether the book value is
positive or negative. If this
value changes from positive
to negative or vice versa, the
balances are reclassified to
the new asset/liability status.
0202160 Contract Contract (zeroization) The system keeps the asset/

liability status stable. In
0202161 Contract Partial contract (zeroization) cases where the asset/liabil
ity status changes, the sys
0202170 Partial contract Partial contract (zeroization)
tem sets the balances to
zero. An offset posting is
made to the Reclassification
Adjustment account so that
the asset/liability status is
reflected in whether the book
value is positive or negative
(including the offset posting).
Zeroization
Some accounting principles (for example, US GAAP) stipulate that insurance contracts are classified as
liabilities. The zeroization principle ensures that insurance contracts are not reclassified as assets (for
example, in the phase in which premium payments have been made but claim payments are not yet due).
Zeroization takes place if the book value’s positive/negative status does not match the asset/liability status
that you have defined at the granularity level of the product segment or production control in Customizing for
the asset/liability status. If this is the case, the book value is set to zero and an offset posting to the
Smart Accounting
Reclassification Adjustment account is created such that the book value (including Reclassification Adjustment)
is zero. If there is already a balance on Reclassification Adjustment, this is always adjusted such that the book
value (including Reclassification Adjustment) is zero.
Method change
If you change the method for determining the asset/liability status, note the following points:
● If you change the method from without zeroization to with zeroization, the system uses the start value for
the asset/liability status defined in Customizing; it does not use the last valid value.
● If you change the method from with zeroization to without zeroization, the system clears the balance on
the offset account Reclassification Adjustment against P&L.
1.7.3.9 Adjust
In the Adjust process step, you can first manually make preliminary entries for contract-related or cross-
contract value adjustments to balances, and then post them using a release workflow. You can reset the
manual postings during period-opening processing, if necessary.
 Example
Manual postings can be required if data from the feeder system (for example, interest settlement) is not
imported in time for period-end processing.
The Adjust process step is an analytical process step with GAAP-dependent results that are documented as
preliminary delta GAAP documents.
The system documents the manual postings in the following subledger accounts, by default:
● Subledger account 10095201 (subledger account group 100952, analytical)

● Subledger account 11800401 (subledger account group 118004, interpreted)
However, you can create any number of custom subledger accounts for the subledger account groups listed.
You can create a subledger account for manual postings for every individual book value component, for
example. In the general ledger transfer and the balance sheet display you can consider documents for
subledger accounts for manual postings and documents for regular subledger accounts together for the
corresponding book value components.
You can make manual postings within regular posting periods, or, if you are using a fiscal year variant with
special periods, at the end of the year in special periods.
Released manual adjustments are included automatically from the next posting date when the following
process steps are run:
● Value FX
● Classify
● Carry Forward
 Note
If you want to make a backdated manual posting, you need to run the process steps listed above again as
required during period-end processing or year-end processing.
Smart Accounting
Manual postings are not taken into account in the other process steps for period-end processing.
Entry
Prerequisites
Legal Entity Define Legal Entities under Basic Settings, you have defined and assigned number ranges
for manual postings.
Settings Define Results Storage , you have set up the results storage for the Smart Accounting result
category 905 (Preliminary Subledger Document).
● On the SAP Easy Access screen under Bank Analyzer Processes and Methods Smart Accounting
Subledger Accounting for Financial Instruments or Insurance Contracts, under Period-End Processing
Open and Close Posting Periods you have opened the relevant posting period for manual postings in each
case.
Procedure
1. To make a preliminary entry for a manual adjustment, on the SAP Easy Access screen, choose Bank
Analyzer Processes and Methods Smart Accounting for Financial Instruments or Insurance Contracts,
Period-End Processing Manual Posting (Contract) or Manual Posting (Cross-Contract). The initial
screen appears.
2. Enter at least the legal entity, an accounting system, and the posting date.
3. Choose Execute. The system displays a detail screen.
4. Enter a posting date for the reset so that you are able to reset the manual posting later in period-opening
processing. The posting date for the reset must be at least one day after the current posting date.
5. Enter at least a profit and loss account, an equity account or a subledger account for manual value
adjustments for debit and credit items from the subledger account groups listed above.
6. Enter the posting amount in transaction currency for each debit and credit item. You can also distribute the
posting amount over more than one account. The system converts the amounts into different currencies.
7. To have the system determine the corresponding general ledger accounts and enter these automatically,
choose Derive G/L accounts.
8. To generate preliminary currency positions and equivalent value positions for postings to the profit and
loss statement and to run the Move and Transform process step, choose Move and Transform.
9. Save your entries. The system performs consistency checks for your entries. Before you can make a
preliminary entry for a manual adjustment, the balance of debit and credit must be zero, for example, and
the debit/credit indicator must be assigned correctly. The system then generates a preliminary document
and stores it in the Results Data Layer (RDL) with the Smart Accounting result category 905.
10. The system starts a release workflow.
Smart Accounting
Release
Prerequisites
● Workflow Template
In Customizing for Bank Analyzer, under Processes and Methods Smart Accounting either Process
Steps for Financial Instruments or Process Steps for Insurance Contracts under Adjust Derive Workflow
for Release of Manual Postings , you have determined whether the release is completed in one step
(principle of dual control), two steps (principle of triple control) or three steps (principle of quadruple
control). SAP provides a workflow framework (WS02400012) and three subworkflow templates
(WS02400011, WS02400014, WS02400015). You have defined which of the subworkflow templates from
the workflow framework the system is to derive at runtime. This derivation depends on the legal entity and,
optionally, on the characteristics of the document header and the total of the debit amounts in functional
currency.
● Event Linking
On the SAP Easy Access screen, under Business Workflow Administration Event Manager Type
linkages (transaction: SWETYPV) you have entered the event linkage for the following event with the
following values:
Object category CL
Object type /BA1/CL_AL_BR_ADJ_DOC_REL_WF
Event SEND_TO_RELEASE
Receiver type WS02400012
Receiver function module SWW_WI_CREATE_VIA_EVENT_IBF
For more information, see .
Workflow
The releaser can display the preliminary document for manual value adjustment in the SAP Business
Workplace (SBWP) and release or reject it. It is not possible to change the data of the preliminary document.
As soon as the release is completed, the system generates a final document with a new document number and
stores this in the RDL with the Smart Accounting result category 900 (Subledger Document). The final
document contains a reference to the preliminary document.
 Note
If the posting date is in a period that is already closed, the system uses the first date of the next open
period as the posting date.
Smart Accounting
Reset
1. To reset the released manual postings, on the SAP Easy Access screen, choose Bank Analyzer
Processes and Methods Smart Accounting for Financial Instruments or Insurance Contracts, Period-
Opening Processing Reset Manual Posting .
2. Specify at least the legal entity and the evaluation key date. For more selection critieria, choose Dynamic
Selections .
3. Choose Execute. The system selects all of the released manual postings where the reset date (which you
specified when you made the preliminary entry) is before or the same as the evaluation key date.
4. The system inverts the amounts of the manual postings and uses the reset date (which you specified when
you made the preliminary entry) as the posting date. The system also generates a reset document with a
new document number and stores this in the RDL with Smart Accounting result category 900. The reset
document contains a reference to the final document for the manual posting.
Related Information
1.7.3.10 Close
You can use the Close process step to open and close posting periods (including special periods) for each legal
entity.
Prerequisites
If you use the Financial Accounting (FI) component, make sure that you have defined the relevant periods there.
In Customizing for Bank Analyzer under Processes and Methods Smart Accounting Basic Settings , you
have defined at least one fiscal year variant, one accounting system and one legal entity in the following
Customizing activities:
● Define Fiscal Year Variant

