What is the meaning of this sentence?
AS 13
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.
1 Replies
shivna majmudar
(CA in practice)
(22 Points)
Replied 01 March 2017
It means that - when the investments are acquired immediately before a rights issue is declared ( cum- right means- inclusive of rights issue) , and post the issue of rights shares , the market value of such investment reduces- then you have to reduce the carrying amount of investments by deducting the price of rights shares -doing so will reflect the correct carrying cost of investments in the books of accounts
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