ACCOUNTING FOR INVESTMENTS (AS 13)

 ACCOUNTING FOR INVESTMENTS (AS 13)

This Accounting Standard comes into effect for financial statements covering periods

commencing on or after April 1, 1995.

This Statement does not deal with:

a. The bases for recognition of interest, dividends and rentals earned on investments which

are covered by AS 9.

b. Operating or finance leases.

c. Investments of retirement benefit plans and life insurance enterprises and

d. Mutual funds and/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, 1956.

Fair value is the amount for which an asset could 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.

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

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’.

Enterprises hold investments for diverse reasons. For some enterprises, investment activity is

a significant element of operations, and assessment of the performance of the enterprise may

largely, or solely, depend on the reported results of this activity.

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 other investments, an active market does not exist and other means are used to determine

fair value.

Classification of Investments

A current investment is an investment that is by its nature readily realisable and is intended to

be held for not more than one year from the date on which such investment is made.