Accounting for Investments -- Contents -- Foreword -- Introduction -- Preface -- Acknowledgments -- Chapter 1: Fixed Income Securities-Theory -- Learning Objectives -- Fixed Income Securities in General -- Basics of the Bond Market -- Types of issues and special characteristics -- Bond coupon -- Bond maturity -- Bond pricing -- Yield measures -- Duration -- Corporate bonds -- Municipal bonds -- Zero coupon bonds -- Risks of investment in bonds -- Definition of Financial Instruments -- Financial asset -- Financial liability -- Equity instrument -- Derivative -- Categories of Financial Instruments-An Overview -- Amendment made through IFRS 9 -- US GAAP proposals -- Fair value through profit or loss (FVPL) -- Available-for-sale -- Held-to-Maturity (HTM) -- Questions -- Theory questions -- 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" -- Fair value concept -- Financial assets and financial liabilities held for trading -- Fixed income security as a hedged item -- Accounting for Fixed Income Securities -- Trade Life Cycle for Fixed Income Securities-Fair Value through Profit or Loss -- Additional events in the trade life cycle -- Buy the bond -- Accrued interest purchased -- Pay the contracted amount for the bond -- Corporate Action -- Coupon accrual -- Reversal of accrued interest purchased -- Coupon receipt -- On accounting for interest based on amortization -- Accrual of interest on valuation date -- Valuation of bond on valuation date -- Reversal of interest accrued -- On selling the bond (liquidation) -- Interest on bonds sold -- Receive the consideration -- Ascertain the profit/loss on the sale -- FX revaluation process -- FX translation process.

Additional Events in the Trade Life Cycle -- Early redemption -- Maturity -- Write off -- Complete Solution to the Illustration -- FX Revaluation and FX Translation Process -- Functional currency, foreign currency and presentation currency -- Primary economic environment -- Primary factors -- Additional factors -- Additional factors for a foreign operation -- Foreign currency transaction -- Initial recognition -- Monetary and non-monetary items -- Carrying amount-non-monetary assets -- Exchange differences on monetary items -- Exchange differences on non-monetary items -- FX revaluation process -- FX translation process -- FX revaluation entries -- FX translation entries -- Consummated FX translation entry -- Transient FX translation entries -- Distinction between Capital Gain and Currency Gain -- Illustration 1: Investment in Bonds held for Trading Purposes -- Bond-trading-Problem 1-USD -- 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 -- Theory questions -- Objective questions -- Journal questions -- 1. Bond-trading-problem-USD -- 2. Bond-trading-problem-GBP -- 3. Bond-trading-problem-JPY -- Chapter 3: Fixed Income Securities-Available-for-Sale -- Learning Objectives -- Basic Understanding of Available-for-Sale (AFS) -- Accounting for Fixed Income Securities Classified as Available-for-Sale -- As per IFRS -- Amendment made through IFRS 9 -- Option to Designate a Financial Asset at Fair Value through Profit or Loss -- Impact of IFRS 9 on available-for-sale category for debt instruments -- FX translation on available-for-sale securities -- Fixed income security (AFS) as a hedged item -- Accounting for Fixed Income Securities.

Trade Life Cycle for Fixed Income Securities-Available-for-Sale -- Trade and other details for the purpose of illustration -- Ascertain the fair value at the end of valuation date -- On liquidation of AFS bonds -- FX Translation on Available-for-Sale Securities -- FX revaluation process -- FX translation process -- Impairment of Available-for-Sale Fixed Income Securities -- Bonds Classified as Available-for-Sale-Complete Solution to the Illustration -- Problem 1-Bonds Held as Available-for-Sale in USD -- Solution to problem 1-Bonds held as available-for-sale in USD -- FX Revaluation and FX Translation process -- Problem 2-Bonds held as available-for-sale in SGD (foreign currency) -- Solution to Problem 2-SGD -- Accounting Entries in Functional Currency-USD -- Summary -- Questions -- Theory questions -- Objective questions -- Journal questions -- 1. Bond-AFS-problem-USD -- 2. Bond-AFS-problem-USD -- 3. Bond-AFS-problem-JPY -- 4. Bond-AFS-problem-JPY -- Chapter 4: Fixed Income Securities-Held-to-Maturity -- Learning Objectives -- Meaning of Securities Classified as Held-to-Maturity (HTM) -- Variable interest rate instrument -- Floating rate instruments -- Default risk -- Perpetual debt instrument -- Equity instruments -- Callable debt & recovery of entire carrying amount -- Puttable debt cannot be an HTM asset -- Fair value vs. amortized cost -- Exceptions to the Rule for Classification as Held-to-Maturity -- Sales before maturity that do not "taint" -- The following are not covered under the exceptions -- Revised criteria for measurement at amortized cost -- US GAAP proposal -- Effective Interest Rate -- Fixed income security (HTM) as a hedged item -- Accounting for Securities Classified as Held-to-Maturity -- Trade Life Cycle for Fixed Income Securities-Held-to-Maturity -- Impairment of bonds -- Additional possible events in the trade life cycle.