● Define Accounting Systems
● Define Legal Entities
Context
You can open and close posting periods for intraday processing (Process Steps Register and Capture (for
insurance contracts), for period-end processing, and for the Adjust process step (manual adjustments)
separately. This enables you to ensure that after a period is closed for intraday processing, operational flow
Smart Accounting
transactions and master data changes no longer affect period-end processing. In the same way, after the
period for the period-end processing has been closed, the adjustments made in the individual process steps in
period-end processing no longer affect the manual adjustments.
Procedure
Subledger Accounting . Then, under Financial Instruments or Insurance Contracts, choose Period-End
Processing Open and Close Posting Periods .
2. Choose a legal entity.
3. To open periods, specify one time period each for the following processes/process steps by entering a
lower limit for the period with fiscal year and an upper limit for the period with fiscal year:
○ Intraday processing
○ Period-end processing
○ Manual adjustments
4. Note the following:

○ Your settings for the fiscal year and the number of periods must be aligned with the settings you make
in the Customizing activity Define Fiscal Year Variant.
○ Intraday processing can be used within the posting periods. Period-end processing and manual
adjustments can be used within the posting periods and/or the special periods.
5. To close a period, change the lower limit for the period, and if required the corresponding fiscal year, so that
the year you want to close is no longer in the period.
 Caution
You should reopen closed periods in exceptional cases only.
Results
Once a period is closed, no further postings are possible in the period. This means that the accounting-relevant
documentation is carried forward to the first posting date of the next open period. The value date is not
affected by this shift. For traceability and reconciliation purposes, the original posting date from the operational
business transaction remains as the document date in the document when operational flow transactions and
master data changes are registered.
 Note
Initial situation: The posting periods 04-2016 through 12-2016 are open for registering, while the periods
03-2016 through 12-2016 are open for period-end processing. Due to an error in the operational system, a
business transaction with posting date and value date 2016-03-27 is imported with a delay.
Consequence: The Register process step documents the transaction with posting date 2016-04-01,
document date 2016-03-27 and value date 2016-03-27. If any currency translations are required, the
exchange rates valid on 2016-04-01 are also used. Balances up to 2016-03-31 are included in period-end
Smart Accounting
processing, which is executed on 2016-03-31. This means that the retroactively entered business
transaction is not included in the period 03-2016.
Special case period 00: Period 00 cannot be opened or closed by the Close process step because only the
Carry Forward process step posts to this period.
1.7.4 Year-End Processing
● You use the Adjust process step to make automated or manual adjustments at the end of the fiscal year in
special periods.
● You use the Carry Forward process step to carry the year-end balance forward to the new fiscal year (period
“00”).
Note that neither the Carry Forward process step nor the Adjust process step automatically react to
adjustments. Since the preceding posting periods must already be closed there is no need for an automated
adjustment function in the system here. You can use the Carry Forward process step to manually make a
selective correction.
Prerequisites
Before you can use period-end processing for a special period, you must have closed the corresponding
preceding period (or special period).
Activities
To execute period-end processing for special periods, on the SAP Easy Access screen, choose Bank Analyzer
Processing Period-End Processing (Contract) or Period-End Processing (Cross-Contract). Enter the special
period you want to process.
To execute the balance carryforward function, on the SAP Easy Access screen, choose Bank Analyzer
Processes and Methods Smart Accounting Subledger Accounting Insurance Contracts Year-End
Processing Balance Carryforward (Contract) or Balance Carryforward (Cross-Contract).
Smart Accounting
Related Information

1.7.4.1 Carry Forward
In the Carry Forward process step, you carry the year-end balance forward to the year-opening balance.
The balances of balance-sheet subledger accounts for the closed fiscal year (including special periods) are
carried forward to the first day of the following fiscal year (period 00), and posted against retained earnings.
The process step is executed for each accounting principle. The leading accounting principle carries forward
analytical subledger balances that have not been interpreted (central GAAP), and analytical subledger account
balances that have been interpreted (delta GAAP). For non-leading accounting principles, the system only
includes balances for analytical interpreted subledger accounts.
The Carry Forward process step is divided into a contract-based step and a cross-contract step. The granularity
of the cross-contract subledger accounts is based on the financial statement entities. Year-end closing
(including the creation of a year-opening balance sheet) is carried out separately in both the subledger and in
the general ledger. This means that the subledger documents of the year-opening period 00 are not taken into
account by the general ledger connection.
The following figure illustrates the balance carryforward. Note that this is a simplified representation that does
not include special periods, for example.
Figure 13: Balance carryforward
Smart Accounting
Prerequisites
You can display the settings for the Carry Forward process step in Customizing for Bank Analyzer under
Processes and Methods Smart Accounting Process Steps for Insurance Contracts Carry Forward .
Special Features
● During the Carry Forward process step, the currency position Profit and Loss Statement is carried forward
to the currency position Reserve.
● Year-opening positions in foreign currency (transaction currency ≠ functional currency) are carried forward
against Preliminary Retained Earnings.
● If there are postings with value dates in the future on the subledger accounts on the last day of the old
fiscal year, the balance carryforwards are carried out such that these value dates are preserved.
● You can run the Carry Forward process step more than once for a fiscal year. If there have been changes to
the year-opening position, the postings from the previous run are inverted.
● The Carry Forward process step does not react automatically to retroactive changes. If the balances
change on the last day of the fiscal year after the Carry Forward process step has been executed, you need
to execute the process step again. Only the initial positions that have been changed are re-documented in
accounting. Documents that have already been written are inverted, and new documents are written for
the initial positions that have changed.
After these changes, you can execute the contract-related process selectively for changed contracts. You
then need to execute the corresponding cross-contract process so that the balance carryforward is also
updated for cross-contract positions.
● We recommend that you execute the Carry Forward process step as soon as all regular periods of the fiscal
year are completed. The balance carryforward is a prerequisite for accounting processes in the new fiscal
year. You should execute the process again after completion of all special periods.
1.7.5 Period-Opening Processing
Period-opening processing resets documents that were created during period-end processing on the previous
day.
This affects the documents of the process steps Move and Transform [page 216] and Value FX [page 221].
You can also reset manual adjustments. For more information, see Adjust [page 149].
Smart Accounting
You can use the reset of period-end process steps for the following purposes:
1. To report the recognition in profit and loss of the adjustment of valuation postings by comparing with a
valid reference value at a designated point in time:
Your choice of reference value combined with the execution of period-opening processing, for example,
gives you the following options for displaying recognition in profit and loss:
Reference Value and Time Display of Recognition in Profit and Execution of Period-Opening Proc
Loss essing
Last adjustment posting Permanent None
Initial recognition in balance sheet Life-to-date Daily
Last adjustment posting in prior pe Period-to-date Daily, except at the end of periods
riod
Last adjustment posting in preceding Quarter-to-date Daily, except at the end of quarters
quarter
First adjustment posting of current Life-to-date Daily, except at the end of years
year
2. Fixing of foreign exchange rates for unrealized profit and loss amounts in a foreign currency at designated
points in time:
Frequency of Exchange Rate Fixing Execution of Period-Opening Processing
Daily None
For each period Daily, except at the end of periods
Quarterly Daily, except at the end of quarters
Annually Daily, except at the end of years
Period-Opening Processing (Contract)
You use the period closing variant to specify for which process steps reset postings are created. The
characteristic values of the subledger coding block valid at the start of the reset day are included in the reset
document.
Period-Opening Processing (Cross-Contract)
The resetting of documents from period-end processing (cross-contract) applies only to the Value FX process
step run by period-opening processing (cross-contract).
Reset Manual Adjustment
You use this to reset manual adjustments.
Smart Accounting
Activities
For contract-related changes, on the SAP Easy Access screen, choose Bank Analyzer Processes and
Methods Smart Accounting Subledger Accounting Insurance Contracts Period-Opening Processing
Period-Opening Processing (Contract) .
For cross-contract period-opening tasks, on the SAP Easy Access screen, choose Bank Analyzer Processes
and Methods Smart Accounting Subledger Accounting Insurance Contracts Period-Opening Processing
Period-Opening Processing (Cross-Contract) .
For resetting manual adjustments, on the SAP Easy Access screen, choose Bank Analyzer Processes and
Methods Smart Accounting Subledger Accounting Insurance Contracts Period-End Processing Reset
Manual Adjustment .
 Note
You want the accounting contributions to the profit and loss statement to be finally fixed only at the end of
the quarter. However, reports still need to be created at the end of each month
Postings at the end of the period (February 28)
a) On February 28, the accruals are USD 10; the exchange rate on this date is 0.8.
Based on these parameters, the Accrue process step creates the following posting:
a) Posting Date Subledger Ac Debit/Credit Amount in Trans Amount in Func

