AS-13 – Accounting for Investments

The standard deals with accounting for investments in the financial statement of enterprises and related disclosures. 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 investments. An enterprise should disclose current investments and long-term investments distinctly in its financial statements. The cost of an investment should include acquisition charges such as brokerage, fees and duties. If an investment is acquired, or partly acquired, by issue of shares or other securities, the acquisition cost should be the fair value of the securities issued. If an investment is acquired in exchange for another asset, the acquisition cost of the investment should be determined by reference to the fair value of asset given up.

Investments classified as current investments should be stated at lower of cost and fair value while long-term investments be stated at cost with provision for diminution to recognise a decline. Any reduction in the carrying amount and any reversals of such reductions should be charged or credited to the profit and loss statement. On disposal of an investment, the difference between the carrying amount and net disposal proceeds should be charged or credited in the profit and loss statement. When disposing of a part of the holding of an 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. The standard requires the disclosure of accounting policies for determination of carrying amounts of investments, classification of investments, the amount included in the income statement in respect of interest, dividends, rentals on investments, profits and losses on sale of current and long-term investments.