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Accounting Standard -13 Accounting for Investment By: CA. ANIL MATHUR Jaipur

Accounting Standard -13 Accounting for Investment By: CA. ANIL MATHUR Jaipur. Introduction :-. Originally issued in 1993 Effective from financial statements covering period commencing on or after 01.04.1995 Mandatory in nature

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Accounting Standard -13 Accounting for Investment By: CA. ANIL MATHUR Jaipur

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  1. Accounting Standard -13 Accounting for Investment By: CA. ANIL MATHUR Jaipur

  2. Introduction :- Originally issued in 1993 Effective from financial statements covering period commencing on or after 01.04.1995 Mandatory in nature Deals with accounting for investment in financial statements & related disclosure

  3. DEALS WITH Accounting for investment in financial statements :- - Classification of Investment - Cost of investment - Carrying amount / Valuation - Disposal of investment - Reclassification of Investment Disclosure in Financial Statements

  4. Does not deal with : • Bases for recognition of interest, dividends & rentals earned on investment which are covered by AS-9 • Operating/finance leases • Investments of retirement benefit plans and life insurance enterprises • Mutual Funds and Venture Capital Fund … and/or related Assets management … Companies, banks & Public Financialinstitutions

  5. Investments • Assets held for earning income, capital appreciation , other benefits. Stock-in-trade is not investment • Current investment • Investment readily realisable and is intended to be held for not more than one year from the date of making such investment • Long term investment • Investment other than current investment • Investment property • Investment in land/buildings that are not intended to be occupied substantially for use or in operations • Fair Value • Amount for which an asset could be exchanged in an arm’s length transactions (i.e. Market value or Net realisable value) • Market value • Amount, net of expenses, obtainable from the sale of investment in open market DEFINITIONS

  6. Forms of Investments Different reasons Major/ minor activity Tangible and intangible form Nature may be debt/ equity Most investment represent financial rights Existence of market Ascertainment of Value

  7. Classificationof Investment

  8. COST OF INVESTMENT • should include acquisition charges (brokerage, fee, duties etc.) • if acquired by issue of shares/securities then fair value of such shares/securities should be taken as cost • if acquired in exchange of other assets then cost determined by reference to fair value of asset given up • Fair value of investment acquired may be appropriate if clearly evident

  9. COST OF INVESTMENT – OTHERS • Interest/ Rentals/ Dividends • - Are generally Income • - However it may be recovery of cost which relates to pre acquisition period. • Rights Shares • - If rights offered / subscribed - add to the carrying amount of original shares • - If not subscribed but sold - sale proceeds credited P & L • - If acquired on cum – right basis and the market value of investments immediately thereafter is lower from the cost at which acquired , appropriate to apply sales proceeds of rights to reduce carrying amount of investments to the market value.

  10. Carrying Amount • CURRENT INVESTMENTS • Lower of cost & F V • B. LONG-TERM INVESTMENTS • Usually at cost • However, provision be made for decline in value, which is not temporary, on individual basis • Reverse the provision if rise in investment • C. Investment property • If investment in shares coupled with right to hold investment property , both will be added together

  11. Charge / credit to P&L a/c • Any reduction / reversal of reduction in carrying amount • On disposal, the surplus / deficiency

  12. Reclassification

  13. Income from investments separately for current/LT at gross figure • Profit/Loss on disposal of investments and changes in carrying amount separately for current/LT investments • Significant restrictions on ownership/realisability of income/disposal proceeds • Aggregate amount of quoted/unquoted investments and MV of quoted investments • Other statutory disclosures as applicable to entity DISCLOSURE

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