The book covers financial instruments from the perspective of the issuer as well as the investor. It explains the concept of recognition, classification and subsequent measurement of financial assets and liabilities, de-recognition of financial assets and liabilities and impairment model. It also covers fair value and cash flow hedge accounting, disclosures required for financial instruments, fair value concepts and effects of fluctuations in foreign exchange.

It includes lucid commentary on Financial Instruments as per Ind AS, discussing Ind AS 32, Ind AS , Ind AS , and some portions of Ind AS and Ind AS As we all know, Financial Instruments accounting is a new concept in India.

The Indian Accounting Standards relating to financial instruments are quite complex and voluminous. The said standards along with other 34 standards are applicable from 1st April for Phase 1 companies, while the rest of the world would be adopting the equivalent standard IFRS 9 only from 1st Jan This book includes the basics of financial instruments and also dwells deep into the Indian Accounting Standards mentioned above with several practical case studies along with solutions for the same.

IFRS 9 — July version replaces all earlier versions of IFRS 9 viz. The good news is that the project is complete. The final version encompasses classification and measurement, new impairment model, revised hedge accounting aspects and replaces IAS Accounting for dynamic risk management is considered as a separate project from IFRS 9 and is still pending.

Salient features of this revised, updated and final IFRS 9 standard that is effective for annual periods beginning on or after 1-Jan are as follows:. It is disheartening to note that IASB and FASB, being the officially recognized standard setting bodies on both sides of the Atlantic were unable to see eye to eye while finalizing the proposals for impairment model while drafting the standards for financial instruments.

IFRS 9 emerges as a principle based standard where the classification is based on business model and nature of cash flows as opposed to intention and ability to hold which were the bases for classification in the earlier IAS 39 standard. Also IFRS 9 simplifies the reclassification process which again is closely tied to the business model rather than the complicated rule-based reclassification provisions.

As per the modifications made to the comprehensive guidelines on derivatives issued by the Reserve Bank of India in early August , banks cannot sell derivatives to corporates without getting approval from the board of directors of such corporates.

The corporate has in place a Risk Management Policy approved by its Board which contains the following:. The corporate has laid down clear guidelines for conducting the transactions and institutionalised the arrangements for a periodical review of operations and annual audit of transactions to verify compliance with the regulations.

Market-makers should not undertake derivative transaction with users till they provide a Board or equivalent forum resolution stating that they have in place a Board approved Risk Management Policy which contains the details as mentioned above.

Comprehensive Guidelines on Derivatives: The Reserve Bank of India RBI is to auction a new government security of year maturity this Friday. The government will issue Rs 6, crore under the new security at a coupon rate to be decided in the auction.

The government is set to borrow Rs 2. This is Rs 52, crore more as compared to the Rs 1. The higher than planned borrowing programme pushed yields on the current year benchmark above three-year highs. As a result, all the three auctions conducted so far in the second half have seen devolvement on underwriters in at least one government security. It is an investment that provides a return in the form of fixed periodic payments and the eventual return of principal at maturity.

In a variable income security, payments change based on some underlying benchmark measure such as short-term interest rates.

However, in this and subsequent chapters, by fixed income securities we mean debt securities that yield a regular return in the form of interest. Investments in equity shares are a form of financial asset. Classification and Measurement, which is Phase 1, was published in July and contained proposals for both assets and liabilities within the scope of IAS An entity shall apply IFRS 9 for annual periods beginning on or after 1 January IFRS 9 Para 4.

Classification of a security as trading shall not be precluded simply because the entity does not intend to sell it in the near term. In a secondary market the buy order is placed through a broker known as a counter party. Most corporate bonds are traded over-the-counter. Investors should account for the interest on the coupon date. However, the interest accrues on the bond on a daily basis even though it is paid periodically as per the terms of the bond, usually on a semi-annual basis.

Typical examples of corporate actions include interest payment by the company, calls or the issuance of new debt by the issuer that result in change of the name, or number of bonds held by the investor, and so on. The accounting event for coupon accrual is recorded on the date on which the interest becomes payable by the company.

