Practical input on the new currency forwards module in PORTMAN

As described in our newsletter, Vitec is introducing a new solution to handle currency forward contracts in PORTMAN version 7.12, which will be ready for client testing in October 2015.
All clients who have the currency forwards module must migrate to the new model when they upgrade to this or subsequent versions.
The purpose of this document is therefore to tell you about the effects the change will have in practice. It particularly concerns the tasks you can expect to have to prepare and carry out during client testing and commissioning, and how your future day-to-day work with currency forward contracts will be affected. This takes the form of a to-do list.

What functionality does the new solution contain?

The new module will include a number of changes to make the processing of currency forward contracts easier and more flexible, and to address some of the problems with the present model.
The changes may be summarised as:

  1. Extension of the module functionality for handling several types of life cycle events.
  2. Saving the transaction history for a currency forward contract regardless of the types of life cycle events involved.
  3. Possibility of using a public holidays calendar for master data for currency forwards.
  4. Expiry is now expressed in terms of both an expiry date and a settlement date, which, for example, solves the double exposure problem.
  5. The calculation of theoretical forward currency rates has now been gathered into one function, so that they are calculated uniformly throughout the system, which was not previously the case.
  6. Theoretical forward currency rates can now be calculated and registered via a function in the PORTMAN user interface.
  7. During the development process, minor shortcomings and faults have been identified and remedied.

Practical effects of the change

In connection with the installation of the new version of currency forward transactions, Vitec will convert existing deals, both 'living' deals (V1 transactions) and expired/settled deals (V2 transactions). A V2 transaction will be converted into a V1 transaction and a V2 transaction in the new format. The invoice no. from the V2 transaction will be copied over to the new transactions, with a 'K' in the first position in the new V1 transaction.

In the previous version, the forward rate was calculated when running e.g. a report if the module did not find the price in the table. In the new version of the currency forwards module, forward rates are calculated exclusively in batch programs and/or via a new menu option under Modules/Prices. The calculated forward rates are inserted into a table, and modules that use forward rates read them from this table. Forward rates for the table therefore have to be calculated after installation of the new version for the whole of the period for which you want to be able to calculate historical values for currency forward transactions, e.g. from 31/12/2012. This initialisation must be performed by users themselves. If you have stored forward rates in the table beforehand, you should opt not to overwrite these on initialisation if you want to obtain the same results in the historical reports as you get today.

Batch calculation of forward rates should also be set up so that calculated forward rates are added to the table each day. You, the client, are responsible for this. Vitec will send out a note in connection with client testing and operation of this version.
The solution still allows you to enter your own forward rates into the system – either via import or manually. You can specify in the batch run whether forward rates that already exist in the table should be overwritten or not. This means you can handle a mix of your own and calculated forward rates.
The changes to the processing of currency forward transactions will also involve changes to the import format. The new import format was sent out earlier.

To-do list

1.  In preparation for this coming version

  • Clients with Finance Link for currency forward transactions should ensure that all currency forward transactions have been posted.
  • Print report showing holdings/amounts, reported value and market value as at the end of the last month before the delivery date.
  • Clients running an import of currency forward transactions should check that their supplier is ready to switch to the new format, which was notified earlier.
  • Clients running an import of currency forward transactions should ensure that the new import format has been implemented by the supplier of the data.

2.  At the time of delivery

  • All recorded currency forward transactions will be automatically converted to the new record format.
  • Run the calculation of historical forward rates for the rates table as above, via the new menu option under Modules/Prices etc. If there are already forward rates in the table, these should be retained by opting to run without overwriting.
  • Check before/after holdings and amounts, reported values and market values against the report output under point 1.
  • Set up the calculation of forward rates for the rates table in batch with the desired parameters.

3.  Day-to-day operation af delivery

  • Daily automated run of the batch calculation of forward rates, and/or calculation of forward rates via new menu option under Modules/Prices etc.
  • For installations that post currency forward transactions via the Finance Link module: if a converted V2 transaction is deleted, all postings linked to the invoice-no for the transaction will be reversed, i.e. both postings for the original entry and the expiry.
  • New options for currency forward transactions available by right-clicking on the Transaction Summary:
    • Life cycle events: displays a window with details of the transactions linked to the same contract-no.
    • Roll over: facility to roll the residual amount into new transaction.
    • Settlement: option of Full, Partial or Ordinary settlement.

Based on our review of the functionality to support currency forward transactions in PORTMAN, Vitec cannot immediately see that the 'List of adjustments of currency forwards' function now has any purpose.
The function provides a specific overview of currency forward transactions in relation to Finance Link.
The function is there for information only and has no effect on calculations, postings or any other accounting functionality.
Vitec therefore plans to drop the function with the coming version, which introduces the new currency forwards module.

If you are using this function today, do please contact us.

Best regards, Michael Esbensen