Book Description
The financial crisis that started in mid2007 resulted in the accounting standard setters and market regulators across the globe to come up with several proposals to modify the accounting standards. Accounting for Investments, Volume 2: Fixed Income and Interest Rate Derivatives covers the revised standards that are already pronounced and covers the proposals that are currently being reviewed. The book begins with the basics for the financial products covered, defining the product, the way it is structured, its advantages and disadvantages, and the different events in the trade life cycle. It then gives an exhaustive treatment of various accounting entries that should be recorded by any entity holding investments in the form of fixed income securities and interest rate derivatives.
Table of Contents
 Cover
 Title
 Copyright
 Dedication
 Contents
 Foreword
 Introduction
 Preface
 Acknowledgments
 Chapter 1: Fixed Income Securities—Theory

Chapter 2: Fixed Income Securities—Fair Value through Profit or Loss
 Learning Objectives
 Meaning and Definition of Fixed Income Securities
 Classification of Debt Securities as “Fair Value through Profit or Loss”
 Accounting for Fixed Income Securities
 Trade Life Cycle for Fixed Income Securities—Fair Value through Profit or Loss
 Corporate Action
 Additional Events in the Trade Life Cycle
 Complete Solution to the Illustration
 FX Revaluation and FX Translation Process
 Distinction between Capital Gain and Currency Gain
 Illustration 1: Investment in Bonds held for Trading Purposes
 Solution to Illustration 1: Investment in Bonds held for Trading Purposes
 Problem 1: Investment in Bonds (Trading) in Foreign Currency (AUD)
 Accounting Entries in Functional Currency
 Summary
 Questions

Chapter 3: Fixed Income Securities—AvailableforSale
 Learning Objectives
 Basic Understanding of AvailableforSale (AFS)
 Accounting for Fixed Income Securities Classified as AvailableforSale
 Option to Designate a Financial Asset at Fair Value through Profit or Loss
 Accounting for Fixed Income Securities
 Trade Life Cycle for Fixed Income Securities—AvailableforSale
 FX Translation on AvailableforSale Securities
 Impairment of AvailableforSale Fixed Income Securities
 Bonds Classified as AvailableforSale—Complete Solution to the Illustration
 Problem 1—Bonds Held as AvailableforSale in USD
 FX Revaluation and FX Translation process
 Accounting Entries in Functional Currency—USD
 Summary
 Questions

Chapter 4: Fixed Income Securities—HeldtoMaturity
 Learning Objectives
 Meaning of Securities Classified as HeldtoMaturity (HTM)
 Exceptions to the Rule for Classification as HeldtoMaturity
 Effective Interest Rate
 Accounting for Securities Classified as HeldtoMaturity
 Trade Life Cycle for Fixed Income Securities—HeldtoMaturity
 Illustration of Bonds HeldtoMaturity—Complete Solution
 Problem—2: Bonds Held as HeldtoMaturity in BRL (Foreign Currency)
 Solution to Problem—2: Bonds Held as HeldtoMaturity in BRL (Foreign Currency)
 Accounting Entries in Functional Currency—Problem 2—USD
 Summary
 Questions

Chapter 5: Presentation, Disclosures & Reclassification
 Learning Objectives
 Relevant Accounting Standards
 General Disclosure as per IFRS 7
 A. Significance of Financial Instruments for Financial Position and Performance
 Statement of Comprehensive Income
 Other Disclosures
 B. Qualitative Disclosures
 C. Quantitative Disclosures
 Amendments to IAS 39 & IFRS 7 (October 2008)
 Reclassification as per IFRS 9
 Presentation of Financial Instruments
 Summary
 Exercise

Chapter 6: Interest Rate Derivatives—Theory
 Learning Objectives
 Derivatives in a Financial Instrument
 Definition of Derivatives as per Accounting Standards
 Accounting Standards for Interest Rate Derivatives
 Differences between US GAAP and IFRS
 OvertheCounter Contracts
 ExchangeTraded Derivative Contracts
 Benefits of Interest Rate Derivatives
 International Swaps and Derivatives Association (ISDA)
 Types of Interest Rate Derivatives
 Hedged or Hedging Instrument—Status of Various Financial Instruments
 Summary
 Exercise

Chapter 7: Interest Rate Swaps—Receive Fixed Pay Floating
 Learning Objectives
 Meaning of Interest Rate Swap
 Definition of a Derivative
 Accounting for Interest Rate Swaps
 The Trade Life Cycle for Interest Rate Swaps
 Receive Fixed & Pay Floating—Illustration 1
 Complete Solution to Illustration 1: Interest Rate Swap—Receive Fixed Pay Floating
 Problem1: Interest Rate Swap—Receive Fixed Pay Floating
 Solution to Problem 1: Interest Rate Swap—Receive Fixed Pay Floating
 Summary
 Questions

