Abstracts » Business, general

Accounting for interest rate swaps

Article Abstract:

Interest rate swaps are among several new methods which have appeared in the last decade for companies facing market volatility. Interest rate swaps are estimated to have grown from less than $10 million in 1981 to between $80 billion and $100 billion in 1985, with perhaps $150 billion in 1986. This tremendous growth is attributed mostly to the swap's simplicity and low cost. The swap in its simplest form entails exchange of fixed-rate interest payment streams for variable rate payments. No accounting pronouncement currently addresses the interest rate swap specifically, but it is strongly suggested that financial statements should show the nature of the swap agreement, dollar amounts, periods, and interest rates.

Analysis, Planning, Finance, Corporations, Corporate finance, Interest rate swaps

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Accounting for deferred charges - Is more guidance needed?

Article Abstract:

The Financial Accounting Standards Board needs to provide more specific guidance in the area of accounting for deferred charges. The present standards, stipulated in Statement of Financial Accounting Concepts No. 6, are too vague to consistently determine whether an incurred cost meets the definition of an asset. Two types of uncertainty prevent costs from being shown as assets: uncertainty about whether an asset exists, and uncertainty about determining the value of the asset.

Standards, Methods, Accounting, Valuation, Financial Accounting Standards Board, Assets (Accounting), Cost accounting

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