By R. Venkata Subramani
The monetary concern that began in mid-2007 ended in the accounting average setters and marketplace regulators around the globe to come back up with numerous proposals to change the accounting criteria. Accounting for Investments, quantity 2: fastened source of revenue and rate of interest Derivatives covers the revised criteria which are already reported and covers the proposals which are at the moment being reviewed. The ebook starts off with the fundamentals for the monetary items lined, defining the product, how it is dependent, its merits and drawbacks, and the several occasions within the exchange lifestyles cycle. It then offers an exhaustive therapy of varied accounting entries that are supposed to be recorded by way of any entity maintaining investments within the type of fastened source of revenue securities and rate of interest derivatives.
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Additional info for Accounting for Investments, Volume 2--Fixed Income and Interest Rate Derivatives. A Practitioner's Handbook
Instead, investors buy zero coupon bonds at a deep discount from their face value, which is the amount a bond will be worth when it “matures” or comes due. When a zero coupon bond matures, the investor will receive one lump sum equal to the initial investment plus the imputed interest. Risks of investment in bonds Interest rate risk: When interest rates rise, bond prices fall; conversely, when interest rates decline, bond prices rise. The longer the time to a bond’s maturity, the greater its interest rate risks.
The meaning of an interest rate swap—pay fixed and receive floating is explained with an illustration. The trade life cycle for an interest rate swap contract is given with the accounting entries to be passed at the various stages. The trade life cycle for an interest rate swap contract viz. recording the trade; accounting for the upfront fee in the form of premium on the trade; resetting the interest rate on the floating leg; accrual of interest on the pay leg as well as receive leg on the valuation date; accounting for the interest payable on the pay leg as well as the receive leg on the coupon date; payment or receipt of net interest; valuation entries on valuation date; and termination of the trade and accounting for termination fee are all covered.
Financial Instruments: Classification and Measurement, which is Phase 1, was published in July 2009 and contains proposals for both assets and liabilities within the scope of IAS 39. An entity shall apply IFRS 9 for annual periods beginning on or after 1 January 2013. Earlier application is permitted. If an entity applies this IFRS in its financial statements for a period beginning before 1 January 2013, it shall disclose that fact. CHAPTER 2 Fixed Income Securities—Fair Value through Profit or Loss LEARNING OBJECTIVES After studying this chapter you will be able to get a grasp of the following: Meaning and definition of fixed income securities Classification of debt securities as “fair value through profit or loss” Accounting for fixed income securities in light of relevant accounting standards Trade life cycle of fixed income security investments held for trading purposes Accounting journal entries to be recorded during the different phases of the trade life cycle Illustration of accounting for investments in fixed income securities held for trading purposes Preparation of general ledger accounts Preparation of income statement, balance sheet after the bond investments are made Disclosure requirements for investments in fixed income securities FX revaluation and FX translation process Functional currency, foreign currency and presentation currency Distinction between capital gain and currency gain in unrealized gain MEANING AND DEFINITION OF FIXED INCOME SECURITIES Fixed income security refers to any type of investment that yields a regular or fixed return.
Accounting for Investments, Volume 2--Fixed Income and Interest Rate Derivatives. A Practitioner's Handbook by R. Venkata Subramani