AS

13.1
AS I3 -
OBIECTIVES ACCOUNTING FOR INVESTMENT
Prescribe Accounting Treatment of various
Enterprises investments in the financial statements of the
Disclosure of lnvestm ents

2. DEFINITIONS
Investments: Investments are assets held bu an enterprise for
dividends, interest, and rentals, for capital earning income by way ot
enterprise, Assets held as stock-in-trade areappreciation,
or for other benefits to the
not 'investments'. investing
Curent investment:Acurrent investment isan investment that is by nature
and is intended to be held for not
more than one year from the date on
readily realisable
is made. which such investment
Long tem investment : A long term
investment.
investment is an investment other than current

Investment property : An investment property is an investment in

not intended to be occupied land or buildings that are
substantially for use by, or in the operations of, the
investing
enterprise. It will be accounted as long term investment.
Fair Value : Fairvalue is amount for which an asset could be
between knowledgeable, willing parties in an arms exchanged or a liability settled,
provides an evidence of fair values lengthtransaction, Market value or NRV

WHEN AS I3 IS NOT APPLICABLE ?

The bases for recognition of interest, dividend and rental (covered in AS 9)

Operating or Finance lease (covered in AS I9)

Investment of retirement benefit plans and life insurance enterprises (IRDA guidelines)

Mutual funds (guidance note)

Venture capital Funds

Banks and Public Financial lnstitutions (RBI guidelines)

AS 13 |Accounting For Investment

4. cOST OF INVESTMENT 3)
The cost of an investment should include acquisition charges such as
duties, brokerage, fees
Acquisition cost

Brokerage
Fees

Duties

Where acquisition of shares of a Co-op. society or company is necessary for

the cost of such shares should also be added to the cost of property. owing aproperty,
How should cost of an investment be detemined
Cost of an investment can be determined in the following manner:
Cost of an investment

Purchase price Incidental expenses

(e.g, brokerage, fees,
HOw to compute purchase price: calculation of duties, etc.)
purchase price does not involve complexities
when actual cash has been paid for acquiring the
investm ents. HOweve, when this is not the
case, certain basis need to be adopted for
computing purchase price. Under such
circumstances, AS 13 prescribes the following guidelines for computing
purchase price:
S. INVESTMENT ACQUIRED BY ISSUVE OF SHARES OR OTHER
If an SECURITIES
investment is acquired by issuing share or other securities then
issued will be taken as cost of the fair value of security
acquisition.
6. INVESTMENT ACQUIRED IN EXCHANGE FOR ANOTHER ASSET
If the investment is acquired by giving any other asset then fair value of
or the fair value of the asset 9rven r
investment acquired if it is more clearly evident will be considered as cost
of acquisition.

www.Swapnilpatni.com CA Anandh RBhanggay"

 13.3
acr OF INVESTMENTS ACQUIRED FOR
CONSIDERATION OTHER THAN CASH

NSdeion i the fom of shores Consideration in the fom of other assets

R(other thon shares ond securnities)
(st of vestments acqumed Cost of imvestments acquired foir value of the osset qiven up
sa veke of the seties issued
HONever, cost of investments acquired may be determined wth
reference to fai value o the investment acquired if it is
More clearly evident.

7. ADJUSTMENT TO CARRYING AMOUNT OF INVESTMENT

Iterest, dividends and rentals receivables in connection with an investment are generally
regarded as incoe, being the retun on the investment. HOwever, pre-acquisition interest and
dividends on eguity nhich are declared from pre-acquisition profits are deducted from the
cost of investment. Such înflows represent recovery of cost and do not form part of income.

8. ADJUSTMENT OF RIGHT AND RIGHT SHARES

CASE I When rights shares offered are subscribed for
The cost of the right shares is added to the carrying amount of the
original holding.
CASE 2 f nights are not subscribed for but are sold in the market
Situation a Investments are acquired on cum-rights basis and the market value of
investments immediately after their becoming ex-right is LOWER than
the cost for which they were acquired,
Treatment Applythe sale proceeds of riqhts to reduce the carrying amount of such
investments to the market value.
Situationb Investments are acquired on cum-rights basis and market vaue of
investments immediately after their becoming ex-right is HIGHER than
the cost for which they were acquired,
Treatment The sale proceeds of rights should be recognised in P&L A/C.
Situation c where the investments are acquired on any other basis
Treatment The sale proceeds are taken to the profitand loss statement.