February 28 Accruals: Interest D USD 10 EUR 8
Income: Unreal C USD -10 EUR -8

ized Interest (Pre
liminary)
b) Since March 28 is a balance sheet key date, the unremitted interest income needs to be transferred to
interest income (Move and Transform process step):

February 28 Income: Unreal D USD 10 EUR 8

ized Interest (Pre
liminary)
Currency Position C USD -10 EUR -8

Income State
ment
Equivalent Value D EUR 8 EUR 8

USD
Smart Accounting
Income: Interest C EUR -8 EUR -8

(Unrealized)
c) Due to a business decision that there is to be no final fixing within a quarter, the system resets this
posting during the period-opening process on March 1:
c) Posting Date Subledger Ac Debit/Credit Amount in Trans Amount in Func

March 1 Income: Unreal D USD -10 EUR -8

ized Interest (Pre
liminary)
Currency Position C USD 10 EUR 8

Income State
ment
Equivalent Value D EUR -8 EUR -8

USD
Income: Interest C EUR 8 EUR 8

(Unrealized)
Postings at the end of the quarter on March 31
d) At the end of the next period, there is a delta of USD 1 (target balance USD 11) on Accruals; the exchange
rate on March 31 is 0.9:
d) Posting Date Subledger Ac Debit/Credit Amount in Trans Amount in Func

March 31 Accruals: Interest D USD 1 EUR 0.9
Income: Unreal C USD -1 EUR -0.9

ized Interest (Pre
liminary)
e) Before the Move and Transform process step is executed, there is a balance of USD -11 on Income:
Unrealized Interest (Preliminary). This is now fixed with the exchange rate on March 31 (0.9) in the net
interest income:

February 28 Income: Unreal D USD 11 EUR 9.90

ized Interest (Pre
liminary)
Smart Accounting
Currency Position C USD -11 EUR -9.90

Income State
ment
Equivalent Value D EUR 9.90 EUR 9.90

USD
Income: Interest C EUR -9.90 EUR -9.90

(Unrealized)
This results in an interest income of EUR 9.90 on March 31, and no foreign exchange result. Due to the
business decision outlined above, the system no longer performs a reset on April 1.
Result in the event of a different business decision
If the business decision was to execute the final fixing at the end of each month, you would not execute the
reset (c) and there would be a shift between the interest income and the foreign exchange result:
Key Date Amount in Foreign Currency Contribution to Net Interest Income

in EUR
February 28 USD -10 EUR -8
March 31 USD -1 EUR -0.90
Net interest income for the fiscal year EUR -8.90
The difference of EUR -1 in comparison to the quarterly fixing is added to the foreign exchange result.
1.7.6 Preparatory Processing
You can use the following transactions on the SAP Easy Access screen, under Bank Analyzer Processes and
Methods Smart Accounting Subledger Accounting Insurance Contracts Preparatory Processing :
Determine Accounting Status
● Determine Onerousness Status

