Accounting Standard - 13
ACCOUNTING FOR INVESTMENTS
Investment means any asset held for earning income or for capital appreciation.
The scope of this AS covers all investments including current investment that includes stock in trade of shares/debentures as per ICAI guidelines.
It also deals with the investment classification and its cost, carrying amt, disposal, reclassification, & disclosures.
It doesn’t apply for the bases of income earned on investment, any investments in lease, for retirement benefit plans & life insurance enterprises, mutual fund, venture capital funds, banks& public fin institutons.
Investments are classified as Long term & Current.
Definitions: Investment which is intended to hold not more than a year is a Current investment. Long term investment is which other than current investment. Investment property means investment in land or building held only for earning income or for capital appreciation without earning income, and that property should not be used for business use or for any of its operations
Cost of investment = purchase price + acquisition charges(brokerage, fee, duties, etc.,). Fair value of asset given up or fair value of investment which is more evident. The pre-acquisition interest, if any included in cost and received after purchase is deducted from cost. Dividend declared for pre-acquisition period should be deducted after the receipt of dividend from the cost of investment. Right shares acquired added to cost & if it’s sold then amt on sale is deducted from cost of investment on the date of sale if such right is a cum right, else the sale amt will be recognised in P&L account.
The carrying amt for--- Current Investment is lower of cost or realizable value. Any reduction in realizable value debited to P&L account & credited if any increase in the realizable value to the extent of cost----long term investment is carried at cost, any decline which is not permanent in nature is reduced by the amt of decline & the same is debited to P&L a/c and this is reversed due to a non-temporary(permanent) rise in value.---- the cost of investment properties is cost of hsres held in case of cooperative society added to cost of investment property purchased in co-operative society & accounted as only long term investment.
When the asset is disposed then the diff., b/w carrying amt & net sale proceeds recognized in p&l account & if disposal is part of asset then the carrying cost is based on average carry amt of total amt.
Investment can be reclassified from-- long term to current investment on basis of - lower of cost or carrying amt on transfer date—current investment to long term on basis of - lower of cost or fair value on transfer date
Disclosure of --a/cing policies for investment valuation – classification of investment into long term and current – separate aggregate amt of quoted or unquoted securities – significant restrictions i.e., like minimum holding period to sale, utilization of or non remittance of sale proceeds held out of India.
Difference b/w As 13, IFRS/IAS & US GAAP: AS 13 vs IFRS/IAS – AS 13 covers all investment of property, in subsidiary, associates, & fin. Investments. – Where as IFRS/IAS is more comprehensive, IFRS 30 covers investment of property, and IFRS/IAS 32,39 covers financial instruments
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