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Accounting Standard 13 – Accounting for investments

Accounting Standard 13 – Accounting for investments

This Standard deals with accounting for investments in the financial statements of enterprises and related disclosure requirements.

Doesn’t applicable to:

1. Leases
2 .Basis of accounting for interest, dividends etc.
3.Investments of retirement benefit plans and life insurance enterprises.
4. Mutual funds , AMCs, banks and Financial institutions.
5. Venture capital funds .

Investment :

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 :

A current investment is an investment that is by its nature readily realisable 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 tha are not intended to be occupied substantially for use by, or in th 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 appropriat e circumstances, market value or net realisable 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.

Classification :

An entity 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 reclassified as long term investments, even though they may be readily marketable.

Cost :

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.

Valuation :

Current Investment :

Current Investment which are intended to be held not for more than one year at cost or fair value whichever is lower.

Long term investment :

Long term ,other than current investments are valued at cost And Premium if any paid over redemption value to be amortised over the remaining period to maturity
And only other than temporary diminution in value is provided.
consider market value, assets of investee, expected cashflows etc. And carrying amount is determined on individual investment basis

Investment property :

The cost of any shares in a company or in a cooperative society ,the holding of which is directly related to the right to hold the investmen property, is added to the carrying amount of the investment property.

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.

Disclosure :

1. Accounting policy.

2.Classification of investments.

3.Separately for long term and short term investments

a) Income to be disclosed as gross and tds.

b)show income from subsidiaries separately.

4.Profit/loss on disposal.

5.Changes in carrying amounts

6.significant restrictions on ownership rights, realisability.

Accounting Standard 13 – Accounting for investments


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