AS 13 Accounting For Investments Best Summary Notes. In the previous articles, we have given AS 14 Accounting For Amalgamation and AS 26 Intangible Assets. Today we are providing complete details of Accounting Standard – 13 accounting for investments. In this article, you can get AS 13 accounting for investments applicability, non-applicability, classification of investments, valuation of current investments and long – term investments and disclosure. You can also download AS 13 notes by ICAI at the end of this article. This is also useful for IPCC students.
AS 13 Accounting For Investments Summary Notes
This Standard deals with accounting for investments in the financial statements of enterprises and related disclosure requirements.
Doesn’t applicable to :
- Basis of accounting for interest, dividends etc.
- Investments of retirement benefit plans and life insurance enterprises.
- Mutual funds , AMCs, banks and Financial institutions.
- Venture capital funds.
Investments are assets held by an enterprise for earning income by way of dividends, interest, and rentals, for capital appreciation, or for other benefits to the investing enterprise. Assets held a stock-in-trade are not ‘investments’.
current investment :
Current Investment :
It is an investment that is by its nature readily realizable and is intended to be held for not more than one year from the date on which such investment is made.
Long-term Investment :
It’s an investment other than a current investment.
Investment Property :
It is an investment in land or buildings that are not intended to be occupied substantially for use by, or in the operations of, the investing enterprise.
Fair Value :
It is the amount for which an asset could be exchanged between a willing buyer , willing seller in an arm’s length transaction. Under appropriate circumstances, market value or net realizable value provides a evidence of fair value.
Market Value :
It is the amount obtainable from the sale of an investmen in an open market, net of expenses necessarily to be incurred on or before disposal.
Cost Includes Acquisition charges like brokerage , fees and duties and Fees paid to SEBI/ merchant bankers, advertising costs incurred for acquiring shares, legal costs for acquiring shares net of incentives received for investment If acquired by issue of shares etc, measured by fair value (market value) of such shares issued Interest received after acquisition to be allocated to pre and post acquisition period.
Classification of Investments
Enterprises present financial statements that classify fixed assets, investments and current assets into separate categories. Investments are classified as long term investments and current investments. Current investments are in the nature of current assets, although the common practice may be to include them in investments.
Investments other than current investments are classified as long term investments, even though they may be readily marketable.
Reclassification of Investments
Where long-term investments are reclassified as current investments, transfers are made at the lower of cost and carrying amount at the date of transfer.
Where investments are reclassified from current to long-term, transfers are made at the lower of cost and fair value at the date of transfer.
Valuation of Current Investments
Any investment which is converted in to cash within one year. All current investments will be calculated on cost or fair market price which is less.
Valuation of Long-Term Investments
Long term investments are valued at its original cost for recording in the books of accounts.
It is very necessary to disclose the method of valuation of investments in the financial statements because of other investor’s interest are affected from this point.
Carrying Amount of Investments
Investments classified as current investments should be carried in the financial statements at the lower of cost and fair value determined either on an individual investment basis or by category of investment, but not on an overall (or global) basis.
Investments classified as long term investments should be carried in the financial statements at cost. However, provision for diminution shall be made to recognise a decline, other than temporary, in the value of the investments, such reduction being determined and made for each investment individually
On Disposal :
At the time of sale of investment Difference between carrying cost and sale value net of expenses is taken to P&L.
On Sale of part holding-Carrying amount to be allocated determined on the basis of average carrying amount of the total holdings.
- Accounting policy.
- Classification of investments.
- Separately for long term and short term investments
- Income to be disclosed as gross and tds.
- show income from subsidiaries separately.
- Profit/loss on disposal.
- Changes in carrying amounts
- significant restrictions on ownership rights, realisability.
Click Here to download AS 13 accounting for investments notes by ICAI.
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