The accelerated growth and development of financial markets leads to the emergence of new financial instruments. Derivative financial instruments are a specific form of new financial instruments, and their investment is increasingly popular among investment funds in the Republic of Croatia. The special thing about derivative financial instruments is that they are not independent, but rely on the value of the underlying asset and are closely related to it. Accounting controls and financial reporting of these instruments are very complex because they are governed by different accounting standards. In the Republic of Croatia, the accounting treatment of these instruments is regulated by the Accounting Act and International Financial Reporting Standards (IFRS), especially IFRS 9 - Financial Instruments. Derivative financial instruments are sometimes difficult to identify, especially if they are embedded in underlying financial instruments (underlying assets). Also, their application is not sufficiently developed in companies, although this way of managing risks in companies has numerous advantages, one of which is the management of corporate cash flows and risks of financial instruments. The question arises as to how derivative financial instruments actually affect the financial markets and what are their advantages and disadvantages. Investment funds in the Republic of Croatia are obliged to publish information on the use of derivatives in their financial statements, including the nature, scope and purpose of these instruments. This ensures transparency and enables investors to better understand the risks associated with the fund's investments. Proper recording and disclosure of derivatives information also helps in compliance with regulatory requirements and reduces the possibility of financial fraud. The accounting treatment of derivatives by investment funds in the Republic of Croatia includes initial and subsequent valuation at fair value, with detailed publication of relevant information. This process enables accurate financial reporting and provides the transparency needed for investor and regulatory trust.