For more information, see Recognize Profit [page 212].
● Determine Term Segment
You can determine the term segment for a combination of legal entity, accounting system, posting date,
and source system for each contract/financial instrument or lot, based on the product segment. On the
Smart Accounting
SAP Easy Access screen, choose Bank Analyzer Processes and Methods Smart Accounting
Subledger Accounting Insurance Contracts Preparatory Processing Determine Term Segment . (In
order to do so, you need to have defined the term segment in Customizing for Bank Analyzer, under
Bank Analyzer Processes and Methods Smart Accounting Subledger Coding Block Analytical
Status Define Term Segment .
● Determine Asset/Liability Status (Insurance Contracts)
For more information, see Determination of Asset/Liability Status [page 37].
Determine Target Value
You can calculate deferred profit. For more information, see Recognize Profit [page 212].
Related Information
Analytical Control Parameters [page 36]
1.7.7 Tools
1.7.7.1 Include Contracts in Day Processing Again
The correction report Include Contracts in Day Processing Again allows you to reprocess insurance contracts
and securities positions that have already been successfully processed in day processing and in period-end
processing.
Reprocessing can be required in the following cases:
● The configuration has been changed and you now want to use it for business transactions and positions
that have already been processed.
● At the time of initial processing, target values (such as accruals or risk provision amounts) had not been
imported or were imported incorrectly.
You can use the Reset Status Values checkbox to restrict reprocessing to the process steps of period-end
processing or, in addition, to reprocess the documents entered in the Register process step.
 Note
If you select the checkbox, the system also runs the Classify process step at the start of the day. This
reclassifies the balance sheet before processing, if required, to ensure a consistent starting point.
Smart Accounting
Activities
Accounting Subledger Accounting Insurance Contracts Tools Include Contracts in Day Processing
Again .
The report selects all of the contracts that meet the dynamic selection and the selection parameters that you
specified on the report screen.
For each contract selected, the report determines the processing status of the contract or the combination of
contract and financial instrument again and updates the processing status for the specified posting date on the
database accordingly.
If the Reset Status Values checkbox has been selected, the system sets status 01 (new). If it has not been
selected, it sets status 02 (to be consolidated).
When you run the report, the selected contracts are processed in end-of-day processing again, even if there is
no external event (such as a backdated master data change).
 Note
If the processing status new (01) is set, you must run the Register process step again before end-of-day
processing, so that the business transactions are also registered again as of the chosen posting date.
If necessary, the system also runs the process steps for insurance contracts again.
1.7.7.2 Exclude Business Transactions from Reprocessing
The correction report Exclude Registered Business Transactions from Processing allows you to exclude business
transactions from being processed again by the Register process step.
Accessing the registration table in this way is advisable in the following cases:
● A business transaction has been included in the Register process step for the sake of completeness,
however it is incorrect, even though the configuration has been corrected or necessary information (such
as exchange rates) has been provided subsequently.
The business transactions have the processing status 01 (“Suspense Account Posting”).
Consequence: As a result, this business transaction can only be posted to a suspense account.
● A business transaction has been imported in a form that does not allow for the creation of a posting record
with debit/credit parity.
 Example
A business transaction has been imported by mistake, in which the amounts in the payment currency
and position currency are in the same currency but the individual amounts differ.
These business transactions have processing status 10 (Reregister).
Consequence: In this case accounting documents cannot be generated for the business transaction.
This needs to be considered during reconciliation.
Smart Accounting
The report can only be run in online mode which means that the user must confirm the deletion. This restricts
the maximum number of data records that can be deleted.
Call the Exclude Business Transactions from Reprocessing transaction.
1.7.7.3 Clean Up General Ledger Document Management
You can use the Clean Up General Ledger Document Management report to remove data records from status
management for the general ledger connection and so limit the size of the status management table.
You can only delete data records under the following conditions:
● The status data for the general ledger account documents from the Results Data Layer (RDL) belongs to a
fiscal year that has already closed.
● The RDL general ledger account documents related to the status data have already been sent to the
general ledger successfully or the failed attempt to send documents has been confirmed in the
Postprocessing Office with the status Sending Canceled.
● The report deletes the status data only if the corresponding RDL general ledger documents have already
been deleted using SAP Information Lifecycle Management.
Call the Clean Up General Ledger Document Management transaction.
1.7.7.4 Destroy Process Controller Data
The Destroy Process Controller Data report allows you to delete data records from the Process Controller’s
status management (for example, for data protection reasons or to reduce the data volume).
Prerequisites
You can delete data records under the following conditions:
● You can only delete entries from closed periods if there are no earlier open periods.
● The contract has already expired. You can determine when a contract is considered expired from the end of
the contract term in the Source Data layer (SDL).
● The contract is active but there is another entry in the Process Controller on a later date than the posting
date in the destruction report.
Smart Accounting
Context
To delete, you use the data destruction object /BA1/RBR_PROC_CTRL and proceed as follows:
Procedure
Subledger Accounting Financial Instruments Tools or Bank Analyzer Processes and Methods
Smart Accounting Subledger Accounting Insurance Contracts Tools . Call the Destroy Process
Controller Data transaction.
2. Choose the Destroy pushbutton.
3. On the selection screen, choose an existing variant or create a new variant. The system processes variants
based on the report /BA1/RBR_PROC_CTRL_DES. In a variant, you can limit deletion to various Process
Controller contract attributes:
○ Accounting system, legal entity and posting date are mandatory.
○ You can also define whether only expired contracts or all active contracts are deleted.
4. Enter a start date and spool parameters (background printing parameters).
5. Finally, choose F8 or the Schedule Job pushbutton to schedule the destruction run.
Results
When the run is completed, you can view the logs either in the data destruction object or in the CVPM process
monitor for the process /BA1/RBR_PROC_CTRL_DESTRUCT.
 Note
Do not execute the process /BA1/RBR_PROC_CTRL_DESTRUCT directly because the connection to the
data destruction run can be lost.
1.7.7.5 Start Smart Accounting Process Monitor
In the Smart Accounting process monitor you can analyze runs for analytical processes in Smart Accounting
for Financial Instruments and Insurance Contracts.
This process monitor has the same functions as the process monitor in the Calculation and Valuation Process
Manager (CVPM) but provides selection parameters that are specific to Smart Accounting, such as the legal
entity and accounting system.
Under Additional Parameters, you can use keywords to restrict your search - for example, the ID of a source
system.
Smart Accounting
To start the Smart Accounting Process Monitor, on the SAP Easy Access screen, choose Bank Analyzer
Processes and Methods Smart Accounting Subledger Accounting Financial Instruments or Bank
Analyzer Processes and Methods Smart Accounting Subledger Accounting Insurance Contracts :
Call the Start Smart Accounting Process Monitor transaction.
For more information about the prerequisites and features of both process monitors, see the documentation
for the CVPM process monitor.
Related Information
1.8 Suspense Accounting
With suspense accounting in Smart Accounting, SAP provides a robust concept that allows you to meet the
basic accounting requirement of completeness. This applies even if the system was unable to determine
correct subledger documents, for example due to incorrect business configuration.
The following use cases are possible:
● It is not possible to determine one or both subledger accounts

● It is not possible to determine other dimensions of the subledger coding block
In both cases, the system applies the suspense accounting concept only if it is unable to determine the value of
a characteristic that was defined in the subledger. This applies to all characteristics of the subledger coding
block that the system determines using a derivation.
Suspense accounting is explicitly not applied to characteristics whose values are defined outside of the
subledger and that are transferred to the subledger only for documentation purposes. For example, all contract
characteristics that the system imports to the SDL belong to the importing system. The subledger reads the
characteristics that are part of the subledger coding block and adds them to the document.
Determination of the Subledger Account
Register
The main task of business configuration in the Register process step is to derive the posting record (subledger
account assignment) based on data from the operational flow transaction (and in exceptional cases, from
contract characteristics). Due to incorrect or incomplete configuration, a situation can arise in which the
system is unable to determine a posting record for a given operational flow transaction.
 Example
For a given operational system, the resulting posting records are based only on the transaction type. At the
start of the project, the system derives posting records for all transaction types.
Smart Accounting
After the system goes live, a new transaction type is introduced in the operational system, but no
notification is sent to the subledger. Therefore, when the system receives a business transaction with this
new transaction type, it is unable to determine a posting record.
To ensure the complete documentation of the imported flow transactions, the system assigns the following
posting record, which is defined as an error value:
D/C Subledger Account
D 90200101
Suspense Account Contract Currency
C 90210101
Suspense Account Payment Currency
The system makes the following assignment:
SDL Business Transaction Subledger Account
Amount in Transaction Currency 90210101
Suspense Account Payment Currency
Amount in Position Currency 90200101
Suspense Account Contract Currency
 Example
In the SDL, the system imports the following business transaction:
Business Transaction Source System Amount in Position Amount in Transac Transaction Type
ID Currency tion Currency
BT_1 SRC_1 EUR 100 EUR 100 123456
A suitable posting record derivation is missing for this transaction type in the Register process step.
Therefore, the system uses the error posting record and creates the following subledger document:
Business Transaction Source System D/C Amount in Transac Subledger Account