Premium/discount on purchase of the security -- Amortization of premium/discount on purchase -- Carrying cost and yield to maturity -- An example to calculate the effective interest -- No valuation at the end of reporting period -- No sale of the bond under held-to-maturity -- Impairment of HTM fixed income securities -- Recovery of impairment -- Illustration of Bonds Held-to-Maturity-Complete Solution -- Problem-2: Bonds Held as Held-to-Maturity in BRL (Foreign Currency) -- Solution to Problem-2: Bonds Held as Held-to-Maturity in BRL (Foreign Currency) -- Accounting Entries in Functional Currency-Problem 2-USD -- Summary -- Questions -- Theory questions -- Objective questions -- Journal questions -- 1. Bond-trading-problem-USD -- 2. Bond-trading-problem-USD -- 3. Bond-trading-problem-USD -- 4. Bond-trading-problem-GBP -- Chapter 5: Presentation, Disclosures & Reclassification -- Learning Objectives -- Relevant Accounting Standards -- General Disclosure as per IFRS 7 -- Classes of financial instruments and level of disclosure -- A. Significance of Financial Instruments for Financial Position and Performance -- Categories of financial assets and financial liabilities -- Financial assets at fair value through profit or loss -- Financial assets measured at fair value through other comprehensive income -- Derecognition of investments at FVPL through OCI -- Reclassification -- Derecognition -- Financial assets pledged as collateral -- Allowance account for credit losses -- Statement of Comprehensive Income -- Items of income, expense, gains or losses -- Disclosure of gain/loss from derecognition of assets measured at amortized cost -- Other Disclosures -- Accounting policies -- Fair value -- Fair value hierarchy -- Nature and extent of risks arising from financial instruments -- B. Qualitative Disclosures -- C. Quantitative Disclosures -- Credit risk.

Financial assets that are either past due or impaired -- Collateral and other credit enhancements obtained -- Liquidity risk -- Market risk-sensitivity analysis -- Interest rate risk -- Currency risk -- Other price risk -- Reclassifications -- Amendments to IAS 39 & IFRS 7 (October 2008) -- Reclassification out of fair value through profit or loss category -- Reclassification as per IFRS 9 -- Reclassification date -- Examples of situations where reclassification is made -- Presentation of Financial Instruments -- Current and non-current assets -- Current and non-current liabilities -- Equity & liability components of financial instruments -- Offsetting a financial asset and a financial liability -- Summary -- Balance sheet -- Other balance sheet-related disclosures -- Income statement and equity -- Other income statement-related disclosures -- Other disclosures -- Fair value hierarchy -- Nature and extent of exposure to risks arising from financial instruments -- Exercise -- Theory questions -- Chapter 6: Interest Rate Derivatives-Theory -- Learning Objectives -- Derivatives in a Financial Instrument -- Various types of derivative contracts -- Definition of Derivatives as per Accounting Standards -- As per US GAAP -- As per IFRS -- Accounting Standards for Interest Rate Derivatives -- Differences between US GAAP and IFRS -- Over-the-Counter Contracts -- Exchange-Traded Derivative Contracts -- Benefits of Interest Rate Derivatives -- Reasons for using interest rate swaps -- To hedge interest rate exposure -- To take speculative positions in relation to future movements in interest rates -- To lower the cost of funding -- To implement the overall asset-liability management strategies -- Comparative cost advantage to both parties -- International Swaps and Derivatives Association (ISDA) -- Netting provisions of ISDA -- Credit support annex.

Types of Interest Rate Derivatives.