Hi all,
I had a conceptual query regarding accounting of sale proceeds of rights on shares acquired on cum-right basis.
As per para 13 of AS13 (Accounting for Investments) -
When right shares offered are subscribed for, the cost of the right shares is added to the carrying amount of the original holding. If rights are not subscribed for but are sold in the market, the sale proceeds are taken to the profit and loss statement. However, where the investments are acquired on cum-right basis and the market value of investments immediately after their becoming ex-right is lower than the cost for which they were acquired, it may be appropriate to apply the sale proceeds of rights to reduce the carrying amount of such investments to the market value.
So, here we are only using the sale proceeds of rights to the extent cost is higher than ex-right market value.
My query is that - why is the full value of sale proceeds not being reduced from the cost? as is done in case of recovery of cost in form of interest (para 12 AS 13)?
Would love to have everyone's inputs.
CAclubindia
