PURPOSE
To show illustration of money market deposit with negative interest rate.
OVERVIEW
i. Deposit revalued to period end closing rate.
ii. Income are reported at average booking rate over the life of the deposit.
iii. Gain and loss arising from foreign exchange movement are analysed into revenue and capital component.
TRANSACTION DETAILS
| Accounting Base Ccy |
| Trade ID |
| Trade Date |
| Value Date |
| Maturity Date |
| Currency |
| Amount |
| Rate |
| Accrual Method |
| Total Interest |
| Maturity Amount |
| SGD |
| MMK1001 |
| 15-Jan-16 |
15-Jan-16 |
15-Feb-16 |
EUR |
| 1,000,000.00 |
-1.00% |
| Act/360 |
-861.11 |
999,138.89 |
SUMMARY OF JOURNALS
| ID | Date | Description |
|---|---|---|
| J1 | 15-Jan-16 | Money Market Deposit Start. |
| J2 | 31-Jan-16 | Money Market Month End Accruals. |
| J3 | 01-Feb-16 | Reversal Money Market Month End Accruals. |
| J4 | 15-Feb-16 | Money Market Deposit Maturity. |
J1 Money Market Deposit Start.
| TradeID | PostDate | B/P | Account | Ccy | Ccy Amt D/(CR) | Rate | Base | Base Amt D/(CR) | Line |
|---|---|---|---|---|---|---|---|---|---|
| MMK1001 | 15-Jan-16 | B | MMK - Deposit | EUR | 1,000,000.00 | 1.550000 | SGD | 1,550,000.00 | J1a |
| MMK1001 | 15-Jan-16 | B | Cash at Bank | EUR | -1,000,000.00 | 1.550000 | SGD | -1,550,000.00 | J1b |
Note J1a: The booking rate on 16-Jan-2016 is 1.550000. The rate is rounded to 6dp for display. Full precision is used in calculation.
J2 Money Market Month End Accruals.
| TradeID | PostDate | B/P | Account | Ccy | Ccy Amt D/(CR) | Rate | Base | Base Amt D/(CR) | Line |
|---|---|---|---|---|---|---|---|---|---|
| MMK1001 | 31-Jan-16 | B | MMK - Deposit - Interest Recv | EUR | -472.22 | 1.532700 | SGD | -723.77 | J2a |
| MMK1001 | 31-Jan-16 | P | MMK - Deposit Interest Income | EUR | 472.22 | 1.548982 | SGD | 731.46 | J2b |
| MMK1001 | 31-Jan-16 | P | FX - Unrealised Gains-Revenue | EUR | 0.00 | SGD | -7.69 | J2c | |
| MMK1001 | 31-Jan-16 | B | MMK - Deposit | EUR | 0.00 | SGD | -17,300.00 | J2d | |
| MMK1001 | 31-Jan-16 | P | FX - Unrealised Losses - Capital | EUR | 0.00 | SGD | 17,300.00 | J2e |
Note J2a: Calculation of Accrual in EUR
| Start date | 15-Jan-16 | |
| Month End Date | 31-Jan-16 | |
| Days (include 31-Jan) | 17 | =A |
| Start date | 15-Jan-16 | |
| Maturity Date | 15-Feb-16 | |
| Days (exclude 15-Feb) | 31 | =B |
| Total Interest | -861.11 | =C |
| Period Interest | -472.22 | =C*A/B |
Note J2b: The average multiplier rate between 15-Jan and 31-Jan is 1.548982. See Exchange Rates below. The rate is rounded to 6dp for display. Full precision is used in calculation.
Note J2c: The unrealised foreign exchange gain on interest income is analyzed as follows:
| EUR | Rate+ | SGD |
|
| At Closing Rate | -472.22 | 1.532700 | -723.77 |
| At Average Rate | -472.22 | 1.548982 | -731.46 |
| Gain in exchange | 7.69 |
+ Rates used for calculation are in full precision. Illustrated rates are rounded to 6dp.
Note J2e: The unrealised loss on the revaluation of the deposit is analyzed as follows:
| EUR | Rate+ | SGD |
|
| At Closing Rate | 1,000,000.00 | 1.532700 | 1,532,700.00 |
| At Start Rate | 1,000,000.00 | 1.550000 | 1,550,000.00 |
| Loss in exchange | -17,300.00 |
+ Rates used for calculation are in full precision. Illustrated rates are rounded to 6dp.