Chapter 8: Interest Rate Swaps—Pay Fixed Receive Floating
 Learning Objectives
 Meaning of Receive Floating and Pay Fixed Type of Interest Rate Swap
 Accounting Standards
 The Trade Life Cycle for Interest Rate Swaps
 Pay Fixed and Receive Floating—Illustration 1
 Complete Solution to Illustration 1: Interest Rate Swap—Receive Floating Pay Fixed
 Pay Fixed to Receive Floating—USD
 Solution
 Summary
 Questions

Chapter 9: Interest Rate Caps
 Learning Objectives
 Interest Rate Caps—Description of the Product
 Accounting for interest rate caps
 The Trade Life Cycle for Interest Rate Caps
 Interest Rate Cap Instrument—An Illustration
 Complete Solution to the Illustration—Interest Rate Cap
 Problem 1: Interest Rate Cap—Pay
 Solution to Problem 1: Interest Rate Cap—Pay
 Problem 2: Interest Rate Cap—Pay
 Solution to Problem 2: Interest Rate Cap—Pay
 Accounting Entries in Functional Currency
 Problem 3: Interest Rate Cap—Receive
 Solution to Problem 3: Interest Rate Cap—Receive
 Problem 4: Interest Rate Cap—Receive
 Solution to Problem 4: Interest Rate Cap—Receive
 Problem 5: Interest Rate Cap—Receive
 Solution to Problem 5: Interest Rate Cap—Receive
 Accounting Entries in Functional Currency
 Summary
 Questions

Chapter 10: Interest Rate Floors
 Learning Objectives
 Interest Rate Floors—Description of the Product
 Accounting for Interest Rate Floors
 The Trade Life Cycle for Interest Rate Floors
 Interest Rate Floor Instrument—An Illustration
 Complete Solution to Illustration
 Problem 1: Interest Rate Floor—Sale of Floor Instrument
 Solution to Problem 1: Interest Rate Floor
 Problem 2: Interest Rate Floor
 Solution to Problem 2: Interest Rate Floor
 Journal Entries in Functional Currency Problem 2: Interest Rate Floor
 Illustration: IRD Floor—Receive
 Comprehensive Solution to Illustration
 Problem 1: Interest Rate Floor (Receive)
 Solution to Problem 1: Interest Rate Floor (Receive)
 Problem 2: Interest Rate Floor (Receive)
 Solution to Problem 2: Interest Rate Floor (Receive)
 Accounting Entries in Functional Currency Problem 2: Interest Rate Floor (Receive)
 Summary
 Questions

Chapter 11: Interest Rate Collar
 Learning Objectives
 Meaning of Interest Rate Collar
 Collar or Reverse Collar as a Hedging Instrument
 Accounting for Interest Rate Collar
 The Trade Life Cycle for an Interest Rate Collar
 Interest Rate Collar Instrument—An Illustration
 Complete Solution to the Illustration—Interest Rate Collar
 Problem 1: Interest Rate Collar
 Solution to Problem 1
 Entries in Functional Currency
 Meaning of Interest Rate Reverse Collar
 Accounting for Interest Rate Reverse Collar
 The Trade Life Cycle for Interest Rate Reverse Collar
 Problem 1: Reverse Collar
 Solution to Problem 1: Reverse Collar
 Problem 2: Reverse Collar
 Solution to Problem 2: Reverse Collar
 Entries in Functional Currency
 Summary
 Questions

Chapter 12: CrossCurrency Swaps (XCCY Swaps)
 Learning Objectives
 A Meaning of CrossCurrency Swaps (XCCY Swaps)
 Accounting for CrossCurrency Swaps
 The Trade Life Cycle for CrossCurrency Swaps
 Complete Solution to Illustration 1: Cross Currency Interest Rate Swap—USD/GBP
 Accounting Entries in Functional Currency
 Problem 1: Cross Currency Interest Rate Swap—USD/EUR
 Accounting Entries in Functional Currency
 Summary
 Questions
 Bibliography
 Index
Product Information
 Title: Accounting for Investments, Volume 2: Fixed Income Securities and Interest Rate Derivatives—A Practitioner's Guide
 Author(s):
 Release date: July 2011
 Publisher(s): Wiley
 ISBN: 9780470829059