How To Fix TPM_THXE1016 - Hedging rel. &1/&2: Retrospective test for bus. tran. &3 is not effective

SAP Error Message - Details

• Message type: E = Error

• Message class: TPM_THXE1 - message class for effectiveness test

• Message number: 016

• Message text: Hedging rel. &1/&2: Retrospective test for bus. tran. &3 is not effective

What causes this issue?

You want to calculate a prospective effectiveness test. This step in
Hedge Accounting is only allowed if the hedging relationship was always
tested as effective in the history before the test date in both test
types, prospective and retrospective effectiveness test.

System Response

The system issues an error message and will not allow you to continue with this transaction until the error is resolved.

How to fix this error?

Procedure for System Administrators

Error message extract from SAP system. Copyright SAP SE.

Smart SAP Assistant

• What is the cause and solution for SAP error message TPM_THXE1016 - Hedging rel. &1/&2: Retrospective test for bus. tran. &3 is not effective ?

  The SAP error message TPM_THXE1016 typically relates to the Treasury and Risk Management module, specifically in the context of hedging transactions. This error indicates that a retrospective effectiveness test for a business transaction is not effective, which means that the hedging relationship does not meet the required criteria for effectiveness as per accounting standards.
  Cause:
  
  Ineffective Hedging Relationship: The hedging relationship may not be effective due to changes in market conditions or the underlying asset's value.
  Data Entry Errors: Incorrect data entry in the hedging relationship or the underlying transaction can lead to this error.
  Configuration Issues: The configuration settings for the hedging relationship may not be set up correctly in the system.
  Timing Issues: The timing of the effectiveness test may not align with the reporting period or the transaction dates.
  
  Solution:
  
  Review Hedging Relationship: Check the hedging relationship settings and ensure that they are correctly defined. Verify that the underlying transaction and the hedging instrument are properly linked.
  Conduct Effectiveness Testing: Perform a detailed effectiveness test to determine if the hedging relationship meets the required criteria. This may involve recalculating the effectiveness based on current market data.
  Correct Data Entries: Review and correct any data entry errors related to the hedging relationship or the underlying transaction.
  Adjust Configuration: If necessary, adjust the configuration settings in the SAP system to ensure they align with the accounting standards and business requirements.
  Consult Documentation: Refer to SAP documentation or help resources for specific guidelines on how to perform effectiveness testing and resolve related issues.
  
  Related Information:
  
  SAP Notes: Check for any relevant SAP Notes that may address this specific error or provide additional guidance.
  Accounting Standards: Familiarize yourself with the accounting standards (such as IFRS or GAAP) that govern hedging relationships, as these standards dictate the effectiveness criteria.
  Training and Support: Consider seeking training or support from SAP consultants or your internal finance team to better understand the hedging process and effectiveness testing.
  
  If the issue persists after following these steps, it may be beneficial to engage with SAP support for further assistance.