ID tion Currency
BT_1 SRC_1 D EUR 100 Suspense Account

Contract Currency
C EUR -100 Suspense Account

Payment Currency
Period-End Processing
Smart Accounting
Since a balance-sheet position component always defines the starting point in period-end processing, the only
account that the system may not be able to determine due to missing configuration is the offsetting account
(P&L, equity).
For this particular case, the system also ensures completeness by assigning error value offsetting accounts for
both credit postings (subledger account 40010199 Income (Unassigned)) and debit postings (subledger
account 50010199 Expense (Unassigned)).
Determination of Other Subledger Coding Block Dimensions
● You need to define error values for all subledger dimensions that have been defined in the subledger. These
are subledger coding block characteristics whose values the system determines using a derivation rule.
● SAP provides predefined error values for all characteristics with fixed values.
● For all characteristics with values that are not predefined (for example, general ledger account), you need
to specify error values.
● For all custom characteristics, you can also define error values.
 Example
For a given operational system, the resulting product segments are based only on the production controls.
At the start of the project, the system derives product segments for all production controls.
Production Control Product Segment
ABC MAXX Checking Account 400 Checking Accounts
ABD MIN Checking Account 400 Checking Accounts
After the system goes live, the new production control ABE (AVG Checking Account) is introduced; no
notification is sent to the subledger.
When the system receives a business transaction for a contract from the new production control, the
system is therefore unable to determine a product segment.
To ensure the complete documentation of the imported flow transactions, the system assigns the following
product segment (defined as an error value):
● 999 Not assigned
In this way the subledger document ensures that the business transaction is documented, but the
characteristic values are not completely correct:
Posting Date D/C Subledger Ac Amount Product Segment Inversion

count
October 22 D Receivable 100 999
C In-Transit Account -100
Solution
The system displays the use of error values in an appropriate way. In addition, the relevant process step marks
postings with errors for review.
Smart Accounting
By supplementing or correcting the configuration (production control ABE belongs to segment 400), you
ensure that the system can not only process the business transaction completely but also correctly.
This means that the system creates an inversion document when it next executes the process step. This offsets
the effects of the complete (but not correct) document in accounting.
 Example
The following shows the solution to the above example:

count
October 22 D Receivable - 100 999 x
C In-Transit Account 100
The business transaction is then posted again and the product segment is determined correctly.
 Example
The renewed posting and correct determination of the product segment for the above example is as
follows:

count
October 22 D Receivable 100 400
C In-Transit Account - 100
1.9 General Ledger Connection

In the general ledger connection, individual subledger documents from the Results Data Layer (RDL) are
aggregated to general ledger documents based on the predefined general ledger coding block, and are
persisted in the RDL. You define the general ledger coding block when you define the subledger coding block.
The general ledger documents can be transferred only to the general ledger.
For the transfer of data to the general ledger, the logic behind the central GAAP approach needs to be taken
into account.
Prerequisites
● For each legal entity, you have assigned the company code, and created and assigned a number range for
G/L documents. You make these settings in Customizing for Bank Analyzer under Processes and
Methods Smart Accounting Basic Settings Legal Entity Define Legal Entity .
Smart Accounting
Settings Define Results Storage , you have defined the results data area and the result type in which you
want to store the general ledger documents.
● In Customizing for Bank Analyzer under Processes and Methods Smart Accounting Chart of
Accounts General Ledger Chart of Accounts Derive General Ledger Account you have defined a
general ledger account as a clearing account for each chart of accounts.
The G/L account that you use as the clearing account must not also be used as the G/L account for errors
in the same chart of accounts. The clearing account must never be derived when you are deriving G/L
accounts. Therefore, do not assign the clearing account under Assignment G/L Accounts to Financial
Statement Subsegments.
● You have made settings in Customizing for configuring services between Bank Analyzer and the general
ledger. For more information, see SAP Note 1350556 – Customizing for Integration of Bank Analyzer with
ERP GL.
● You have defined the outbound mapping in Customizing for Bank Analyzer under Infrastructure
Settings for Enterprise Services PI Structure Mapping .
● In Customizing for the general ledger connection, you have assigned a mapping rule set to Accounting. To
do so, choose Bank Analyzer Processes and Methods Smart Accounting Basic Settings General
Ledger Integration Technical Settings Select Rule Set for PI Structure Assignment .
Features
The general ledger connection includes the following features:
● Prepare General Ledger Documents

To run this process, on the SAP Easy Access screen, choose Bank Analyzer Processes and Methods
Smart Accounting General Ledger Connection Prepare General Ledger Documents .
The process aggregates all subledger documents (at the granularity of the general ledger dimensions) that
have been created since the process was last executed. It ensures debit/credit parity of the general ledger
documents created, and persists the result in the form of general ledger documents.
● Send General Ledger Documents
To run this process, on the SAP Easy Access screen, choose Bank Analyzer Processes and Methods
Smart Accounting General Ledger Connection Send General Ledger Documents .
The process sends the created general ledger documents to the general ledger using the service operation
NotifyOfAccountingDocuments of the enterprise service interface
FinancialInstrumentsAnalyticalAccountingDocumentPreparationAccountingDocumentNot
ificationOut.
You can display general ledger documents. On the SAP Easy Access screen, choose Bank Analyzer Results
Data Layer Display Results Data , and choose the relevant result view.
Smart Accounting
General Ledger Document
A general ledger document refers either to central GAAP or to a specific delta GAAP. Each document can have
up to 99 items, the sum of which must be a zero amount for every currency (zero balance principle).
If there is more than one general ledger document for a posting day, the system ensures that the balance for
each document is zero by making a corresponding offsetting posting to a G/L clearing account, if required. The
postings to the clearing account for the same posting date cancel each other out.
Related Information

Clean Up General Ledger Document Management [page 164]
SAP Note 1350556
1.10 Notes to Financial Statements
On the SAP Easy Access screen, you can use the functions for displaying the notes to financial statements
under Bank Analyzer Processes and Methods Smart Accounting Notes to Financial Statements
Financial Instruments .
Related Information
Determining Fair Value [page 248]

Maturity Grouping [page 249]
1.10.1 Determining Fair Value
For the notes to the financial statement, you can also determine the fair value for contracts and securities
positions that you do not want to report at fair value in the balance sheet.
The fair value is calculated by the fair value calculator.
Smart Accounting
Prerequisites
In Customizing for Bank Analyzer under Processes and Methods Smart Accounting Notes to Financial
Statements Financial Instruments Fair Value , you have viewed the methods for determining the fair value,
created custom methods if required, and have defined derivation rules.
 Note
These are the same Customizing activities as those used for determining the fair value in the Value TC
process step.
1.10.2 Maturity Grouping
You have the option of determining the maturity grouping for contracts and securities positions for the notes to
the financial statement. You can use the following methods:
● Contract-based maturity grouping

In contract-based maturity grouping you can assign two criteria, according to the book value, to the
maturity band you have defined. The assignment can be made on the key date (due at call) or at the end of
the term.
● Cash-flow based maturity grouping
In cash-flow based maturity grouping you can assign the nominal payments from the cash flow to the
maturity band you have defined. The following cash flow categories are supported:
○ Contractual cash flow
○ Behavioral cash flow
○ Credit risk adjusted cash flow
Special Features
The maturity grouping converts the amounts in all of the document currencies assigned to the legal entity with
the current rate valid on the key date.
Prerequisites
Smart Accounting Notes to Financial Statements Financial Instruments Maturity Grouping :
● You have viewed the relevant methods and, if required, created your own methods under Define Methods
for Contract-Based Maturity Grouping and Define Methods for Cash Flow Based Maturity Grouping.
● You have defined derivation rules under Derive Methods. You have also defined and entered the relevant
maturity band. (To do this, choose the Define Maturity Band button.
Smart Accounting
1.11 Additional Information
1.11.1 Going Live with Smart Accounting for Financial

