Interest Rate Swap
Accounting glossary · Understand, connect, apply
An interest rate swap exchanges interest cash flows calculated on an agreed reference amount. A common arrangement exchanges fixed-rate payments for floating-rate payments.
Example
A borrower with floating-rate debt enters a swap to pay fixed interest and receive floating interest on the same reference amount.
Remember the difference
The reference principal usually serves only to calculate payments in a plain interest rate swap. The original borrowing continues under its own terms.
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Prepared with AI assistance. Examples are fictional and simplified for learning.
Examples are simplified for learning. Where a term depends on US law, IFRS, US GAAP or a historical rule, check the context explained above and the requirements relevant to your course.
Study references: OpenStax financial accounting and managerial accounting. For reporting requirements, consult the applicable IFRS Standards or FASB guidance. US tax terms should be checked against the relevant tax-year IRS instructions.
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