Brokerage etc. paid

CXample :l00Shares of lnfo Co. Ltd. purchased cum ight @ Rs. ISO each.
renunciated at Rs. l000, Market price of
200, 20 Rights shares were offered which were
amount received on
shares after ights issue was Rs. l46 each. Suggest the treatment of the
sale of rights.
Solution :
CA Anandh RBhanggariya
 AS 13 |AccountingFor Investment

Cost of investment
|00 x 1S0
Purchase cost
Add i- Brokerage 206
IS206
over
Market value after the right issue is
100 shares x l46= l4,600
The amount realised by selling of right to be adjusted against cost of investment =S200

14,600 = 600
account = 1000-600 = Rs. Gon
Amount realised to be credited to profit and loSS

9. VALUATION OF INVESTMENT
Current Investment Long termInvestment
1. Should be valued at loner of cost or fair I. Should be valued at cost
value
2. Determined either on an individua 2. provision for diminution shall be made
basis(preferred as more prudent) or by to recognise a decline, other thon
category of investment (ike equity, temporary, in the value of the
preference, convertible debenture, etc.) investments,
3. Global(overall) basis should not be 3. Such reduction being determined cnd
adopted. made for each investment individuals.
4. Comparison between Cost and Fair value 4. Global (overall) basis should not be
and not carrying amount and fair value. adopted.

At ohat value should investments be carried in the balance sheet

Carrying amount of investments when investments is a

Current Investment
Long-Tem Investment
LOwerof
Cost
(i) cost ond
() Foir value

Example An unquoted long term investment is caried in the books of the

lakhs. The published accounts of the investee received by investor at Rs.
the
balance sheet date showed that the company was incurring cashinvestor subsequent to is
share and the investment may not fetch more than Rs. 20,000.
losses with declining m

www.Swapnilpatni.corm CA Anandh RBhanggariya

 Cvample :X Ltd. in its balance sheet 13.5
discloses its
. The protit or loSS on
long term investment areaccounting policy regarding investments as
investment. Hence, no recoqnized at the time of sale of such
provision has been made with respect to
jnvestment. Comment, decrease in value of its
Solution:
Contention of the management is not right. As per AS -13 if there is a perm
the Market Value of the long anent decline in
term investment, the company must
Therefore XLtd. Must make aprovision for decline in make a provision for it.
the Market Value of the shares.
J0. CHANGES IN CARRYING AMOUNTS OF
The reduction in carryinQ amount is INVESTMENTS
reversed when there is a
investment, or if the reasons for the reduction no longer exist. If rise in the value of the
investment and long term investment.Any reduction in the carryingwill apply to both current
of such reduction should be amount and any reversal
charged or credited to the profit and loss
statement.
, DISPOSAL OF INVESTMENTS:
On disposal of an investment, the
difference between the
proceeds should be charged (if loss) or credited if profit) carrying amount and net disposal
tothe profit and loss statement.
2, HOW TO DETERMINE PROFITS,
When part of the holding of an investment is sold
then carying amount for the part sold will
be calculated on average cost basis, If
investment were held as stock-in-trade then the
calculation can be by FIFO or average formula.

3. RE-CLASSIFICATION FROM LONG TERM INVESTMENT (LTI) TO CURRENT

INVESTMENT (CI)
If LTIis transferred to Ci It will be at lower of cost and carrying amount (book value) at
the date of transfer.

4 RE-CLASSIFICATION FROM CURRENT INVESTMENT (CI) TO LONG TERM

INVESTMENT (LTI)
HClis transferred to LTI It will be at lower of cost and fair value at the date of transfer.
Example :
Vdya Ltd. wants to re-classify its investments in accordance with AS 13. Decide on the
amount of transfer, based on the following information:
portion of Current Investments purchased for Rs. 20 lakhs, to be re-classified as Long
Term Investments, as the Company has decided to retain them, The market value as on
the date of Balance Sheet was Rs. 25 lakhs.

swapnilpatni .com CA Anandh RBhanggariya

AS 13 |Accountin For vestent
2. Another ortior of cunent àvestments Nrchased for Rs, Is lakhs, to t
Iono te»ivestents, The »arket valve of these vestments as on the
sheet sRs, 6,S lekhs.
rdatee-clas ibeladnce
of

3. Certain long ten vestments No longer considered for holding purposes, to

as curent vestments. The original cost of these were Rs, I8 lakhs lut
dON to Rs. 12 lekbs to recose pemanent declne, as per AS I3.
Solution
had
berbeeneclas wrif teedn
The transfers shuld be made at loner of (a) Cost, ond (b) Fai value at the date of
1. this case, the transfer should be made at cost (being lower of Rs. 20 lakhs
and
transfe
lakhs) and hence the long tem nvestments should be caried at Rs, 20 lakhs Rs. 2s
2. In the second case, the transfer should be made at Market Value (being lonser of
lakhs and Rs, 6.5 lakhs) and hence the long tem investments should
Rs. Is
be caried at Rs
6.50 lekhs., The loss of Rs. IS - Rs. 6.5 =Rs. 3,S lakhs should be provided for in
Gnd loss Qccont.
the proft
3. Here, the transfer sihould be made at canying amount (being loner of Rs, Ig lobhe.
Rs. 12 lokhs) and hence these reclassified current investments should be caried ot p.
12 lakhs.