Instruments
To use Smart Accounting for Financial Instruments in a live system, you need to execute an initial balance
transfer for your source systems.
This can be divided into two different cases:
● Transfer of balances from operational source systems by registering initialization business transactions
● Creation of accounting valuation components in period-end processing on the initialization date
○ By transferring them from an operational feeder system (accruals)
○ By transferring them from an analytical feeder system
If the current posting date is the same as the initialization date of the source system, the system recognizes
that it is an initial balance transfer and automatically replaces the offsetting account with the subledger
account for the retained earnings (subledger account 30100101 (dependent on value date) or 30100201 (not
dependent on value date)).
Activities
Preparatory phase
In Smart Accounting
1. If required, install the SAP Business Content.

2. Adjust the Business Content to meet your requirements.
3. In Customizing for Bank Analyzer under Processes and Methods Smart Accounting Basic Settings
Basic Settings Define Source Systems , create your source systems and assign a go-live date
(initialization date).
 Note
To enable you to create a complete profit and loss statement, we recommend that you go live at the
start of a new fiscal year. You can then use the closing balances in your old system as the basis for
creating your annual opening balance sheet in Smart Accounting.
Year-end closing
In the old system
1. Close the last fiscal year.

2. Generate the relevant initialization business transactions for the operational balances (accruals) for
payables/receivables and for securities at cost on the initialization date. Extract the required operational
and analytical balances as target values.
Smart Accounting
Migration phase
In Smart Accounting
1. Load the current master data on the initialization date.

2. Import initialization business transactions on the initialization date.
3. Open the period on the initialization date.
4. Set the posting date to the initialization date.
5. Register the master data and initialization business transactions.
6. Import the relevant target values or calculation base data if required (for example, market data, cash flows
or risk parameters).
Import the target values to the semantic cluster according to the Customizing settings. Use the method
that is derived in Customizing as the key (/BA1/C55CMETH).
7. Run end-of-day processing for all relevant accounting systems on the initialization date (starting with the
leading accounting system).
The Move and Transform process step initializes the cross-contract nodes for the currency position and the
equivalent value.
8. Run period-end processing (contract and cross-contract) on the initialization date for all relevant
accounting systems (starting with the leading accounting system).
The system reads the imported target value or calculates new target values and carries out the relevant
delta postings.
The system also initializes the internal calculation base data (CBD) if applicable.
9. Execute year-end processing. The Carry Forward process step creates the opening balance sheet for the
new fiscal year.
10. Switch the import from feeder systems and the general ledger connection to Smart Accounting.
Live system
 Note
You can only import live business transactions that have a posting and/or value date that is later than the
posting date of the initial balances.
 Note
The following table illustrates the process sequence of a go-live for the fiscal year change 2018/2019 with a
go-live date of 2018-12-31.
Table 15: Example of process sequence for going live
Phase Old system Smart Accounting
Preparatory phase - ● Smart Accounting configuration

○ Install Business Content
○ Adjust Business Content
○ Set initialization date to 2018-12-31
for each source system
Year-end closing Close fiscal year 2018 -
Smart Accounting
Phase Old system Smart Accounting
Migration phase Create initialization business transactions ● Load master data

● Import initialization business transac
tions
● Register initialization business transac
tions
● End-of-day processing on 2018-12-31
● Period-end processing on 2018-12-31
● Close fiscal year 2018
● Balance carryforward with opening bal
ance for 2019-01-01
● Switch import from feeder systems
Live system - Start processing in Smart Accounting on

2019-01-01.
1.11.2 Value Added Tax
In many countries, financial services are subject to value added tax (VAT). Smart Accounting registers
imported VAT information that has been transferred to a connected general ledger (for example, SAP FI-GL).
The role of the subledger when the VAT-relevant business transaction items are registered constitutes only the
following tasks:
● The business transaction defined in the operational system and assigned the required VAT information is
entered for accounting purposes.
● The tax base amount is translated into all the required local currencies.
● The document is transferred to the G/L with the VAT-relevant information.
Receivables (input tax) and liabilities (VAT) are settled separately with the tax office. The VAT due can be offset
against the input tax. The VAT return is carried out in the connected general ledger.
Prerequisites
To handle VAT, the following prerequisites must be met:
● In Customizing for Bank Analyzer under Smart Accounting Subledger Coding Block Flow Data
Definition of Flow Transaction Characteristics , you have defined the VAT-relevant characteristics.
In Customizing for Bank Analyzer under Smart Accounting Subledger Coding Block Flow Data
Derivation of Flow Transaction Characteristics , you have defined derivation rules.
For more information, see the documentation in the Customizing activities.
Smart Accounting
● To update the VAT in the general ledger, the following characteristics need to be provided at the item level
of the operational flow transaction in the subledger, and need to be copied to the posting document in the
Register process step:
Display Coding Block
Characteristic Description
/BA1/C35BTIDRF Reference Business Transaction ID
/BA1/C35BTINRF Reference Item Number
/BA1/C55ACCKEY Transaction Key
/BA1/C55TCNTRY Tax Country
/BA1/C55TCODE Tax Code
/BA1/C55TCODER Reference Tax Code
Define General Ledger Coding Block
Characteristic Description
● The Tax Base Amount key figure (in transaction currency &5STAXBO) needs to be imported at the item level
of the business transaction.
● You use the Web service
FinancialInstrumentsAnalyticalAccountingDocumentPreparationAccountingDocumentNot
ificationOut to transfer general ledger account documents (that may contain VAT-relevant information)
to the general ledger.
Integration
VAT processing comprises several tasks:
● Tax calculation
● Tax posting
● Documentation
● Tax reports
● Tax return
● Reconciliation
These tasks are spread across various application components. Smart Accounting documents the tax-relevant
business transactions, posts them at single transaction level, and transfers the resulting accounting
Smart Accounting
documents to a connected general ledger. In the SAP system, you can use the FS-GL report RFUMSV00 to file
the VAT return.
The following table provides an overview of which component is responsible for which task:
Activity Feeder Systems Smart Accounting FI G/L (General Ledger)
Tax calculation X
Documentation X
Tax posting X X
Tax reports X
Tax return to authorities X
Reconciliation X X X
Features
You use a delivery interface (for example, Data Load Layer) to import payment items that are associated with
base transactions subject to VAT (for example, fees and relevant VAT) to the Source Data Layer (SDL) as
individual business transactions. The business transactions for the base transaction and the VAT are classified
using different transaction types. You use the ID of Reference Bus. Trans. field to link the underlying base
transaction to the corresponding VAT.
However, period-end results that are transferred at the end of a period via the delivery interface contain the
bank fees and the corresponding VAT in one common business transaction. You link the bank fee and the
related VAT using the reference item number.
When this is transferred to the accounts in the Register process step, the system writes VAT-specific
characteristics and key figures to the document line that updates the amount in payment currency (SDL
amount in transaction currency). In Business Content, you use the subledger account 10100104 (In-Transit
Account: VAT) for this.
In the same process step and depending on the local currencies used, the system also translates the tax base
amount into all relevant local currencies. All local currencies that have been configured for the legal entity are
relevant:
Key Figure Description
&5STAXBR Tax Base Amount (Functional Currency)
&5STAXBL Tax Base Amount (Local Currency)
&5STAXBH Tax Base Amount (Hard Currency)
&5STAXBI Tax Base Amount (Index-Based Currency)
Smart Accounting
&5STAXBG Tax Base Amount (Group Currency)
The VAT item contains the following VAT-related characteristics and key figures:
Characteristic/Key Figure Description
/BA1/C35BTIDRF ID of Reference Bus.Trans
/BA1/C35BTINRF Reference Item Number
&5STAXBO Tax Base Amount in Transaction Currency
The underlying bank fee contains the following VAT-related characteristics and key figures:
Characteristic/Key Figure Description
 Note
To ensure that they are updated correctly in the general ledger, you need to enter all VAT-relevant
document line items as central GAAP documents. This means that the same general ledger account needs
to be derived in all the accounting principles that you use. In addition, if you are using multiple accounting
principles, you must not use any subledger accounts that have GAAP-specific subledger coding block
characteristics that are part of the general ledger coding block.
 Recommendation
Use the subledger account 10100104 (In-Transit Account: VAT) at the cross-contract granularity level.
For an overview of the posting records, see Customizing for Bank Analyzer under Processes and Methods
Smart Accounting Process Steps for Financial Instruments Register Account Assignment Posting
Records Define Posting Record Types or under Processes and Methods Smart Accounting Process
Steps for Insurance Contracts Register Account Assignment Posting Records Define Posting Record
Types .
Smart Accounting
General Ledger Account Documents
In the subledger coding block, you need to mark the following characteristics as general ledger dimensions:
 Note
Settings in the system already define that these key figures are to be transferred to the general ledger.
Subledger documents with the same tax properties for the characteristics and key figures listed above must
not be distributed to different G/L account documents in the general ledger connection. The system ensures
that these documents are aggregated to one G/L account document.
 Note
You post a fee of EUR 100 with 19% VAT.
Fee Business Transaction
Transaction Amount EUR 100
VAT-Relevant Characteristics
Tax Country DE
Reference Tax Code For example A1 (EUR 19)
VAT Business Transaction
Transaction Amount EUR 19
VAT-Relevant Characteristics
ID of Reference Bus. Trans. Fee Business Transaction ID
Reference Item Number
Transaction Key VAT
Tax Country DE
Tax Code For example A1
Smart Accounting
VAT-Relevant Key Figure
Tax Base Amount (Transaction Currency) EUR 100
Related Information
General Ledger Connection [page 246]
1.11.3 Processing SDL Products Mapped as Structured

