3780472 - Amortization of Upfront Fees for Long-Term Loans in Treasury and Risk Management - SAP S/4HANA Cloud Public Edition

• When managing a long-term loan (borrowing transaction) in the Manage Financial Transactions app, there is a requirement to amortize an upfront fee (e.g., bank charge / processing fee) on a monthly basis. 

• How to configure the amortization of upfront fees so that the loan outstanding principal remains unchanged on the TRM side, while the liability is amortized over the contract term (e.g., 3 years) in Accounting.

• Whether the app Perform Valuation (TPM44) can be used for the amortization of this upfront fee.

SAP S/4HANA Cloud Public Edition

Step 1: Configure the Position Component Category

To ensure the upfront fee increases the carrying value (capitalized cost) of the position rather than reducing the principal, update the effects of the update type:

1. Open configuration activity Set Effects of Update Types on Position Components (SSCUI 102097).
2. Locate the target update type associated with the upfront fee flow type.
3. Change the Position Change Category (PCC) to 1011 - Post Cost to Purchase Value Component.

Step 2: Define Account Determination

To ensure the capitalized costs are posted to the correct position/liability account during the initial payment:

1. Open configuration activity Define Account Determination for Treasury and Risk Management (SSCUI 103014).
2. Define a Posting Specification for the target update type according to the following schema:
   
   

   Line	Posting Key	Account Symbol	Cat	Currency	Description
   Debit	40	1 — PC (Position)		Position Currency	Debit liability position (increases carrying value / capitalized cost)
   Credit	50	3 — Payment Currency		Payment Currency	Credit bank clearing account (cash paid)

3. Assign this Posting Specification to the target update type.

1. In SSCUI 102097 “Set Effects of Update Types on Position Components,” locate the target update type used for the upfront fee flow type and set the Position Change Category (PCC) to 1011 – Post Cost to Purchase Value Component.
2. In SSCUI 103014 “Define Account Determination for Treasury and Risk Management,” create a posting specification for the same target update type as follows:

• Debit: Posting key 40, Account Symbol 1 (Position/Liability), Category 1 — Position Currency.
• Credit: Posting key 50, Account Symbol 3 (Bank Clearing), Category 3 — Payment Currency.

1. Assign the posting specification to the target update type.
2. Use the configured update type/flow in the borrowing transaction so the upfront fee is capitalized and amortized through accounting while the loan position remains unchanged.
3. Do not use TPM44 for this scenario; it is not the standard way to realize upfront fee amortisation for long-term loans.

• refer to: Treasury interest rate instrument to manage long-term loan (Community)
• refer to: 3072643

upfront fee, amortization, long-term loan, borrowing, treasury and risk management, trm, manage financial transactions, bank charge, other flows, update type, pcc 1011, posting specification, sscui 102097, sscui 103014, tpm44 , KBA , FIN-FSCM-TRM-TM-2CL , Transaction Management (Public Cloud) , How To