How ALMAN assists in doing Fair Value Calculations (IFRS 7)

Future cash flows of all instruments are “present valued” at a rate determined by a yield curve.

For a product with an indeterminate maturity date (such as savings accounts), the future flows are not considered. Instead, the product’s capital (face value) is taken as the fair value.

Fair value calculations in ALMAN are very much influence by the type of interest calculation that is set by the user. The setting of fair value calculations in ALMAN is based on the selection of the mark-to market calculation:

Instrument Types

Within ALMAN the following instrument types are specifically influences by this of type calculation being:

This allows one to see clearly the impact of a movement in the interest rates in generating a profit or loss - not to be confused with the time value of money. The variable profit or loss due to a rate change can be specifically allocated to the reserves in the balance sheet for financial instruments that is available for sale.

•	YTM products (e.g. Bonds)
•	Discount products (e.g. Treasury Bills)
•	Certificates of Deposits (instruments where interest is payable at the end of the term)

•	YTM
•	Capital at previous market rate
•	Profit/Loss due to rate change
•	Interest
•	Accrued interest
•	Amortization
•	Fair value

Accounting entries

ALMAN creates all the values required to ensure that the correct entries are created via defined rules of the financial reports.

Example

Government Bond:

Download Full Brochure