The purpose is to update bookkeeping for the month being closed such that the P&L (PLR) and Inventory Balance (BAL) reflect the trading records of the month-end database (FREEZE).

Principles

Title transfer date is when the goods move from forward to inventory (title passed from Supplier to Operating Company) and realised (title passed from Operating Company to Customer). Bill of Lading (BL) or variations by Inco code is a good indicator of when title transfer actually occurs. However Operations are not consistent in entering this data, the trigger for EOMPOW is TRADE/Title Transfer Date.

1^st/main Purchase invoice date; automatically fills the ‘Title transfer Date’ on the purchase contract – thus moving contract split from the forward book to inventory

1^st/main Sale invoice date; automatically fills the ‘Title Transfer Date’ on the sale contract and the ‘Sale Title Transfer Date’ on the purchase and the sale – thus moving the purchase from inventory to realised and moving the sale from the forward book to realised

The advantage of using Title Transfer Date instead of invoice date is that the Management Accounts team are able to manipulate this field as part of their end of month corrections of the data and thus the postings and reports.

Notes

i)  Title transfer date of P and S is independent.  The TT date of the purchase does not copy to the TT field of the sales contract.

ii) If a contract is allocated to an internal cross the title transfer date of the internal cross will default to the title transfer date of the sale.  i.e. P has its own TT date, The S, IP & IS all have the Sale TT date. So when the sales invoice is raised and the sale is allocated to an IP then the TT date needs to be copied from the sale to the IP and to the IS (same as invoice marking).

Infrastructure Setup

Recognition of Title Transfer is controlled in S01 (ctrl02_titletransfer) by either presence of BL date, presence of Invoice Date or strictly manual entry.

There are a number of General Ledger (NOM) accounts needed for output of accounting records, which are nominated in

S01..View...Accrual Nominations. In addition to these, expense codes are nominated in Tab 2 of EXP/Right Click... Maintain Control Expense Codes.

1) S01 nominated WIP account to transact accounting entriies where the contract is not assigned to a WIP e.g. title transferred but no Wip yet (ctrl02_acexwip)

2) S01 nominated accounts for payable and receivable costs for ‘Accrue Executed Physicals’ (ctrl02_acexcopay, ctrl02_acexcorec)

3) S01 nominated accounts for ‘Costs Accrual of non executed Physicals (blank TT date)’

Payable (ctrl02_mtmpaycosbs) and receivable (ctrl02_mtmreccosbs)

4) S01 nominated account for ‘Unposted broker side F&O comsn (BS). (ctrl02_fwdcomsn)

5) Physcodes/Cost Types ‘Not in PL’ column to be maintained

6) Physcodes/Cost Types  ‘In Stk Value’ column to be maintained

7) Dept ‘Unrealised Phys’ column to be maintained (cmy102_nafwdphys)

8) Dept nominate account ‘Forward Commissions’ (cmy102_fwdcomsn)

Overview of the Process

Step	Description
1	FREEZE and close month for operations (MEPACT)
2	‘Top up’ uninvoiced aspects of all executed trades i.e. accrue everything which is not invoiced on splits with a title transfer date
3	Reverse invoiced items (costs) on non-executed trades.
4	Transfer inventory value out of P&L into the inventory account in the balance sheet
5	M2M of forward physicals
6	M2M of inventory
7	Accrue costs value of  forward physicals
8	M2M on unsettled future
9	Review results and make changes as required in TRADEV; mainly in the area of title transfer date. Use option to select specific contracts and reverse existing EOM postings and re-post according to TRADEV values.

EOM Postings Procedure in Detail

Note, any accounts mentioned below starting with ‘ctrl02_’ are accounts nominated in S01.

expense codes starting with ctrl06_ are nominated expense codes in EXP.

Accrue Executed Physicals.

Includes contract splits with title transfer date. Accrues uninvoiced parts of contract value, costs and commission.

It will post USD equivalent values converted at the Title transfer date.

The P&L side will post the individual amounts to the contract’s WIP A/c using linked expense code as per invoicing. If no WIP it will post to ctrl02_acexwip

The balance sheet postings will be consolidated by Dept and payable/receivable i.e. each individual item will be accumulated by dept and account: The accounts are purchases, sales, payable costs and receivable costs. Intercompany trades will  book directly to the client account (phys01_counterparty) i.e. not NOM.

If the contract is assigned to a WIP account that is closed or frozen it will be ignored. If a cost is ticked as ‘no act’ in TRADE it is ignored.

Balance sheet accounts are: ctrl02_acrealisedpay (purchase), ctrl02_acrealisedrec (sale), ctrl02_acexcopay (payable costs - new) and ctrl02_acexcorec (receivable costs - new)

Balance sheet expense code is ctrl06_accrualcosts

Reverse invoices of Non-executed Physicals

Drives from invoice marking on contracts and costs which have been invoiced where the contract has a blank TT Date

It will post USD equivalent values converted at the invoice date rate.