IS, DISCLOSURE :
a. The accounting policies for detemination of carying amount of investments, and
b. An enterprise should disclose curent investments and long-tem
investments distinctls in
its financial statements.
Curment and long-tem investments should be further classified as may be required by the
statue goveming it, otherwise classification as follons shallbe made.
Govemment or Trust securities
Shares, debentures or bonds
Investment Properties
others - specifying nature.
c. The amounts incduded in profit and loss statement for :
i. Interest, dividends (shoving separately dividends from subsidiary companies), md
rentals on investments shosing separatels such income from long-tem and cune
investments. Gross income should be stated, the amount of income-tax deducted a*
source being included under Advance Taxes paid;
ii, Profits and losses on disposal of cument investments and changes in the
canyN
amount of such investments:
iù, Profits and losses on disposal of long tem ivestments and changes n the cany"y
amount of such investments;
d. Significont restrictions on the right of onership, realisability of ivestments o
remittance of income and proceeds of disposal;
www.Swapnilpatni.com
AS }|Accounting For Investment
3
13.7

The aggregated amount of quoted and unquoted investments, giving the aggregate market
value of quoted investments;
 Let's Get Started.. Wthclass Wort
I. ICAI Illustration I
nquoted long term investmet is corried in the boobs at oc0st of 2lohe
The
occOunts of the unlisted compony received in May, 2071 shoned thot the compony wos uhihe4
cosh losses with declining morbet shore ond the long term investment moy ma tuch
?20,000. Hon oill you deol voith this in preporing the tinonciol stotements of bLtd
ended 31 st Morch, 201?
Solution
As it is stoted in the question thot finonciol stotements for the yeor ended
20X1 ore under preporation, theviews hove been given onthe bosis thot the finoncial
315t Much
ore yet to be completed and opproved by the Boord of Diectors. hlso, the fall in vale of
investments hos been considered on occount of conditions enisting on the bolance cheet due
Imvestments cdossified os long teVnimvestmentsshould be corriedinthe finonciol
stotemens
cost. HoHever, provision for diminution should be mode to recognise o decline, ther the
temporory, in the volue of the imvestments, such reduction being determined ond mode for ee
investmem individuolly. AS 13 (Reviced) 'hccounting for Investnents´ stotes thot indicotors #
the volue of on investment ore obtoined by reference to its morket value, the inestee':sc
Gnd rets ond the espected cosh flos from the investrnent. on these boses, the foct: s ihe
given cose cleonyuggest thot the provision for diminution should be mode to reduce the comu,
Gmout of long term investment to 20,000 in the finonciol stotements torthe yeor ended 3i
Morch, 20X1.

2. ICAI llustrotion 2/ Inter RTP Nov 20 /IPCCRTP Nov 20/ RTPMoy

2015
X Ltd.on --20%1hod mode on investment of? 600lakhs in the eguityshores of Y
Ltd. of whie
S0% is mode in the long tem cateory ond the rest as temporory
investnent. The resiisaoe
volue of oll wch inestment on 31-3-20X1become 200 lakhs os YLtd. lost o cose of
copyrgr
From the given morket conditions, it is opparent thot the reduction in the value is not temporary
in noture. How will yourecognise the reduction in finoncial statemets for the yeor ended on 3
-3-20X1?
Soltion
Y Ltd. imvested 600 lokhs in the euity shores of YLtd. out of the inters
sorme, the compony
to hold s0% shores for long tem period ie. ? 300 lokhs ond remaining os tenporory (currer
imestmem ie. 300 lokhs. Irespective of the fact thot investment has been held by XLtd. P3
for 3 months (from 1.J. 20%1 to 31.3.20XI), AS I3 (Revised) Ilays emphosis on intention of
investor to clossify the investment os current or long ternn even thoughthe long term investnrt
moy be reodiy morketoble.