This effectively reduces the interest income during the first period during which the bond is held by the investor. However, interest should be accounted for as though the bond is required to be shown on the basis of amortized cost. The premium paid or discount realized on purchase of the bond should be amortized over the remaining life of the bond on a yield-to-maturity basis. Such an amortized premium or discount is added with the interest on the one hand and held separately in a mark-to-market account on the other.

The carrying cost at the end of the tenure of the bond should be equal to the face value of the bond. Hence, when the bond is sold, the investor actually should get not merely the value of the bond but also the interest element from the previous coupon date until the date of settlement of the trade.

Cost of sales is arrived at by following FIFO, LIFO or the weighted average method. All other currencies other than the functional currency are known as foreign currencies for the entity.

Presentation currency is the currency in which the financial statements are presented to the investors. The entity is free to choose any currency as its presentation currency. On initial recognition foreign currency transactions are recorded in the functional currency by applying to the foreign currency amount the spot exchange rate between the functional currency and the foreign currency at the date of the transaction. The essential feature of a monetary item is the right to receive or an obligation to deliver a fixed or determinable amount of units of currency.

The effect of this comparison may be that an impairment loss is recognized in the foreign currency but would not be recognized in the functional currency, or vice versa. Such exchange differences must be recognized as income or expenses in the period in which they arise. When a gain or loss on a non-monetary item is recognized directly in other comprehensive income, any exchange component of that gain or loss is recognized directly in other comprehensive income.

This process is known as FX revaluation.

Product Description While there are a number of outstanding texts on valuation of interest rate derivatives, there are hardly any that provide a comprehensive treatment of the relevant accounting principles. For each instrument, the author first provides a clear description of the product and its associated cashflows. This book, written by a leading subject expert, is definitely unique in its treatment and content.

Shankar Head, Center for Advanced Financial Studies, Institute of Financial Management and Resource IFMR Program Director, MBA-Financial Engineering Chennai, India. This second volume by R. Venkata Subramani is a valuable contribution to the accounting and finance literature providing comprehensive coverage of accounting for fixed income securities and interest rate derivatives.

Subramani provides a systematic and step-by-step description of, and accounting for, all the possible events and transactions in the life of the security or derivative concerned.

This excellent feature makes it effective for the reader to attain an in-depth understanding of the topics covered. I am sure that this book will be greatly appreciated by users of financial statements, academics and business students.

Srinivasan Rangan Associate Professor of Finance and Control Indian Institute of Management Bangalore, India. The recent global financial crisis has resulted in a thorough review and overhaul of accounting standards in order to improve financial reporting and enhance investor confidence. Although accounting for fixed income and derivative financial instruments is complex this book provides the reader with a clear and concise explanation of this intricate subject.

The informative product descriptions and detailed explanations of the accounting events at each stage of the trade life cycle will be of great benefit to those who want to gain a better understanding of this intricate topic. With this second volume Venkata Subramani has structured a very comprehensive book focused on accounting for fixed income securities and interest rate derivatives.

This author puts in perspective a very detailed and exhaustive presentation of the nuances of the different flavors of financial instruments and a detailed description of the related accounting events and associated entries.

It becomes very effective because every example details how the life cycle of financial instruments interacts with the accounting output making this book a helpful bridge between the financial products and their accounting translation. Jean-Daniel Morfin Product Manager Calypso Technology France From the Inside Flap Accounting for Investments Volume 2: This companion volume to Accounting for Investments Volume 1: Equities, Futures and Options starts from fixed income securities and interest rates.

Accounting for Investments Volume 2 starts from the basics for the financial products covered, defining the product, the way it is structured, its advantages and disadvantages, the different events in the trade life cycle and then elaborates on the accounting entries that are necessary for the same. The book also explains how the entries get reflected in the general ledger accounts, giving a macro-level picture for the reader to understand the basics of the effect of such accounting.

This volume is the presentation of the results in the final accounts—the income statement and balance sheet and disclosure requirements are also covered. Accounting for Investments Volume 2 will prove useful to an expert as well as a novice, not to mention the ever-increasing number of technology consultants who require for such a book.

