Accounting of derivatives represents a challenge to accountants because it involves an application of the traditional transaction / value based accounting system to instruments whose risk content differs substantially from their value content. Accounting standards and guidance notes on this subject are still evolving and seem nowhere near completion. Opinions are fractious. The accounting profession has taken a long time to come to terms with them. Both the International and the US Accounting Standards have seen the introduction and implementation of major changes in their accounting recently. Indian Accounting standards still deal with them in a fragmented manner through two guidance notes (on futures and options) and an Accounting Standard (AS11). This paper is an attempt to synthesize and coordinate differing viewpoints and unify perspectives. The paper explains at length the principles for derivatives accounting,because of the complexity inherent in the definition and financial implications of financial derivatives. The author compares the treatment of accounting for financial derivatives in US, International and Indian Accounting Standards and emphasises the need for having a comprehensive Indian accounting standard for them with fair value accounting and hedge accounting.