CA Anadh RBhargi
 13 |ACCOunting For Investment
13.9

thegiven situatio, the realisable value of all such investments on 31.3. 20XI became 200
akhsie. FJ00 lakhs in respect of current investment and l00 lakhs in respect of long term
jnvestment
oor AS l3 (Revised), Accounting for
e lower of cost and fair value, In
investment,the carrying amount for current investments
respect of current investments for which an active market
wists, market value generally provides the best evidence of fair
value.
ACCordingly, the carrying value of investment held as
temporary investment should be shon ot
ealisable value i.e. at? l00 lakhs. The reduction of ? 200 lakhs in the
carrying value of current
nvestment will be charged to the profit and loss account.
Standard turther states that long-term investments are usually carried at cost.
However, When
there is a decline, other than temporary, in the value of long term
investment, the carrying amount
is reduced to recoqnise the decline.
Here, YLtd. lost a case of copyright which drastically reduced the realisable value of its shares
to one third which is quiet a substantial tigure. Losing the case of
copyright may affect the
business and the performance of the company in long run. Accordingly, it will be appropriate to
reduce the carrying amount of long ternm investment by? 200 lakhs and sho the
investments at
100 lakhs, since the downfall in the value of shares is other than
temporary. The reduction of
1200 lakhs in the carrying value of long term investment will also be
charged to the Statement
f profit and loss.

3. ICAI Illustration 3
M's Innovative Garments Manufacturing Company Limited invested in the shares of another
company on lst October, 20X3 at a cost of 2,50,000, it also earlier purchased Gold of 4,00,000
d Silver of ? 2,00,000 on Ist March, 20XI. Market value as on 3lst March, 20X4 of above
ivestments are as follos:
Porticulars
Shares 2,25,000
6,00,000
Silver 3,S0,000
0above investments ill be shown in the b0oks of accounts of M/s lnnovative Garments
nufacturing Company Limited for the year ending 3ist March, 20X4 as per the provisions of
QuntingStandard 13 "AcCounting for Investments'?
'Auion investment
PAS 13 (Revised) 'Accountino for Investments, for investment in shares - if the
intention to hold for short-term period (less than one year), then it will be
Purchased with aninvestment in case of
assified as Current and to be carried at lower of cost and fair value, i.e.,

CA Anandh RBhanggariya
lpatni com
AS 13 |Accounting For Investment
March
market value (? 2,25,000) 0s on 3/
shares, at lower of cost (R
2,2 5,000,.
2,50,000) and

intention to hold for long term period

(more
2974,14,
Ifthen
equity shares
should be considered with an thon ye,
are acquiredas long-term investment to be shon at cost in the Boloneone he
the COmpany. However, provision for diminution should be made to rec0gnise odecline, if he

than temporars, in the value of the investments.

Gold and silver are generally purchased with an intention to hold it for long term period n
than one year) until and unless aiven otherwise. Hence, the investnent in Gold ond ilver
(purchased on Ist March, 20X1) should continue to be shown ot cost (since there is n9 the
2,00,000
diminution) as on 31st March, 20X4, i.e., ? 4,00,000 and ?
than temporary
though their market values have been increased. respeiv,
4. ICAI lustration 4
ABC Ltd. wants to re-classifu its investments in accordance oith AS 13 (Revised). Decide .
state on the amount of transfer, based on the following information:
Aportion of current investments purchased for 20 lakhs, to be reclassified as lon +ers
investment, as the company has decided to retain them. The market value as on the dote et
Balance Sheet was 25lakhs.
2. Another portion of current investments purchased for IS lakhs, to be reclassified as lorr
term investments. The market value of these investments as on the date of balance sheet os
6.5 lakhs.
3. Certain long term investments no longer considered for holding purposes, to be reclassitied a:
current investments. The original cost of these was I8 lakhs but had been oritten doon to
? 12 lakhs to recognise other than temporary decline as per AS 13 (Revised).
Solution:
As per AS 13 (Revised), where investments are reclassified from current to long- term,
transters
are made at the lower of cost and fair value at the date of transfer.
I, ln the first case, the market value of the investment is 25 lakhs.
which is higher than i5
cost i.e. 20lakhs. Therefore, the transfer to long term
investments should be carried at cost
i.e. 20 lakhs.
2. In the second case, the market value of the
investment is 6.5 lakhs. which is lower th0n i
cost i.e. IS lakhs. Therefore, the transfer to long term
investments should be carried in he
books at the market value i.e. ? 6.5 lakhs. The loss of 8s lokhs
should be charged to pro
and loss account.
As per AS 13 (Revised), where long-term investments are re-clossified as current
investmen
tronsfers are made at the lower of cost and carrying amount at the date of
transter.

www.Swapnilpatni.com CA Anandh RBhanggarya

 I3
AS
|Accounting For Investment
13.11
the third case, the book value of the
investment is 12 lakhs, which is lower than its
cost
: I8 lakhs. Here, the transfer should be at
carrying amount ond hence this re-classified
urrent ivestment should be carried at 12 lakhs.