While generally accepted US accounting principles and the International Financial Reporting Standards IFRS are given adequate treatment, the readers are advised to refer to the appropriate GAAP requirements for their own country.

The accounting standards that are dealt with here in the book can, however, be used as a benchmark to understand the specific requirements of other countries. Wiley; 1 edition July 20, Language: This volume covers the financial instruments of fixed income securities and interest rate derivatives viz. As in the first volume, this book provides an exhaustive treatment of accounting, presentation and disclosure aspects of any entity dealing with such financial instruments.

Since the break out of a severe financial crisis starting in the year that virtually crippled the world economy, the regulatory authorities including the accounting standard setters have been on their toes and, thanks to their tireless efforts, a substantial addition to the knowledge of accounting has been made along with a thorough overhaul of the accounting standards relating to financial instruments. The good news is that the seat of accounting standard setting authorities on both sides of the Atlantic are now speaking in a singular voice despite some lag in the implementation timeline.

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Never in the past have we seen such rapid succession of accounting standards issued on financial instruments continuously revised and fine-tuned, based on feedback received from the accounting fraternity and other users of financial statements across the globe.

Nevertheless, it is a good development and this book captures the changes that have already been announced irrespective of the actual date of implementation, and other key proposals in the exposure draft stage are also considered at the appropriate places. This book assumes that the reader already has basic accounting knowledge. Those who are entirely new to the field of accounting should refer to some basic accounting books before attempting to this one.

It might be useful to have some basic orientation on accounting for investments, especially plain derivatives on equity instruments like equity futures and equity options to understand better the concepts given in this volume.

However, it is not a must and the readers can easily grasp the essentials as this volume is meant to be self-sufficient in dealing with basic accounting concepts in so far as it relates to the particular financial instrument under review. The entire trade life cycle of each financial instrument is covered in detail from the accounting perspective. For each illustration, the accounting journal entries, general ledger accounts, trail balances, income statements and balance sheets are presented to give a complete understanding of the accounting treatment.

Also for all calculated numbers the details of such calculations are given. The presentation and disclosure requirements for these financial instruments are given separately in an exclusive chapter and are not given as part of each illustration and solution to the worked out problems in this book.

While an overview of the trade life cycle for each financial instrument is given, the readers are advised to refer other resources for a detailed treatment on the trade life cycle from the front office and middle office perspective.

The trade life cycle in so far as it relates to the back office viz. For each financial instrument, the relevant accounting standards that are applicable are given and wherever necessary a comparison showing the similarities and differences between the US GAAP and IFRS is also provided.

Fixed Income Securities — Theory — This chapter gives some basics of fixed income securities, basics of bond markets, types of issues and special characteristics, bond coupons, bond maturity, bond pricing, yield measures, duration and certain types of bonds like municipal bonds, corporate bonds, risks of investment in bonds and so on.

Fixed Income Securities — Fair value through profit or loss — This chapter covers the accounting for fixed income securities held for trading purposes. After explaining the meaning and definition of fixed income securities, an overview of the categories of financial instruments is given along with the recent changes contemplated by the accounting standard IFRS 9.

The explanation of fair value through profit or loss is given with the circumstances in which the designation at fair value through profit or loss on initial recognition is allowed.

Fair value concepts and the measurement hierarchy of fair value as per the accounting standard are explained here. The trade life cycle for fixed income securities held as trading securities is given with the accounting entries to be passed at various stages. Illustrations cover fixed income securities in the functional currency of USD held for trading purposes.

Distinctions between FX revaluation and FX translation are given in great detail along with the explanation of functional currency, foreign currency and presentation currency and the requirements of accounting standards in this regard.

Another illustration covers bonds in AUD with the functional currency of USD explaining the FX revaluation and FX translation processes.

Accounting for Investments: Equities, Futures and Options, Volume I - Wiley Online Library

Fixed Income Securities — Available-for-sale — This chapter covers the accounting for bonds that are held as available for sale. Amendments made through IFRS 9 that impacts this category is explained.

