Manage Exposure Hedging - Hedge Accounting
Application component: Transaction Manager
App type: SAP GUI
Description: In hedging relationships, hedged items (created for exposures that have arisen from your underlying transactions) are assigned to hedging instruments (deployed to hedge the risks of the hedged item).  Within Hedge Accounting for Exposures, the hedging relationships are created and managed in a hedge plan.  
Key features: You manage your hedging relationships in a hedge plan (transaction THMEX)  You use the function Effectiveness Test (transaction THM80) to perform prospective and retrospective effectiveness assessments as well as effectiveness valuations. A hedging relationship becomes effective when the change in value of the derivative is connected to a significant extent to the change in value of the hedged exposure. A prospective effectiveness assessment is used to determine whether a hedging relationship can be assumed to be effective over a period in the future. You can perform a prospective effectiveness assessment by performing an effectiveness valuation with a market data scenario. You can perform the effectiveness assessment using different calculation methods. Which calculation method is used is dictated by the underlying hedge category (Cash Flow Hedge, Fair Value Hedge, and Net Investment in Foreign Subsidary) as well as by the product category of the hedging instrument. Note However, you can also perform the prospective effectiveness assessment in an external system and then import it. See also:Transferring Prospective Effectiveness Assessments  A retrospective effectiveness assessment determines the effectiveness of a hedging relationship for a period in the past. You can perform the effectiveness assessment using different calculation methods. Which calculation method is used is dictated by the underlying hedge category (Cash Flow Hedge, Fair Value Hedge, and Net Investment in Foreign Subsidary) as well as by the product category of the hedging instrument.  Effectiveness valuation valuates the derivative and the exposure both at the start and at the end of the valuation period and then divides the valuation difference of the derivative in a designated part and a freestanding part. The designated part is compared against the valuation difference of the exposure (or against the valuation difference of that part of the exposure that is allotted to the derivative). If the designated part exceeds the valuation difference, this part is deemed ineffective and the remaining part is deemed effective. With the valuation (transaction TPM1), it is possible to post these parts differently; typically, the effective part is posted to other comprehensive income (OCI), and the other parts are posted in the P&L.   With the valuation of financial transactions using key date valuation (transaction TPM1), the valuation recognizes the involvement of the transactions in hedging relationships and performs valuation in accordance with the rules for Hedge Accounting. For the valuation key date, key date valuation automatically performs a retrospective effectiveness assessment to establish whether the hedging relationship has proved to be effective in the past period. If the retrospective effectiveness assessment deems the hedging relationship to be effective, key date valuation performs the prospective effectiveness assessment as the next step of the effectiveness test. If the prospective effectiveness assessment also deems it to be effective, an effectiveness valuation is performed and posted.  If the retrospective effectiveness assessment deems the hedging relationship to be ineffective, you need to dissolve the hedging relationship. See also:Dissolve Ineffective Hedging Relationships   You can also print the documentation of hedging relationships (transaction THM86).   
Business roles: Treasury Accountant
Treasury Accountant : 
Makes postings in accounting to reflect treasury activities.

Treasury Risk Manager : 
Manages all the company's treasury activities. Uses evaluation reports to ensure that the various strategies defined for trading, market risk management, limit management, and cash management have been observed.