ACCOUNTING STANDARD - 13

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ACCOUNTING STANDARD - 13
ACCOUNTING FOR INVESTMENTS
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PURPOSE

• Accounting for investments in the financial
  statements of enterprises and related disclosure
  requirements.

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DEFINITION

• 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 as stock-in-trade are not
  investments.

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CLASSIFICATION

• 1. LONG TERM INVESTMENTS
• 2. CURRENT INVESTMENTS.

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COST OF INVESTMENTS

• INCLUDES
• 1. Basic cost
• 2. Acquisition charges such as brokerage, fees
  and duties.

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OTHER MODES

• If an investment is acquired by the issue of
  shares or other securities, the acquisition cost
  is the Fair value of the securities issued.
• The right shares, if subscribed to is added
  to the carrying amount of original shares but if
  rights are sold, the sale proceeds are treated as
  income and credited to profit and loss statement.

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INCOME FROM INVESTMENTS

• Interest, dividend and rentals receivable in
  respect of such investments are treated as income
  except where such interest or dividend relates to
  pre-acquisition period, in which case, such
  interest or dividend received is reduced from the
  acquisition cost.

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CARRYING AMOUNT OF INVESTMENTS

• Current Investments - At Lower of cost or
  fair value.
• Long term investments - At Cost.
• However, in case of a permanent decline,
  provision for diminution shall be made.
• Any reduction in the carrying amount should be
  charged to the profit and loss statement.

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BASIS

• Current Investments
• Either on an individual investment basis or by
  category of investment, but not on an overall
  basis.
• Long term investments
• Each investment individually

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DISPOSAL

• When any investments is sold, the difference
  between the carrying amount and net sale proceeds
  should be charged or credited to the profit and
  loss statement
• In case of partial disposal, the carrying amount
  to be allocated to that part is to be determined
  on the basis of the average carrying amount of
  the total holding of the investment.

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DISCLOSURES

• 1. Classification of investments,
• 2. The accounting policies for determination of
  carrying amount of investments,
• 3. The amounts included in profit and loss
  statement for interest, dividends,
  rentals,profits and losses on disposal of
  investments
• contd..

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DISCLOSURES

• 4. Significant restriction on the right of
  ownership, realisability of investments or the
  remittance of income and proceeds of disposal
• 5. The aggregate amount of quoted and unquoted
  investments
• 6. Other disclosures specifically required by
  the relevant statute.