FX translation on available-for-sale securities calls for some special treatment, which is explained in this chapter. The trade life cycle for bonds classified as available for sale securities is given with the accounting entries to be passed at various stages. One illustration covers equity shares in the functional currency of USD held as available for sale; one more illustration is given in a foreign currency with FX translation into the functional currency of USD.

Fixed Income Securities — Held-to-maturity — This chapter covers the accounting for bonds that are classified as held-to-maturity. Meaning of securities classified as held-to-maturity is discussed. Tainting rules along with exceptions are given. However, tainting rules are dispensed with in light of the recent changes made to this category.

Similar changes are also proposed by the FASB. The concept of effective interest rates is then explained.

Impairment provisions relating to amortized cost category is covered in this chapter. The trade life cycle for bonds classified as held-to-maturity securities is given with the accounting entries to be passed at various stages.

Onet illustration covers equity shares in the functional currency of USD held as available for sale. FX revaluation and FX translation on held-to-maturity securities is explained with the help of one more illustration, which is given in foreign currency with FX translation and accounting entries in the functional currency.

Presentation, Disclosure and Reclassification — This chapter covers the current accounting standards for the presentation of financial instruments in the financial reporting system, the mandatory disclosures required for these financial instruments, as well as the requirements when an entity reclassifies the financial instruments. The presentation and disclosure requirements are very important as these give quantitative and qualitative information about the financial position of the entity and provide adequate information for the reader of the financial statements to understand the nature and extent of risks undertaken by the entity.

These presentation and disclosure requirements are mandatory and ought to have been provided in the illustrations and solutions to problems throughout this book. However, for the sake of convenience the requirements are all bunched and presented in this chapter only. Readers should understand that these requirements should be taken to be an inclusive component of the illustrations and solutions to the problems throughout the book.

Interest Rate Derivatives — Theory — This chapter covers the theoretical aspects of interest rate derivatives. First an explanation of what is meant by derivatives in a financial instrument is explained, followed by a definition of derivatives as per US GAAP as well as IFRS accounting standards.

Then the nuances of over-the-counter derivates are elaborated on comparing the same with exchange-traded derivative contracts. The benefits of interest rate derivatives are spelled out. The following common types of interest rate derivatives are briefly explained viz. The status of various financial instruments for hedging purposes is covered in this chapter. Interest Rate Swaps — Receive fixed and pay floating — This chapter covers the accounting aspects of interest rate swaps — receive fixed and pay floating.

Meaning of interest rate swap — receive fixed and pay floating is explained with an illustration. The definition of a derivative as per US GAAP and as per IFRS is then given. 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. Ane illustration covers the accounting aspects of an interest rate swap contract in the functional currency of USD.

Interest Rate Swaps — Pay fixed and receive floating — This chapter covers the accounting aspects of interest rate swaps —pay fixed and receive floating.

The meaning of an interest rate swap — pay fixed and receive floating is explained with an illustration. An illustration covers the accounting aspects of an interest rate swap contract in the functional currency of USD. Interest Rate Caps — This chapter covers the accounting aspects of interest rate caps. The meaning of interest rate caps is explained with an illustration, before covering the benefits of interest rate caps and the risk associated with it.

The trade life cycle for an interest rate cap contract is given with the accounting entries to be passed at the various stages. The trade life cycle for an interest rate cap contract viz. An illustration gives the accounting aspects of an interest rate cap contract in the functional currency. One problem as a holder of the cap instrument and another problem as a writer of the cap instrument are also given here. Interest Rate Floors — This chapter covers the accounting aspects of interest rate floors.

The meaning of interest rate floors is explained with an illustration before covering the benefits of interest rate floors and the risk associated with it.

The trade life cycle for an interest rate floor contract is given with the accounting entries to be passed at various stages. The trade life cycle for an interest rate floor contract viz. An illustration gives the accounting aspects of an interest rate floors contract in the functional currency. One problem as a holder of the floor instrument and another problem as a writer of the floor instrument are also provided. Interest Rate Collars and Reverse Collars — This chapter covers the accounting aspects of interest rate collars and reverse collars.

