As 13

Accounting Standard (AS) 13
Accounting for
Investments
This Standard does not deal with
1. the bases for recognition of interest, dividends and
rentals earned on investments which are covered
by Accounting Standard 9 on Revenue Recognition;
2. operating or finance leases;
3. investments of retirement benefit plans and life
insurance enterprises; and
4. mutual funds and venture capital funds and/or
the related asset management companies, banks
and public financial institutions
Definitions
• 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’.
• A current investment is an investment that is
by its nature readily realizable and is intended
to be held for not more than one year from the
date on which such investment is made.
• A long term investment is an investment
other than a current investment, which gives
the returns to the firm in a longer run.
• An investment property is an investment in
land or buildings that are not intended to be
occupied substantially for use in the
operations of, the investing enterprise.
• 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.
Forms of Investments
• Some investments have no physical existence
and are represented merely by certificates or
similar documents (e.g., shares) while others
exist in a physical form (e.g., buildings).
• 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
exist and other means are used to determine fair
value.
Cost of Investments
• The cost of an investment includes acquisition
charges such as brokerage, fees and duties.
• 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.
• If an investment is acquired in exchange, or part
exchange, for another asset, the acquisition cost
of the investment is determined by reference to
the fair value of the asset given up.
Carrying Amount of Investments
• Investments classified as current investments
should be carried in the financial statements at
the lower of cost and fair value determined
either on an individual investment basis or by
category of investment.
Carrying Amount of Investments
Investments classified as long term investments
should be carried in the financial statements
at cost. However, provision for depreciation
shall be made to recognize a decline, other
than temporary, in the value of the
investments, such reduction being determined
and made for each investment individually.
Changes in Carrying Amounts of
Investments
• 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
• 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.
Reclassification of Investments
• Where long-term investments are reclassified

as current investments, transfers are made at
the lower of cost and carrying amount at the
date of transfer.
• Where investments are reclassified from
current to long-term, transfers are made at
the lower of cost and fair value at the date of
transfer.
Disclosure as per AS-1
Classification of Investments
• An enterprise should disclose current investments and long
term investments distinctly in its financial statements.
• 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
the amounts included in profit and loss
statement for:
• interest, dividends (showing separately dividends
from subsidiary companies), and rentals on
investments showing separately such income from
long term and current investments.
• profits and losses on disposal of current
investments and changes in the carrying amount
of such investments;
• profits and losses on disposal of long term
investments and changes in the carrying amount
of such investments;
• significant restrictions on the right of
ownership, realizability of investments or the
remittance of income and proceeds of
disposal;
• the aggregate amount of quoted and
unquoted investments, giving the aggregate
market value of quoted investments

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Accounting Standard (AS) 13

• Investments are assets held by an enterprise

• Where long-term investments are reclassified

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