What is present value in SAP FI-AF-SAI - Simplified Accounting Integration?

SAP Term: present value

• Component: FI-AF-SAI

• Component Name: Simplified Accounting Integration

• Description: The discounted value on a given date of a future payment or series of future payments. In the area of leasing, the present value calculation is used to determine the value of future payments on a specific key date. For example, a lessee must pay EUR 10,000 on December 31, 2019 and at the end of 2020. The lessee wants to know the net present value on January 1, 2015. Assuming a market interest rate of 5%, the present value of the payments can be calculated as follows: For the first payment due on December 31, 2019, the present value on January 1, 2015 is EUR 7,835.26. For the second payment due on December 31, 2020, the present value on January 1, 2015 is EUR 7,462.15. The total net present value valid on January 1, 2015 is EUR 15,297.41.

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• Key Concepts: 
  Present value is a concept used in SAP's FI-AF-SAI Simplified Accounting Integration module. It is a measure of the current value of a future payment or series of payments, discounted to reflect the time value of money. It is calculated by taking the future payment or series of payments and discounting it back to its present value using an appropriate discount rate. 
  
  How to use it: 
  In SAP's FI-AF-SAI Simplified Accounting Integration module, present value is used to calculate the current value of a future payment or series of payments. To calculate present value, you need to know the future payment or series of payments, as well as an appropriate discount rate. Once you have these two pieces of information, you can use the present value formula to calculate the current value of the future payment or series of payments. 
  
  Tips & Tricks: 
  When calculating present value in SAP's FI-AF-SAI Simplified Accounting Integration module, it is important to use an appropriate discount rate. The discount rate should reflect the risk associated with the future payment or series of payments, as well as any other factors that may affect its current value. 
  
  Related Information: 
  Present value is closely related to other concepts such as net present value and internal rate of return. These concepts are also used in SAP's FI-AF-SAI Simplified Accounting Integration module and can be used to evaluate investments and other financial decisions.