The meaning of an interest rate collar is explained with an illustration, before covering the benefits of an interest rate collar and the risk associated with it. An interest rate collar is an instrument that gives protection against rising rates by guaranteeing that the holder will never pay above a pre-agreed rate but at the same time sets a downside rate below the floor rate, which the holder will benefit from if interest rates do fall below the floor rate.

The trade life cycle for an interest rate collar contract is given with the accounting entries to be passed at the various stages. The trade life cycle for an interest rate collar contract viz. An illustration gives the accounting aspects of an interest rate collar contract in the functional currency. Similarly, the accounting and trade life cycle of a reverse collar are also given with suitable illustrations.

Cross Currency Swaps — This chapter covers the accounting aspects of cross currency swaps — receive floating and pay floating in different currencies. Meaning of a cross currency swap is explained with an illustration. The trade life cycle for a cross currency swap contract is given with the accounting entries to be passed at various stages. The trade life cycle for a cross currency swap contract viz. FX revaluation and FX translation for a cross currency swap contract is explained with the help of an illustration.

Time Value of Money — This appendix gives an overview of the mathematics involved in fixed-income securities transactions. Recent Proposals in Accounting Standards — This appendix gives an overview of the recent proposals by the accounting standard setting authorities viz. The proposals are in the exposure draft stage and are yet to be promulgated as authoritative standards.

The reason for covering this material in the appendix is that some of the changes contemplated have far-reaching implications on the accounting followed for the financial instruments covered in this volume. Counterparty credit risk CVA is the risk that the counterparty to a financial contract will default prior to the expiration of the contract and will not make all the payments required by the contract.

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Obviously exchange-traded derivatives are not subject to counterparty risk as the respective exchange guarantees the settlement of cash flows as per the derivative contract. CVA is a measure that adjusts the risk-free value of an instrument to incorporate counterparty credit risk.

CVA can be positive or negative depending on which of the two counterparties is most likely to default and the relative balances due or receivable to each other. There were some concerns expressed in certain quarters as to whether the Debit Value Adjustment DVA should be considered in determining the fair value. Now based on the recent exposure draft announced jointly by IASB and FASB on 28th January on Offsetting Financial Assets and Financial Liabilities it is amply clear that the DVA also should be recognized along with CVA.

The most practical, authoritative guide to governmental GAAP Wiley GAAP for Governments is a comprehensive guide to the accounting and financial reporting principles used by state and local governments as well as other governmental entities. Wiley GAAP for Governments is a thorough, reliable reference financial professionals will consistently keep on their desks rather than on their bookshelves. The most practical, authoritativeguide to governmental GAAPWiley GAAP for Governments is a comprehensive guide to the accounting and financial reporting principles used by state and local governments as well as other governmental entities.

Financial statement preparers, attestors, and readers will find its full coverage of authoritative accounting standards coupled with many examples, illustrations, and helpful practice hints extremely useful and user-friendly. A look ahead at the status of current and future Governmental Accounting Standards Board standards and projects provides information on the very latest in standard-setting activities and covers:.

The Institute of Chartered Accountants of India has sent out recently 35 near-final Indian Accounting Standards Ind-AS — the Indian version of IFRS — to the National Committee on Accounting Standards NACAS for deliberation and finalisation, to emable transition to International Financial Reporting Standards. Over the past year, it has trained accountants on IFRS and issued a draft of the revised Schedule XIV to the Companies Act. It is now left to the regulators to take this forward and legislate on them.

This site rocks the Classic Responsive Skin for Thesis. Financial Instruments as per Ind AS — Book from Wolters Kluwer — CCH by R. Venkata Subramani on June 28, Description About the Book The book covers financial instruments from the perspective of the issuer as well as the investor. New avatar of IFRS 9 by R. Venkata Subramani on January 19, Salient features of this revised, updated and final IFRS 9 standard that is effective for annual periods beginning on or after 1-Jan are as follows: Logical single classification and measurement approach for financial assets that reflects the business model of the entity; Forward-looking expected credit loss model; Own credit gains and losses presented in OCI for FVO liabilities instead of recognizing the same in profit or loss.

