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Accounting for Investments w.e.f 30-3-2016

AS - 13 - B. Accounting Standard (AS) - Companies Law - AS - 13 - [W.e.f. 30-3-2016 - See Notification no. 364E dated 30-3-2016] Accounting Standard (AS) 13 Accounting for Investments (This Accounting Standard includes paragraphs set in bold italic type and plain type, which have equal authority. Paragraphs in bold italic type indicate the main principles. This Accounting Standard should be read in the context of the General Instructions contained in part A of the Annexure to the Notification.) .....

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or the related asset management companies, banks and public financial institutions formed under a Central or State Government Act or so declared under the Companies Act, 2013. Definitions 3. The following terms are used in this Standard with the meanings assigned: 3.1 Investments are assets held by an enterprise for earning income by way of dividends, interest, and rentals, for capital appreciation, or for other benefits to the investing enterprise. Assets held as stock-in-trade are not investme .....

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be exchanged between a knowledgeable, willing buyer and a knowledgeable, willing seller in an arm s length transaction. Under appropriate circumstances, market value or net realisable value provides an evidence of fair value. 3.6 Market value is the amount obtainable from the sale of an investment in an open market, net of expenses necessarily to be incurred on or before disposal. Explanation Forms of Investments 4. Enterprises hold investments for diverse reasons. For some enterprises, investm .....

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ng to the holder and usually bearing interest; alternatively, it may be a stake in the results and net assets of an enterprise such as an equity share. Most investments represent financial rights, but some are tangible, such as certain investments in land or buildings. 6. For some investments, an active market exists from which a market value can be established. For such investments, market value generally provides the best evidence of fair value. For other investments, an active market does not .....

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ents, even though they may be readily marketable. Cost of Investments 9. The cost of an investment includes acquisition charges such as brokerage, fees and duties. 10. If an investment is acquired, or partly acquired, by the issue of shares or other securities, the acquisition cost is the fair value of the securities issued (which, in appropriate cases, may be indicated by the issue price as determined by statutory authorities). The fair value may not necessarily be equal to the nominal or par v .....

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umstances, such inflows represent a recovery of cost and do not form part of income. For example, when unpaid interest has accrued before the acquisition of an interest-bearing investment and is therefore included in the price paid for the investment, the subsequent receipt of interest is allocated between pre-acquisition and post-acquisition periods; the preacquisition portion is deducted from cost. When dividends on equity are declared from pre-acquisition profits, a similar treatment may appl .....

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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. Carrying Amount of Investments Current Investments 14. The carrying amount for current investments is the lower of cost and fair value. In respect of investments for which an active market exists, market va .....

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y be carried at the lower of cost and fair value computed categorywise (i.e. equity shares, preference shares, convertible debentures, etc.). However, the more prudent and appropriate method is to carry investments individually at the lower of cost and fair value. 16. For current investments, any reduction to fair value and any reversals of such reductions are included in the profit and loss statement. Long-term Investments 17. Long-term investments are usually carried at cost. However, when the .....

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uted to the investment. 18. Long-term investments are usually of individual importance to the investing enterprise. The carrying amount of long-term investments is therefore determined on an individual investment basis. 19. Where there is a decline, other than temporary, in the carrying amounts of long term investments, the resultant reduction in the carrying amount is charged to the profit and loss statement. The reduction in carrying amount is reversed when there is a rise in the value of the .....

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ment, the difference between the carrying amount and the disposal proceeds, net of expenses, is recognised in the profit and loss statement. 22. When disposing of a part of the holding of an individual investment, the carrying amount to be allocated to that part is to be determined on the basis of the average carrying amount of the total holding of the investment.4 Reclassification of Investments 23. Where long-term investments are reclassified as current investments, transfers are made at the l .....

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y dividends from subsidiary companies*), and rentals on investments showing separately such income from long term and current investments. Gross income should be stated, the amount of income tax deducted at source being included under Advance Taxes Paid; (ii) profits and losses on disposal of current investments and changes in carrying amount of such investments; (iii) profits and losses on disposal of long-term investments and changes in the carrying amount of such investments; (c) significant .....

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ts. 27. Further classification of current and long-term investments should be as specified in the statute governing the enterprise. In the absence of a statutory requirement, such further classification should disclose, where applicable, investments in: (a) Government or Trust securities (b) Shares, debentures or bonds (c) Investment properties (d) Others-specifying nature. Cost of Investments 28. The cost of an investment should include acquisition charges such as brokerage, fees and duties. 29 .....

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ce to the fair value of the asset given up. Alternatively, the acquisition cost of the investment may be determined with reference to the fair value of the investment acquired if it is more clearly evident. Investment Properties 30. An enterprise holding investment properties should account for them in accordance with cost model as prescribed in AS 10, Property, Plant and Equipment. Carrying Amount of Investments 31. Investments classified as current investments should be carried in the financia .....

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Amounts of Investments 33. Any reduction in the carrying amount and any reversals of such reductions should be charged or credited to the profit and loss statement. Disposal of Investments 34. On disposal of an investment, the difference between the carrying amount and net disposal proceeds should be charged or credited to the profit and loss statement. Disclosure 35. The following information should be disclosed in the financial statements: (a) the accounting policies for determination of carr .....

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current investments and changes in the carrying amount of such investments; and (iii) profits and losses on disposal of long term investments and changes in the carrying amount of such investments; (d) significant restrictions on the right of ownership, realisability of investments or the remittance of income and proceeds of disposal; (e) the aggregate amount of quoted and unquoted investments, giving the aggregate market value of quoted investments; (f) other disclosures as specifically require .....

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der formulation, which will, inter alia, cover accounting for livestock. Till the time, the Accounting Standard on Agriculture is issued, accounting for livestock meeting the definition of Property, Plant and Equipment, will be covered as per AS 10 (Revised), Property, Plant and Equipment. 2 Shares, debentures and other securities held as stock-in-trade (i.e., for sale in the ordinary course of business) are not investments as defined in this Standard. However, the manner in which they are accou .....

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e head current assets . 4 In respect of shares, debentures and other securities held as stock-in-trade, the cost of stocks disposed of is determined by applying an appropriate cost formula (e.g. first-in, first-out, average cost, etc.). These cost formulae are the same as those specified in Accounting Standard (AS) 2, in respect of Valuation of Inventories. * As defined in AS 21, Consolidated Financial Statements * Paragraph 23 shall not apply to any scheme of amalgamation approved under the Com .....

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