Introduction

The last decade has been one of constant changes in theory and practice in the economic sphere. The decade has also been one where significant changes in the thinking and organization of control structure in the financial sector have taken place, where regulatory functions hitherto exercised by the State have been gradually but certainly passed on to statutory supervisory bodies which have been established as independent operators. All these have brought about exciting times with new and fresh research in the financial sector leading to the adoption of new structures and products. It is the financial sector that has, in the recent years, shown phenomenal growth. This has led to very important changes in the thinking and adoption of practices in the commercial world.

Changes in accounting theory and practices have not been ignored by these developments. Globalization which has led to a breakdown in the geographical barriers has led to a free movement of resources, capital, manpower and ideas. Such measures have brought about a serious relook at aligning the accounting theory and practices to global prescriptions and practices, though there are still some areas of discussion pending even amongst the western experts on principles.

The unprecedented growth in the financial sector has called for not only an adoption of changed accounting standards and principles but also has brought about the creation and adoption of financial instruments that are continuously appraised and fine-tuned based on experiences of the accounting fraternity and also other users of these instruments. Such measures attempt to bring about accounting models that are reflective of the present day demands by plugging inherent gaps and inconsistencies in the current complex economic environment. We are still in a formative and experimental stage and one does not know for certain that what we adopt now will really stand the test of time and prove to be adequate to meet the exacting demands of the future. We are still based on the hope that future changes may not vitally affect our current practices.

It is in this background that one should view the efforts of R. Venkata Subramani in bringing out literature on the new areas that get highlighted because of a change in the perspectives. I am informed that the author would be bringing out a set of four volumes—all connected with the various types of financial products that are currently available. It is encouraging to note that this professional accountant has decided to share his scholarship and expertise with others by authoring such illuminating and scholarly treaties. The book written in a very simple, straight and candid manner presupposes a basic knowledge and awareness of the current practices prevalent in this field on the part of the reader. The efforts of the author in bringing out such a cluster of books is not only welcome but should be appreciated in a situation where such books are not that freely available.

The present book, Accounting for Investments Volume 2—Fixed Income Securities and Interest Rate Derivatives, covers an important area on a subject that often confuses and misleads the thinking and behavior of even tested practitioners. Subjects such as swaps, caps, floors, and collars etc., which are currently extensively popular, are dealt in the book in a very facile manner to impart education to both a novice and a professional alike.

What is very significant in the treatment of the subject in the book is that each instrument has been treated very comprehensively—its full life cycle right from its inception to its closure or redemption has been thoroughly explained and treated in a very simple, straight and lucid manner. Accounting entries that are called for at each of the stages have been fully recorded and explained in the book that makes it of great value and importance. The treatise also covers the requirements of presentation and disclosure.

I find that the author’s approach to the subject and its treatment in the book is very practical. His efforts are to be lauded. This work satisfies the requirements of the modern accounting theory and practices that are assuming importance.

I have no doubt that the book will be one that will be welcomed by the experts in the field of finance and will also be ideally satisfying the needs of the academic and the profession. The author deserves our appreciation for his intellectual ability, clarity of thought, facile expression and above all simplicity that pervades the entire work. I along with all others will await the release and publication of the other two books on connected subjects to the present one to make the literature comprehensive and complete.

My sincere appreciation is to the author for a job well done.

N. Rangachary

Retired Chairman

Central Board of Direct Taxes, New Delhi,

Government of India

Insurance Regulatory and Development Authority, Hyderabad