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Unquoted invstments in subsidiaries

Swathy (Article assistant) (63 Points)

18 May 2013

I have a doubt regarding classification of unquoted investments in subsidiary companies. Whether it is in the nature of current asset? Auditor has classified it as current investment. Whether it can be included in the calculation of current ratio? please reply fast.Its urgent

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Yogesh Shah (Managing Corporate Finance) (1051 Points)
Replied 18 May 2013

Hi Swathy,

As per Revised Sch VI, current period means normal operating cycle of a company (normally 1 year). If company acquired investments with an intention to sell it in short run (i.e. before 1 year from date of acquisition), then only it can be classified under 'Current Assets'. All depends on an INTENTION behind acquisition.

If company acquired with an intention to hold it for a long run, then such investments has to be included under 'Non Current Assets'.

Even if company sold it before 1 year, still initially it will be under NCA since 'intention' was to hold for a long run.