LEARNING OBJECTIVES
After studying this chapter you will be able to get a grasp of the following:
- Meaning of receive floating and pay fixed type of interest rate swap
- Interest rate swap as a hedging instrument
- Accounting for interest rate swaps
- Interest rate swap instrument—pay fixed and receive floating
- Trade life cycle of interest rate swaps
- Accounting journal entries to be recorded during the different phases of the trade life cycle
- Illustration of investments in interest rate swaps
- Preparation of general ledger accounts
- Preparation of income statement, balance sheet after the investments in interest rate swaps are made
- FX revaluation and FX translation process
- Functional currency, foreign currency and presentation currency
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