Www.SafeEcollege.com1 Accounting for Investments AS 13.

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Accounting for Investments

AS 13


1. This AS is mandatory in nature and applicable to all entities.

2. Investment means assets held by entity for earning income or for capital appreciation except stock. Investment can be :

Current Investment Long Term Investment


3. Current Investment means Investment which are ready, releasable and held with intention to dispose off within 12 months from day of purchase.

4. Long Term Investment are those which are other than Current Investment.

5. Investment should be disclosed in Balance Sheet as follows :

Investment in Government security Investment in shares and Debentures Investment Property Other Investment


6. Investment can be acquired as follows :A) By Purchase : Cost =

Purchase Price

Add: Taken on purchase

Add: Expenses on purchase

Add: Expenses on Title

Less: Pre acquisition Dividend

Less: Sale Proceeds of Right to the Extent

of decline in Market Price

Cost Price


Note: Whenever shares purchased are Cum Right

then difference between Purchase Price and Price Ex-Right.

OR

Actual Sale Proceeds

whichever is lower will be deducted from cost.

Note: Sale Proceeds other than above, transferred to P&L.


B) By Exchange :

Value of shares to be recognized :

Fair Value of asset surrendered

OR

Fair Value of Investment Obtained

Whichever is more clearly evident.


7. Valuation

Current Investment are valued at Cost Price or Fair Value which ever is Lower.

Any Difference in Valuation is transferred to P&L A/c.

Permanent Investment are valued at Cost Price Only.

However if there is any permanent decline, provision for permanent decline should be made.


8. Reclassification of Investment :

a) From CI to LTI :

Value of LTI will be Cost Price or Fair Value whichever is Lower.

b) From LTI to CI :

Cost Value of CI will be Cost or Carrying Cost whichever is Lower.


9. Disclosure Requirement

i) Investment should be disclosed as specified in Law or AS.

ii) Investment Valuation Policy be disclosed.

iii) Profit / Loss and earning from Investment shall be disclosed in P&L a/c.

Www.SafeEcollege.com1 Accounting for Investments AS 13.

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