Products
Prerequisites
● You have mapped contracts (financial transactions and insurance contracts) or securities (financial
instruments) in structured form in the Source Data Layer (SDL). Structured means that one or more child
nodes have been assigned to a parent node.
● The node number within each structured product is unique within the complete object. The highest node
must have the node number 1.
● When you import business transactions for structured products, the partial contract (parent template,
child template and node number) that the business transaction refers to must be identified.
 Note
To identify the partial contract, Smart Accounting needs only the node number. In the SDL, you also
need to enter the parent template and the child template.
Business Considerations
We recommend that you only map a contract in structured form in the SDL if there are business reasons to do
so. The following technical aspects, however, are not good reasons:
● A contract or security has balances on a subledger account in different currencies. (This applies to
accounts that are managed in both US dollars and euros, for example).
● A contract or security has a cash flow in different contract currencies (for example, a currency swap).
● A contract or security has a cash flow with different payment currencies (for example, a multicurrency
bond).
● A contract has optional contract components (for example, unscheduled repayment options).
Smart Accounting
Processing in Smart Accounting
When the structured mapping is transferred to Smart Accounting, the system creates a work structure at the
level of the overall contract in the process controller. This means that in period-end processing the system
always takes the entire contract into account.
Smart Accounting uses the node number of the SDL financial transaction or financial instrument as the unique
and only identifier of the partial contract. To clearly separate financial transactions and securities, Smart
Accounting uses a node number of the contract and a node number of the security. The following tables
provide an overview of the fields to be transferred, comparing the Source Data Layer and Smart Accounting.
Table 16: Fields to be transferred for financial transactions
SDL Smart Accounting
Financial transaction Contract or insurance contract
External number Contract ID
Parent template
Child template
Node number Node number of the contract
Table 17: Fields to be transferred for deposits
Securities account class position Own securities account
External number Contract ID
Table 18: Fields to be transferred for securities
Financial instrument Securities
External number Securities ID
Parent template
Child template
Node number Node number of the security
Smart Accounting
1.11.4 Purchased or Originated Credit Impaired (POCI)
Financial Assets
POCI receivables are receivables that are already impaired at the time when they are purchased or originated.
They can be identified by the impairment status with the value 104 POCI Asset.
For these contracts it is assumed that the capital returns will not meet the requirements of the contractually
agreed cash flow. This is taken into account in risk provision, where the risk-adjusted expected cash flow is
used to determine the impairment.
 Note
In the case of purchased receivables, the impairment results in a purchase price reduction (deferral) that
has to be imported using a business transaction.
In the case of originated receivables, the purchase price reduction is the result of the risk provision
available when the switch to impairment status 104 occurs, which is posted to valuation remnants.
The net interest income of a POCI receivable is taken only from the change in the present value of the credit-
risk-adjusted expected cash flow, that has been discounted using the contractual effective interest rate. All
changes to the expected cash flows must be posted against the risk provision (in the risk provision result).
To ensure that these requirements are met, special offset methods are available in the process steps Defer,
(responsible for amortizing the purchase price reduction) and Release (responsible for amortizing the risk
provision posted to valuation remnants). These methods enable you enter all the change reasons for the POCI
receivables (with the exception of the time-effect), which have been determined in the relevant step, against an
offset account in the balance sheet. This forwards these effects to the Value TC process step, which documents
the change to the expected cash flow by entering it against the risk provision.
1.11.5 Customer Enhancements
You can use separate Customizing activities and Business Add-Ins for customer-specific enhancements.
Financial Instruments
Impairment status
The following BAdIs can be used for the impairment status under Technical Settings Business Add-Ins :
● BAdI: Overwrite Impairment Status

● BAdI: Determination of Impairment Status at Subportfolio Level
Smart Accounting
Determination of Target Values
You can define custom methods for determining target values. To do so, you can use the following Customizing
activities in Customizing for Bank Analyzer under Processes and Methods Smart Accounting Process
Steps for Financial Instruments :
● Accrue
Methods Accrual Define Custom Methods
● Defer
Methods Deferral Definition Define Custom Deferral Methods and Defer Methods Deferral
Derivation Derive Custom Deferral Methods
● Release
Methods Release of Valuation Remnants Define Custom Methods for Releasing Valuation
Remnants
● Value TC
○ Methods Adjustment for Risks Credit Risk Define Custom Methods for Determining Credit
Risk
○ Methods Fair Value Define Custom Methods
● Notes to Financial Statements
Financial Instruments Maturity Grouping Define Custom Methods
Insurance Contracts , you can use the following Customizing activities:

