Money Market – Deposit – Negative Interest Rate

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

IDDateDescription
J115-Jan-16Money Market Deposit Start.
J231-Jan-16Money Market Month End Accruals.
J301-Feb-16Reversal Money Market Month End Accruals.
J415-Feb-16Money Market Deposit Maturity.

J1                          Money Market Deposit Start.

TradeIDPostDateB/PAccountCcyCcy Amt D/(CR)RateBaseBase Amt D/(CR)Line
MMK100115-Jan-16BMMK - DepositEUR1,000,000.001.550000SGD1,550,000.00J1a
MMK100115-Jan-16BCash at BankEUR-1,000,000.001.550000SGD-1,550,000.00J1b

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.

TradeIDPostDateB/PAccountCcyCcy Amt D/(CR)RateBaseBase Amt D/(CR)Line
MMK100131-Jan-16BMMK - Deposit - Interest RecvEUR-472.221.532700SGD-723.77J2a
MMK100131-Jan-16PMMK - Deposit Interest IncomeEUR472.221.548982SGD731.46J2b
MMK100131-Jan-16PFX - Unrealised Gains-RevenueEUR0.00SGD-7.69J2c
MMK100131-Jan-16BMMK - DepositEUR0.00SGD-17,300.00J2d
MMK100131-Jan-16PFX - Unrealised Losses - CapitalEUR0.00SGD17,300.00J2e

Note J2a:          Calculation of Accrual in EUR

Start date15-Jan-16
Month End Date31-Jan-16
Days (include 31-Jan)17=A
Start date15-Jan-16
Maturity Date15-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:

EURRate+
SGD
At Closing Rate-472.221.532700
-723.77
At Average Rate-472.221.548982
-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:

EURRate+
SGD
At Closing Rate1,000,000.001.532700
1,532,700.00
At Start Rate1,000,000.001.550000
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.

TradeIDPostDateB/PAccountCcyCcy Amt D/(CR)RateBaseBase Amt D/(CR)Line
MMK100101-Feb-16BMMK - Deposit - Interest RecvEUR472.221.532700SGD723.77J3a
MMK100101-Feb-16PMMK - Deposit Interest IncomeEUR-472.221.548982SGD-731.46J3b
MMK100101-Feb-16PFX - Unrealised Gains-RevenueEUR0.00SGD7.69J3c
MMK100101-Feb-16BMMK - DepositEUR0.00SGD17,300.00J3d
MMK100101-Feb-16PFX - Unrealised Losses - CapitalEUR0.00SGD-17,300.00J3e

J4                          Money Market Deposit Maturity.

TradeIDPostDateB/PAccountCcyCcy Amt D/(CR)RateBaseBase Amt D/(CR)Line
MMK100115-Feb-16PMMK - Deposit Interest IncomeEUR861.111.541629SGD1,327.51J4a
MMK100115-Feb-16BMMK - DepositEUR-1,000,000.001.550000SGD-1,550,000.00J4b
MMK100115-Feb-16BCash at BankEUR999,138.891.537890SGD1,536,565.71J4c
MMK100115-Feb-16PFX - Realised Gains-RevenueEUR0.00SGD-3.22J4d
MMK100115-Feb-16PFX - Realised Losses - CapitalEUR0.00SGD12,110.00J4e

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:

EURRate+
SGD
At Closing Rate-861.111.537890
-1,324.29
At Average Rate-861.111.541629
-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:

EURRate+
SGD
At Closing Rate1,000,000.001.537890
1,537,890.00
At Start Rate1,000,000.001.550000
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

DateEUR/SGD
15-Jan-161.550000
31-Jan-161.532700
15-Feb-161.537890

Average

From DateTo DateEUR/SGD
15-Jan-1631-Jan-161.548982
15-Jan-1615-Feb-161.541629

* round to 6 dp. Full precision used for calculation of average rates

FREQUENTLY ASKED QUESTIONS

RELATED INFORMATION

CHANGE HISTORY

DateByChanges
27-Jun-2017TSCreation.
07-May-2020LTRe-formatting.
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