Contents
Chapter 1: Financial Instruments
Accounting Standards for Financial Instruments
Definition of Financial Instruments
Categories of Financial Instruments
Fair Value Measurement Concepts
Recognition and Derecognition of Financial Instruments
Difference between Investment and Speculation
Two Major Standards: U.S. GAAP and IFRS
Chapter 2: Accounting for Equity Investments: Trading
Accounting Standards for Equity Investments
Definition of Equity Securities
Passive Investments: Less than 20 Percent
Significant Influence: 20–50 Percent
Controlling Interest—More than 50 Percent
Exchange-Traded Securities versus Over-the-counter Securities
The Trade Life Cycle for Equity Trading Securities
FX Revaluation and FX Translation Process
Trade Date Accounting versus Settlement Date Accounting
Distinction between Capital Gains and Currency Gains
Chapter 3: Accounting for Equity Investments: Available-for-Sale
Accounting Standards for Equity Investments: Available-for-sale
The Trade Life Cycle for Available-for-sale Equity
FX Translation on AFS Securities
Chapter 4: Transfer of Categories
Presentation in Income Statement
Deferred Tax Effects on Unrealized Gain/Loss
Chapter 5: Equity Derivatives: Theory
Accounting Standards for Equity Derivatives
Derivatives in a Financial Security
Definition of Derivatives per Accounting Standards
Components of a Futures Contract
Open Interest in Derivatives Contracts
Method of Computing Open Interest
What Does Change in Open Interest Indicate?
Stock Futures and Index Futures
Chapter 6: Accounting for Equity Index Futures
The Trade Life Cycle for Equity Index Futures
Illustrations with FX Translation
Chapter 7: Accounting for Equity Stock Futures
Trade Life Cycle for Equity Stock Futures
Chapter 8: Accounting for Equity Call Options
Accounting Standards—Derivative Instruments and Hedging Activities
Trade Life Cycle for ETOs—Long Call Non-hedging
Trade Life Cycle for Exchange-Traded Options—On Writing a Call Option
Chapter 9: Accounting for Equity Put Options
Trade Life Cycle for Exchange-Traded Options—Long Put, Non-hedging
Trade Life Cycle for Exchange-Traded Options—On Writing a Put Option
Chapter 10: Equity Options: Hedge Accounting
Accounting Standards—Derivative Instruments and Hedging
The Trade Life Cycle for ETOs—Long Put as Hedging
Chapter 11: Accounting for Contract for Difference
Chapter 12: Accounting for Short Equity Investments
Definition of Short Equity Securities
Box Position and Short-selling
Regulatory Requirements of Short Sales
The Trade Life Cycle for Equity Short Sales
Chapter 13: Accounting for ADR/GDR Investments
Definition of a Depositary Receipt
Issuance and Cancellation of DRs
Risks Associated with Investment in DRs
The Trade Life Cycle for Equity ADR Securities
Chapter 14: Presentation and Disclosures
Accounting Standards for Presentation and Disclosure
Presentation in Income Statement
Differences between U.S. GAAP and IFRS
Disclosure Requirements under U.S. GAAP
Disclosure Requirements under IFRS
Statement of Profit and Loss and Equity
Appendix A: Basics of Accounting Theory
Appendix B: Accounting Standards for Financial Instruments
Appendix C: Financial Statements of Sample Fund