Accounting standard 30,31,32

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

27 January 2013
As per AS 30,31,32 -What is procedure for

1.accounting of Equity shares , their loss/ gains and

2.accounting of Futures and options.

in case of INVESTMENT COMPANY.
(both intial and subsequent measurement)???

Further what is the procedure of accounting of Collateral Shares appearing in Balance Sheet in opening stock ??? (Pledged for Mark to margin money of futures with their Broker. The Broker has the right to sell it)

PLEASE EXPLAIN IN A LAYMAN LANGUAGE. IN A SIMPLER WAY.

Querist : Anonymous

Querist : Anonymous (Querist)

28 January 2013 Isn't there any one can reply this .... Come on Caclub!!!!!!!!!

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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14 July 2024 Let's break down the accounting procedures for an investment company according to Accounting Standards (AS) 30, 31, and 32, focusing on equity shares, gains/losses, futures and options, and collateral shares:

### 1. Accounting of Equity Shares:

**Initial Measurement:**
- Equity shares are initially recorded at their purchase cost, including transaction costs (like brokerage fees).
- For example, if an investment company buys 1,000 shares of ABC Ltd at ₹100 per share and incurs ₹1,000 in brokerage fees, the initial cost recorded would be = ₹1,01,000.

**Subsequent Measurement (at each reporting date):**
- Equity shares are generally classified as 'at fair value through profit or loss' (FVTPL) unless they are held for strategic purposes or classified under other categories.
- Fair value changes (gains or losses) are recognized in the profit and loss account (income statement) for the period in which they occur.
- For example, if the fair value of the 1,000 shares of ABC Ltd increases to ₹110 per share by the next reporting date, the investment company recognizes a gain of ₹10,000 (1,000 shares × (₹110 - ₹100)) in the profit and loss account.

### 2. Accounting of Futures and Options:

**Initial Measurement:**
- Futures and options are initially recorded at their fair value on the date of acquisition.
- Fair value includes the market price of the contract at the time of purchase.
- For instance, if an investment company buys a futures contract for crude oil at ₹5,000 and the fair value on the acquisition date is ₹5,200, it is recorded at ₹5,200.

**Subsequent Measurement (at each reporting date):**
- Futures and options are also classified as 'at fair value through profit or loss'.
- Changes in fair value are recognized in the profit and loss account for the period.
- For example, if the fair value of the crude oil futures contract decreases to ₹4,800 by the next reporting date, the investment company recognizes a loss of ₹400 in the profit and loss account.

### 3. Accounting of Collateral Shares:

**Initial Measurement:**
- Collateral shares (shares pledged as collateral) are initially recorded at their fair value on the date they are pledged.
- The fair value is based on the market price of the shares on the date of the pledge.

**Subsequent Measurement (at each reporting date):**
- Collateral shares pledged as security for margin money on futures contracts are still recognized in the balance sheet at their fair value.
- If the broker exercises the right to sell the collateral shares due to margin calls, any changes in fair value are recognized in the profit and loss account.

### Summary:

- **Equity Shares:** Recorded at purchase cost initially, with subsequent fair value adjustments recognized in profit and loss.
- **Futures and Options:** Initially recorded at fair value, with changes in fair value recognized in profit and loss.
- **Collateral Shares:** Initially recorded at fair value when pledged, with any subsequent changes in fair value recognized in profit and loss if the broker sells them due to margin calls.

These accounting treatments ensure transparency and accurate reflection of the investment company's financial performance and position in accordance with AS 30, 31, and 32. For precise application and compliance, consulting with a qualified accountant or financial advisor familiar with these standards is advisable.

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