Methods Adjustment for Risks , for each risk category Define Custom Methods
Methods Adjustment for Prudence Define Custom Methods
● Value TC
Methods Adjustment for Risks , for each risk category Define Custom Methods
Methods Adjustment for Prudence Define Custom Methods
Methods Margins Cost-of-Capital Margin (Regulatory) Define Custom Methods
● Recognize Profit
Methods Define Custom Methods
In the Customizing activities for the custom methods, you can use the BAdI button to go directly to the
implementation of the relevant BAdI. You will also find the BAdIs and the corresponding documentation under
Technical Settings Business Add Ins :
● BAdI: Determination of Accrual

● BAdI: Determination of Deferral
● BAdI: Release of Valuation Remnants
● BAdI: Determination of Credit Risk
● BAdI: Determination of Fair Value
● BAdI: Maturity Grouping
● BAdI: Determination of Risk and Prudence Adjustments
● BAdI: Determination of Margin for Regulatory Cost of Capital
● BAdI: Determination of Deferred Profit
Smart Accounting
1.11.6 Change of Legal Entity
You have the option of assigning a different legal entity to a contract. As a result, the balances are reclassified
using a reclassification account.
Unlike other master data changes, the change of legal entity is a special case because the accounting
processes are run at the granularity level of the legal entity. This means that the reclassification cannot take
place in the same process run.
You may need to change the legal entity in the following situations, for example (provided the old and the new
legal entity belong to the same parent company):
● You want to transfer individual contracts of a legal entity to another legal entity.
● You want to dissolve a legal entity and transfer all the contracts assigned to it to another legal entity
beforehand.
● You want to transfer selected contracts of a legal entity to a newly created legal entity.
Prerequisites
The system supports the change of legal entity on the current key date for financial transactions, insurance
contracts and securities accounts, and the registration of retroactive business transactions, master data
changes and analytical decisions after the change of legal entity.
You can change the legal entity of a contract if the following prerequisites are met for the both the old and the
new legal entity:
● The accounting systems for both legal entities are identical.

● The posting date of the master data change is in the same fiscal year for both legal entities and the
respective posting period is open.
 Restriction
There must be no postings in the future. This means that you cannot retroactively change the legal entity,
even if period-end processing has already run on the same day.
If you are using lot accounting to document securities positions in accounting, you cannot change the legal
entity for these positions.
Process
If you change the legal entity in a contract, the following activities are run in the system:
1. Register
The Register process step registers the master data change of the contract.
2. End-of-day processing (contract) with the old legal entity
Triggered by the master data change, the system executes all the steps of contract-related end-of-day
processing with the old legal entity to update the balances. The system then clears the balances in the
Classify process step using a reclassification account.
Smart Accounting
3. End-of-day processing (contract) with the new legal entity
In the next end-of-day processing run with the new legal entity, the Classify process step posts the
balances against a reclassification account to complete the reclassification to the new subledger coding
block. You can identify this process in the document by the process ID 5551 Classify (End of Day) for LE
Change.
 Note
If the new legal entity is assigned an accounting system that was not assigned to the old legal entity,
the system reclassifies only the balance on the subledger account Receivables/Payables (Not Due) for
the new accounting system. The other book value components are initialized during period-end
processing.
After the legal entity has been changed, the period-end closing process steps are run only for the new legal
entity.
Smart Accounting
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Smart Accounting
Important Disclaimers and Legal Information PUBLIC 263
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● Processes for Financial Instruments [page 47]

Smart Accounting for Financial Instruments and Insurance Contracts

Processes in Smart Accounting

Smart Accounting can be subdivided into the following processes:

Central GAAP and Delta GAAP Approach [page 25]

1.1 Accounting Process Model and Book Value Components

1.1.1 Financial Instruments

Dimensions of the Accounting Process Model

● Operational vs. analytical

Book value components

Unpaid Principal Balance Operational Dependent on the value date Event-driven

Accruals Operational Dependent on the value date Deterministic

Deferrals Analytical Dependent on the value date Deterministic

Write-Down (Nominal) Analytical Not dependent on the value Event-driven

Valuation Remnants Analytical Not dependent on the value Deterministic

Credit Risk Adjustment Analytical Not dependent on the value Stochastic

LCM Adjustment Analytical Not dependent on the value Stochastic

Fair Value Adjustment Analytical Not dependent on the value Stochastic

Write-Down Adjustment Analytical Not dependent on the value Stochastic

● Register [page 63]

Process Step Book Value Component

Register Unpaid Principal Balance (UPB)

Write Down Write-Down (Nominal)

Release Valuation Remnants

Value TC Credit Risk Adjustment

Interest Rate Risk Adjustment

Fair Value Adjustment

Processes for Financial Instruments [page 47]

1.1.1.1 Product Scope

Product Segment Impairment Own Credit Risk POCI

Cash balances at Expected cash One-year expected Lifetime expected

Imported target Customer-specific impairment calcula­

Deposits (credit Expected cash One-year expected Lifetime expected

Imported target Customer-specific impairment calcula­

Checking ac­ Expected cash One-year expected Lifetime expected

Imported target Customer-specific impairment calcula­

Derivatives (ETD) Expected cash One-year expected Lifetime expected

Imported target Customer-specific impairment calcula­

Derivatives (OTC) Expected cash One-year expected Lifetime expected

Imported target Customer-specific impairment calcula­

Equity instru­ Expected cash One-year expected Lifetime expected

Imported target Customer-specific impairment calcula­

Debt securities Expected cash One-year expected Lifetime expected

Imported target Customer-specific impairment calcula­

Debt securities Imported target

Imported target Customer-specific impairment calcula­

Financial guaran­ Expected cash One-year expected Lifetime expected

Imported target Customer-specific impairment calcula­

Master agree­ Expected cash One-year expected Lifetime expected

Imported target Customer-specific impairment calcula­

Product Segment Hedge Accounting

Cash balances at central banks

Deposits (credit institutions) Imported target value

Checking accounts Imported target value

Savings accounts Imported target value

Term deposits Imported target value

Derivatives (ETD) Imported target value

Derivatives (OTC) Imported target value

Equity instruments Imported target value

Debt securities Imported target value

Debt securities (issued) Imported target value

Loans and advances Imported target value

Imported target Customer-specific impairment calcula

Imported target Customer-specific impairment calcula

Checking ac Expected cash One-year expected Lifetime expected

Imported target Customer-specific impairment calcula

Imported target Customer-specific impairment calcula

Imported target Customer-specific impairment calcula

Equity instru Expected cash One-year expected Lifetime expected

Imported target Customer-specific impairment calcula

Imported target Customer-specific impairment calcula

Imported target Customer-specific impairment calcula

Financial guaran Expected cash One-year expected Lifetime expected

Imported target Customer-specific impairment calcula

Master agree Expected cash One-year expected Lifetime expected

Imported target Customer-specific impairment calcula

Equity instru FIFO LIFO HIFO LOFO

Loans and advan