This removes the counter-intuitive paradox of entities booking gains when the value of their own debt falls due to decrease in their own credit worthiness; Improved hedge accounting model that reflects the economics of risk management while accounting for the same. Under the new requirements debt instruments can only be measured at fair value through OCI if they are held in a particular business model.

That is different to the available-for-sale category today, which is generally an unrestricted option. Measurement of impairment will be the same regardless of the type of instrument held and how it is classified. The new impairment model provides two important pieces of information to assist users of financial statements in understanding changes in the credit risk performance of financial instruments.

A portion of expected credit losses a month measure is recognized for all relevant financial instruments from when they are first originated or acquired. In subsequent reporting periods, if there has been a significant increase in the credit risk of a financial instrument since it was first entered into or acquired, full lifetime expected credit losses would then be recognized.

The way in which interest revenue is calculated depends on whether an asset is considered to be actually credit-impaired. Initially interest is calculated by applying the effective interest rate to the gross amount of an asset.

However, if an asset is considered to be credit-impaired, the calculation changes to applying the effective interest rate to the amortized cost amount i. New requirements of the impairment model: Modifications to Comprehensive Guidelines on Derivatives by Reserve Bank of India by R. Venkata Subramani on November 3, The corporate has in place a Risk Management Policy approved by its Board which contains the following: Guidelines on risk identification, measurement and control Guidelines and procedures to be followed with respect to revaluation and monitoring of positions Names and designation of officials authorized to undertake transactions and limits assigned to them A requirement that the assignment of limits to an official would be specific and in case the limits assigned are not quantified, then the bank should offer derivative products to that client only after getting appropriate documents certifying assignment of specific limits Accounting policy and disclosure norms to be followed in respect of derivative transactions A requirement to disclose the MTM valuations appropriately A requirement to ensure separation of duties between front, middle and back office Mechanism regarding reporting of data to the Board including financial position of transaction etc 2.

RBI to introduce new yr govt bond on 4-Nov by R. Venkata Subramani on November 2, Fixed Income Securities — FVPL by R. Venkata Subramani on July 11, Volume 2 — Fixed Income and Interest Rate Derivatives: Venkata Subramani on July 5, Shankar Head, Center for Advanced Financial Studies, Institute of Financial Management and Resource IFMR Program Director, MBA-Financial Engineering Chennai, India This second volume by R. Srinivasan Rangan Associate Professor of Finance and Control Indian Institute of Management Bangalore, India The recent global financial crisis has resulted in a thorough review and overhaul of accounting standards in order to improve financial reporting and enhance investor confidence.

Loretta Wickenden Chief Executive Officer Latilla LLC USA With this second volume Venkata Subramani has structured a very comprehensive book focused on accounting for fixed income securities and interest rate derivatives.

Preface — Accounting for Investments — Volume 2: Venkata Subramani on February 17, What is Credit Value Adjustment CVA in Accounting? Venkata Subramani on February 16, Wiley GAAP for Governments Interpretation and Application of Generally Accepted Accounting Principles for State and Local Governments by R.

Venkata Subramani on February 15, Product Description The most practical, authoritative guide to governmental GAAP Wiley GAAP for Governments is a comprehensive guide to the accounting and financial reporting principles used by state and local governments as well as other governmental entities. Full coverage of authoritative accounting standards Extremely useful and user-friendly examples, illustrations, and helpful practice hints A comprehensive guide to the accounting and financial reporting principles used by state and local governments as well as other governmental entities Provides a look ahead to the status of current and future Governmental Accounting Standards Board standards and projects Offers information on the very latest in standard-setting activities Also by Warren Ruppel: Governmental Accounting Made Easy Wiley GAAP for Governments is a thorough, reliable reference financial professionals will consistently keep on their desks rather than on their bookshelves.

From the Back Cover The most practical, authoritativeguide to governmental GAAPWiley GAAP for Governments is a comprehensive guide to the accounting and financial reporting principles used by state and local governments as well as other governmental entities.

A look ahead at the status of current and future Governmental Accounting Standards Board standards and projects provides information on the very latest in standard-setting activities and covers: Wiley; Revised edition edition March 1, Language: Transitioning to IFRS in India by R. Venkata Subramani on January 28,