AS-13(accounting for inventeries)
This query is : Resolved
24 November 2007
Dear all
I am intrested to know detailed
information about classification,reclassification,valution of investments with examples
I am intrested to know detailed
information about classification,reclassification,valution of investments with examples
24 November 2007
s
24 November 2007
AS-13 Investments
This states on Investments made.
AS-13 does not apply to the Banks.
It classifies investments into tade and non-trade. It states of valuation. I will mail you all the details with examples as it runs into pages. drk59@rediffmai.com
This states on Investments made.
AS-13 does not apply to the Banks.
It classifies investments into tade and non-trade. It states of valuation. I will mail you all the details with examples as it runs into pages. drk59@rediffmai.com
26 November 2007
Classification of Investments
1. Enterprises present financial statements that classify fixed assets,
investments and current assets into separate categories. Investments are
classified as long term investments and current investments. Current
investments are in the nature of current assets, although the common
practice may be to include them in investments.
2. Investments other than current investments are classified as long term
investments, even though they may be readily marketable.
Cost of Investments
Accounting for Investments 191
1. The cost of an investment includes acquisition charges such as
brokerage, fees and duties.
2. 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 value of the securities issued.
3. 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. Itmay be appropriate to consider the fair
value of the investment acquired if it is more clearly evident.
4. Interest, dividends and rentals receivables in connection with an
investment are generally regarded as income, being the return on the
investment. However, in some circumstances, 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 pre-acquisition portion is deducted from cost.When dividends
on equity are declared from pre-acquisition profits, a similar treatment may
apply. If it is difficult tomake such an allocation except on an arbitrary basis,
the cost of investment is normally reduced by dividends receivable only if
they clearly represent a recovery of a part of the cost.
5. When right shares offered are subscribed for, the cost of the right
shares is added to the carrying amount of the original holding. If rights are
not subscribed for but are sold in the market, the sale proceeds are taken to
the profit and loss statement. However, where the investments 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
1. 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 value generally provides the best evidence of fair value. The
valuation of current investments at lower of cost and fair value provides a
prudent method of determining the carrying amount to be stated in the
balance sheet.
2. Valuation of current investments on overall (or global) basis is not
considered appropriate. Sometimes, the concern of an enterprise may be
with the value of a category of related current investments and not
with each individual investment, and accordingly the investments may 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.
3. 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
4. Long-term investments are usually carried at cost. However, when
there is a decline, other than temporary, in the value of a long term
investment, the carrying amount is reduced to recognise the decline.
Indicators of the value of an investment are obtained by reference to its
market value, the investee’s assets and results and the expected cash flows
from the investment. The type and extent of the investor’s stake in the
investee are also taken into account. Restrictions on distributions by the
investee or on disposal by the investor may affect the value attributed to the
investment.
5. 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.
6. 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 investment, or if the reasons
for the reduction no longer exist.
Reclassification of Investments
1. 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.
2. 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.
1. Enterprises present financial statements that classify fixed assets,
investments and current assets into separate categories. Investments are
classified as long term investments and current investments. Current
investments are in the nature of current assets, although the common
practice may be to include them in investments.
2. Investments other than current investments are classified as long term
investments, even though they may be readily marketable.
Cost of Investments
Accounting for Investments 191
1. The cost of an investment includes acquisition charges such as
brokerage, fees and duties.
2. 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 value of the securities issued.
3. 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. Itmay be appropriate to consider the fair
value of the investment acquired if it is more clearly evident.
4. Interest, dividends and rentals receivables in connection with an
investment are generally regarded as income, being the return on the
investment. However, in some circumstances, 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 pre-acquisition portion is deducted from cost.When dividends
on equity are declared from pre-acquisition profits, a similar treatment may
apply. If it is difficult tomake such an allocation except on an arbitrary basis,
the cost of investment is normally reduced by dividends receivable only if
they clearly represent a recovery of a part of the cost.
5. When right shares offered are subscribed for, the cost of the right
shares is added to the carrying amount of the original holding. If rights are
not subscribed for but are sold in the market, the sale proceeds are taken to
the profit and loss statement. However, where the investments 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
1. 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 value generally provides the best evidence of fair value. The
valuation of current investments at lower of cost and fair value provides a
prudent method of determining the carrying amount to be stated in the
balance sheet.
2. Valuation of current investments on overall (or global) basis is not
considered appropriate. Sometimes, the concern of an enterprise may be
with the value of a category of related current investments and not
with each individual investment, and accordingly the investments may 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.
3. 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
4. Long-term investments are usually carried at cost. However, when
there is a decline, other than temporary, in the value of a long term
investment, the carrying amount is reduced to recognise the decline.
Indicators of the value of an investment are obtained by reference to its
market value, the investee’s assets and results and the expected cash flows
from the investment. The type and extent of the investor’s stake in the
investee are also taken into account. Restrictions on distributions by the
investee or on disposal by the investor may affect the value attributed to the
investment.
5. 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.
6. 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 investment, or if the reasons
for the reduction no longer exist.
Reclassification of Investments
1. 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.
2. 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.
27 November 2007
Hai Vineet,
How r u ? Iam fine here.Thank u for sending me the reply. iam very thankful to u bcos u have send me the as-13. well u please be helpful to others like me who get the doubts.
Any iwish u a hearty thankful to u.
Bye
Urs
Pavan kumar
How r u ? Iam fine here.Thank u for sending me the reply. iam very thankful to u bcos u have send me the as-13. well u please be helpful to others like me who get the doubts.
Any iwish u a hearty thankful to u.
Bye
Urs
Pavan kumar
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