Table of Contents
Preparing your FX Transaction(s)
Building the Accounting Setup
Setting Up the Amortizing Scheduled Journal Entries
Introduction
The following guide walks through how to set up FX forwards in ChathamDirect with a "Fair Value" designation, where you will split out the forward point value of your transaction. The guide will demonstrate how to amortize that value to build a set of journal entries which can be loaded into the system, set up for scheduled for release throughout the life of the trade.
Preparing your FX transaction(s):
- You will first need to execute your transactions and get them loaded into ChathamDirect. The trades can be sent in from an FX trading platform, manually created, loaded via an Excel file or through an API connection to ChathamDirect.
Building the Accounting Setup
- Once loaded, if you have not yet applied the necessary Accounting Strategy to your trade(s) which will separate forward points, then you will need to complete that step next. The following link has instructions for how to complete this step:
https://chathamdirect.freshdesk.com/en/support/solutions/articles/69000778635 - Once your transaction(s) set up is complete, you can then run a Valuation Report to pull out the trade economics. Using that data, you will need to:
- Calculate the forward point value.
- Calculate the number of days to amortize.
- Calculate the daily amortization amount.
Setting up the Amortizing Scheduled Journal Entries
- Next you will need to create an Amortization Schedule using Excel, or an equivalent software, which can be loaded into ChathamDirect. The system needs the schedule split into Date and Amount to Amortize:
- Amortization Start Date = Trade Date
- Amortization End Date = Maturity Date
- Period Ends to be added in based on reporting frequency
- Once the Amortization Schedule has been calculated in Excel, log back into ChathamDirect.
- In ChathamDirect, navigate to Accounting > Accounting Dashboard and search in the top right corner for the trade needing the amortization entries loaded.
- Check the box on the left to select the trade then click Take Action > Create Reclass/Amortization Schedule:
- Once in the Reclass/Amortization Schedule Builder, populate the following data points:
- Set Entry Type = Amortization
- Debit and Credit Accounts will be determined by the value of forward points.
- Other Income/Expense - Excluded Components (I/S)
- FX Interest Differential (I/S)
- Type = Custom
- Add in your schedule created in Excel in the format “date amount.”
- Note: The amount needs to be submitted as an absolute value, so the debit and credit accounts are utilized as expected.
- Once the schedule is loaded, a preview will be displayed in the right-hand side of the display. Please review prior to clicking submit.
Once the data has been submitted you will see a message indicating the information was saved successfully.
You can now repeat the process as needed for each trade. If you experience any issues with the procedures or if there are any questions, please reach out to your Chatham representative.