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R12: CE: Interest Rate Swap (IRS) Payment And Receiving Dates Schedule Are Wrong, Etc (Doc ID 811153.1)

Last updated on JULY 10, 2020

Applies to:

Oracle Treasury - Version to 12.1.3 [Release 11.5 to 12.1]
Information in this document applies to any platform.
This problem can occur on any platform.


Scenario 1:

Enter Interest Rate Swaps (IRS) - rollover frequency is 3 months on both fixed (payment) and floating (receiving) schedule. Fixed / Floating periods start date is 09/29/05 and maturing 11/05/15. For the first period, the schedule requires an end date of 11/05/05. The first period is therefore, a short period. The first interest date was adjusted to reflect this date.
Upon reviewing the paying and receiving details tables, find that rather than 90 days calculation for all payments and receipts, the system calculated interest for 114 days on the paying details schedule,
and 111 days on the receiving details schedule for the 3rd period.

Steps to Reproduce:
Responsibility name: Treasury , Cash Management SuperUser
Navigation: Money Market Transactions >> Derivatives >> Interest Rate Swaps
1) Enter Swap information in the main page
2) Click on Swap details
3) Populate the Paying details and Receiving details forms as required
4) click on the Paying Details button to see the payment schedule with corresponding amounts
5) Click on the Receiving details button to see the Receiving details schedule.
6) Review both schedules for details


Scenario 2: Cross Currency Swaps (IRS) Initial Value Not Zero
1. Problem Description*When entering into cross currency swaps, at origination time the value of the swap equals zero and the present value of the two (expected) cash flows from both legs or streams equal each. Accounting generated for the two legs at the begining of the deal should also reflect this mentioned fact. However, when the rate by which the foreign exchange currency leg is converted to local currency (Cross Currency Rate), it’s not the same as the rate by which accountring entries are generated (corporate rate type) for both legs of the swap (in functional currency), accounting initial amounts do not net each other and therefore the swap initial value is not zero.

2. an example:
Date Type: Dealt Amount type Initial Action Code Incrse:
Invest Leg: USD 52.631.578.95
Fund Leg: CLP (Chilean Pesos)
Cross Currency Rate: 475
Start Date: 12-DEC-2012
Maturity Date: 12-MAR-2013
Swap Interest Rate USD: 0.9%
Swap Interest Rate CLP: 6%
Accounting Rate: 474.78
Initial Accounting Value - Invest leg : 24.988.421.054
Initial Accounting Value - Fund leg :
Differece: 11.578.946

This deal was entered using Interest Rate Swap (IRS) functionality since it swaps interest cashflows until maturity at each currency (considering different interest rates for each currency) and prinicipal swap at maturity date.

3. This initial value difference between two legs of a currency or interest rate swap, where one currency is the local currency and the other is a foreign exchange currency, is produced by the fact that foreign exchange leg is converted when creating journal entries (using gl rates) to an initial value (in functional currency) different than the local currency leg initial value (which is also derived from the foreign exchange amount but at a negotiated rate with the deal counterparty).

Can this initial difference be treated in any way when setting IRS JEA.




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