J3 Reversal Money Market Month End Accruals.
| TradeID | PostDate | B/P | Account | Ccy | Ccy Amt D/(CR) | Rate | Base | Base Amt D/(CR) | Line |
|---|---|---|---|---|---|---|---|---|---|
| MMK1001 | 01-Feb-16 | B | MMK - Deposit - Interest Recv | EUR | 472.22 | 1.532700 | SGD | 723.77 | J3a |
| MMK1001 | 01-Feb-16 | P | MMK - Deposit Interest Income | EUR | -472.22 | 1.548982 | SGD | -731.46 | J3b |
| MMK1001 | 01-Feb-16 | P | FX - Unrealised Gains-Revenue | EUR | 0.00 | SGD | 7.69 | J3c | |
| MMK1001 | 01-Feb-16 | B | MMK - Deposit | EUR | 0.00 | SGD | 17,300.00 | J3d | |
| MMK1001 | 01-Feb-16 | P | FX - Unrealised Losses - Capital | EUR | 0.00 | SGD | -17,300.00 | J3e |
J4 Money Market Deposit Maturity.
| TradeID | PostDate | B/P | Account | Ccy | Ccy Amt D/(CR) | Rate | Base | Base Amt D/(CR) | Line |
|---|---|---|---|---|---|---|---|---|---|
| MMK1001 | 15-Feb-16 | P | MMK - Deposit Interest Income | EUR | 861.11 | 1.541629 | SGD | 1,327.51 | J4a |
| MMK1001 | 15-Feb-16 | B | MMK - Deposit | EUR | -1,000,000.00 | 1.550000 | SGD | -1,550,000.00 | J4b |
| MMK1001 | 15-Feb-16 | B | Cash at Bank | EUR | 999,138.89 | 1.537890 | SGD | 1,536,565.71 | J4c |
| MMK1001 | 15-Feb-16 | P | FX - Realised Gains-Revenue | EUR | 0.00 | SGD | -3.22 | J4d | |
| MMK1001 | 15-Feb-16 | P | FX - Realised Losses - Capital | EUR | 0.00 | SGD | 12,110.00 | J4e |
Note J4a: The average multiplier rate between 15-Jan to 15-Feb is 1.541629. See Exchange Rates below. Note that the last day of the deposit is not included. The rate is rounded to 6dp for display. Full precision is used in calculation.
Note J4d: The realised foreign exchange gain on interest income is analyzed as follows:
| EUR | Rate+ | SGD |
|
| At Closing Rate | -861.11 | 1.537890 | -1,324.29 |
| At Average Rate | -861.11 | 1.541629 | -1,327.51 |
| Gain in exchange | 3.22 |
+ Rates used for calculation are in full precision. Illustrated rates are rounded to 6dp.
Note J4e: The realised loss on the deposit is analyzed as follows:
| EUR | Rate+ | SGD |
|
| At Closing Rate | 1,000,000.00 | 1.537890 | 1,537,890.00 |
| At Start Rate | 1,000,000.00 | 1.550000 | 1,550,000.00 |
| Loss in exchange | -12,110.00 |
+ Rates used for calculation are in full precision. Illustrated rates are rounded to 6dp.
EXCHANGE RATES
Our illustration assumes the company uses different daily exchange rates for accounting.
Average rates are computed by using the multiplier rate from trade/transaction currency to the base currency each day and averaging this over the relevant period.
The following rates were used for this illustration.
Spot rate
| Date | EUR/SGD |
| 15-Jan-16 | 1.550000 |
| 31-Jan-16 | 1.532700 |
| 15-Feb-16 | 1.537890 |
Average
| From Date | To Date | EUR/SGD |
| 15-Jan-16 | 31-Jan-16 | 1.548982 |
| 15-Jan-16 | 15-Feb-16 | 1.541629 |
* round to 6 dp. Full precision used for calculation of average rates
FREQUENTLY ASKED QUESTIONS
RELATED INFORMATION
CHANGE HISTORY
| Date | By | Changes |
|---|---|---|
| 27-Jun-2017 | TS | Creation. |
| 07-May-2020 | LT | Re-formatting. |
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