The P&L side will post the individual amounts to the contract’s WIP A/c using linked expense code as per invoicing.

The balance sheet postings will be consolidated by Dept and payable/receivable

Balance sheet accounts are: ctrl02_acrealisedpay, ctrl02_acrealisedrec, ctrl02_acexcopay and ctrl02_acexcorec

Balance sheet expense code is ctrl06_accrualcosts

Inventory Balance Adjustment

Inventory is defined as purchases with a title transfer date and a blank sale title transfer date.

The inventory value is the contract value plus any costs classified in ‘In Stk Value’, converted to USD at the title transfer date rate.

The P&L side will post the individual amounts per contract split out of the contract’s WIP Account or ctrl02_acexwip if WIP account is blank

The Balance sheet postings will be consolidated by dept.

The balance sheet account is ctrl02_invacc

The expense code is ctrl06_m2minvadj

M2M of Non-executed Physicals

Includes contract splits with a blank title transfer date. The M2M will be contract value vs market value including Pol, but not including costs nor commission and converted to USD at the month end rate.

The P&L side will post the individual amounts per contract split to the contract dept’s nominated Unrealised Physicals A/c (ctrl02_nafwdphys)

Each contract’s P&L (i.e. per 6 digits, not per split) will be evaluated as an overall profit or loss and posted to he nominated B/S account. Note Group contracts (whose c/party is a group client) will post to their own 2 B/S accounts. Non group BS accounts are ctrl02_namtmlossesphys & ctrl02_namtmgainsphys. Group BS accounts are ctrl02_mtmintercogainsbs &  ctrl02_mtmintercolossesbs.

Internal cross contracts to post to their own nominated BS account (ctrl02_mtmintbs)

The balance sheet postings will be consolidated by Dept and account

The expense code is ctrl06_m2mphys

Inventory M2M

Includes purchase contract splits with a title transfer date and a blank sales title transfer date. The M2M will be contract value vs market value including Pol, comsn and all costs which are not ticked as ‘not in pl’ (e.g. freight and dem will be excluded) and converted to USD at the month end rate. The P&L side will post the individual amounts per contract split to the contract’s WIP  account or ctrl02_acexwip if WIP account is blank

The balance sheet postings will be consolidated by Dept and posted to ctrl02_namtminventory.

The expense code is ctrl06_m2minv.

Costs Accrual of non executed Physicals (blank TT date)

As the costs are not included in the M2M of non executed Physicals, they are accrued in their own routine. It includes all costs on non executed Physicals (blank TT Date) which are flagged as ‘Inc PL’ in TRADE and are not ticked as ‘Not in PL’ in  Physcodes/Cost Types. The costs will be converted to USD at the month end rate.

The posting accounts will be two new nominated BS accounts payables and receivables (ctrl02_mtmpaycosbs and ctrl02_mtmreccosbs). The expense code will be as linked to the cost code.

M2M Open Futures & Options

1) M2M of unsettled F&O of the client side trades converted to USD at the month end rate. This is the P&L side and will post to nominated account per dept (cmy102_nafwdfuts) – no segregation of futures and options. 

2) Unposted commission of the client side trades converted to USD at the month end rate. This will post to a nominated account per dept (cmyl02_fwdcomsn – new dept nomination)  – no segregation of futures and options. 

3) M2M of unsettled F&O of the broker side converted to USD at the month end rate. This is the BS side – each trade is a gain or loss and is accumulated as gain/loss and broker.  Accounts are ctrl02_mtmgainsfut & ctrl02_mtmlossesfut - no segregation of futures and options. Each posting will show the broker in the narrative.

4) Unposted commission of the broker side converted to USD at the month end rate. This is the post to a nominated BS Account (ctrl02_fwdcomsn). The commission will be accumulated per broker. No segregation of futures and options. Each posting will show the broker in the narrative.

5) Any difference will post to the timing suspense account to balance what has been posted already.

6) Internal crosses will be included in 1.

M2M Open FX (Fair value adjustments)

Will calculate the Variation margin (TOPEN) and aggregate per broker and currency pair.

When a Gain:

credits MTM gain – Currency futures forward

debits derivative assets – Forex

When a Loss (i.e. excess of inventory at cost over market value) it:

debits MTM loss – Currency futures forward

credits derivative liabilities – Forex

Re-Post Specific Contracts

The TAs will be created and posted quickly using the above procedures. Then the results will be evaluated and some modifications made to contracts in TRADEV; the principle one being the manipulation of title transfer date to re-categorise contracts between forward, inventory and realised.

Instead of reversing the large TA’s created so far, you can specify  the individual contracts and the program will reverse the existing postings for the contract and re-post according the status in TRADEV.  Note, if the TRADEV adjustments involve splitting, both the parent and child will need to be included in the Re-Post entry.

This procedure will mark the WIP postings so they’re not reversed again if the contract is re-posted again. It will also secure the adjusting TAs docrefs (on the eop01) so they can be reversed if the contract is re-posted again and reversed if the whole run is reversed on the View. Document References screen.