Accounting standard 13

Accounting for Investment

1. A CCOUNTING STANDARD- 13 ACCOUNTING FOR INVESTMENT

2. ACCOUNTING FOR INVESTMENT The Statement deals with accounting for investments in the financial statement of enterprises and related disclosures. INVESTMENTS Investment are the assets held by an enterprise for earning income by way of dividend, interest and rental for capital appreciation or for other benefits to the investing enterprise. Assets held as stock-in-trade are not investment.

3. DOESN’T APPLICABLE TO This Statement does not deal with:- The bases for recognition of interest, dividend, and rental earned on investment which are covered by AS-9 on Revenue Recognition. Operating or Finance lease. Investment of retirement benefit plans and life insurance company and mutual funds and/or related asset management companies, bank and public financial institution . Venture Capital Fund

4. DEFINITION Investment classified as long term investment and current investment. CURRENT INVESTMENT A Current investment is an investment that by its nature readily realisable and is intended to be held for not more than one year from the date on which such investment is made. Current investment are in the nature of current assets. LONG TERM INVESTMENT A Long term investment other than a current investment .

5. INVESTMENT PROPERTY An investment property is an investment in land or building that are not intended to be occupied subsequently for use by or in the operation of, the investing enterprises. This may be typical of a company dealing in properties. MARKET VALUE OF INVESTMENT It is the amount obtainable from the sale of investment in an open market, net of expenses necessarily to be incurred on or before disposal.

6. FAIR VALUE OF INVESTMENT Fair value of investment is the amount for which an asset could be exchanged between a knowledgeable willing seller in an arm’s length transaction. Market value is the amount obtainable from the sale of an investment in open market, net of expenses necessarily to be incurred on or before disposal. Some investments have no physical existence and are represented merely by certificates or similar document while other exists in physical form. The nature of an investment may be that of equity or debt other than short or long term loan or trade debt.

7. COST OF INVESTMENT The cost of investment includes cost of acquisition charges such as brokerage, fees and duties. If an investment is acquired or partly acquired, by issue of share or other securities, the acquisition cost is the fair value of securities issued. If an investment is acquired in exchange or partly exchange, for another assets, the acquisition cost of investment is determined by reference to the fair market value of the assets given up . Continue….

8. Interest, dividend and rental receivables in connection with an investment are generally regarded as income, being return on investment. However in certain circumstances such inflow represent a recovery of cost and do not form a part of income.

9. CARRYING AMOUNT OF INVESTMENT CURRENT INVESTMENT The carrying amount for current investment is the lower of cost and fair value. This follows the principles of conservation. LONG TERM INVESTMENT Long term investment are usually carried at cost. However, when there is decline, other than temporary, in the value of a long term investment, the carrying amount is reduced to recognize the decline.

10. DISPOSAL OF INVESTMENT On the disposal of an investment, the difference between the carrying amount and the disposal proceed, should be charged or credited to profit and loss statement. When disposing of a part of holding of individual investment, the carrying amount should be allocated to that part and is to be determined on the basis of the average carrying amount of the total holding of the investment. In respect of share, debentures and other securities held as stock-in-trade, the cost of stock disposed off is determined by applying an appropriate cost formula.

11. DISCLOSURES IN FINANCIAL STATEMENT The accounting policies for determination of carrying amount of investment. The amount included in profit or loss statement for: (a) Interest, dividend, rental on investment, profit and losses on sale on current and long term investment. (b) Aggregate amount of quoted and unquoted investment. (c) Other disclosures as specifically required by the relevant statue governing the enterprises.