ICAI Question 9
alue-chip Equity Investments Ltd, wants to re-classify its
(Revised). State the values, at ohich the investments haveinvestments
in accordance with AS 13
cOses:
to be reclassified in the follo»ing
0 Long term investments in Company A, costing 8.5 lakhs are to be re- clossified os
The curent.
cOmpany had reduced the value of these investyments to 6.5 lakhs to recognise other
than temporary' decline in value. The fair value on date of
transfer is 6.8 lakhs.
(ü) Long term investments in Company B,
costing?7 lakhs are to be re-classified as current. The
fair valueon date of transfer is 8 lakhs and
book value is 7 lakhs.
(G) Current investnent in Company C,
costing ? I0 lakhs are to be re-classified as long term os
the company wats to retain them. The
market value on date of transfer is 12lakhs.
Solution:
As per AS I3 (Revised) 'Accounting for
s Current investments,
Investments, where long-term investments are reclassified
transters are made at the lower of cost and carrying amount at
af transfer. And where the date
investments are reclassified from curent to long term, transfers are made
t lower of cost and fair value on the date of
transfer.
kccordingly, the re-classification will be done on the following basis:
GIn this case, carrying am ount of
investment on the date of transfer is less than the cost:
hence this re-classified current investment should be
caried at 6.S lakhs in the books.
The carrying / book value of the long term
investment is same as cost i.e.7 lakhs. Hence
this long term investment will be reclassified as current
investment at book value of 7lakhs
only.
4lnthis case, reclassification of curent investment into long-term investments will be made
atR lolakhs as cost is less than its market value of 12 lakhs.

.Inter
RTP May 2018 /Inter RTP May 2019 / IPCC RTP May 2019
son knlldeal with the follousing in the financial statements of the Paridhi Electronics Ltd.
31.3.17 with reference to AS-13?
Puridhi Ellectronics Ltd. invested inthe shares of another unlised company on May 2012 at a
3,00,000 with the intention of holding more than ayear. The published accounts of

SApnilpatni.com CA Anandh RBhanggariya

AS 13 |Accounting For Investment

cash 13l1o2s es
unlisted Company received in Januaru, 2017 reveals that the cOmpany has incurred
with decline in market share and investment of Paridhi Electronics Ltd. may not
? 45,000. fetch more than
Solution
As per As 13, "Accounting for lnvestments" Investments classified as long term
should be carried in the financial statements at cost. However, provision for
diminutiinovnestmerts
made to recognise a decline, other than temporary, Inin the value of the investments.
such shall be
being determined and made for each investment individually. The standard also
indicators of the value of an investment are obtained by reference to its
market starteeducts ion
thot
mvestee s assets and results and the expected cash flows from the investment. value, the
On this basis, the facts of the case given in the question clearly suggest that
the provision
for
diminution should be made to reduce the carying amount of shares to
<45,000 in the financial statements for the year ended 31st March, 201I7 and charge the.
of loss of 2,5S,000 to profit and loss account. dif erence
7. lnter RTP Nov 2018

Active Builders Ltd, invested in the shares of another company on 3/S

October, 2016 at a cost of
4,s0,000, It also earlier purchased Gold of S,00,000 and Silver of 2,25,000 on 3/st Morch
2014. Market values as on 31st March, 2017 of the above invest1ments are as
follows: shares ?
3,75,000; Gold? 7,s0,000 and silver 4,35,000
HOw oill the above investments be shon in the books of account of
Active Builders Ltd. for the
year ending 315t March, 2017 as per the provision of AS-13?
Solution
As per AS 13 "Accounting for Investments', if the shares are purchased with an
intention to hold
for short-term period then investment will be shon at the
realizable value.
If equity shares are acquired with an intention to hold for long
term period then it will continue
to be shObn at cost in the Balance Sheet of the companu. HOwever,
provision for diminution shal
be made to recognize a decline, if other than temporaru, in the value of the
jnvestments. In the
given case, shares purchased on 31 St October, 2016, oill be valued ot 3.75.000 as on 3/St Marc,
2017, Gold and silver are generally purchased with an intention to hold it for long term pern
until and unless given otherwise. Hence, the investment in gold and silver
(purchased on
March, 2014) shall continue to be shown at cost as on 31st March, 2017 i.e.r S,00,000and
2,25,000 respectively, though their realizable values have been increased.
Thus the shares, gold and silver oill be shown at 3,75,000, S,00,000 and 2,2 5,000 respectively
Active
and hence, total investment will be valued at 1,00,000 in the books of account of M/s
Builders for the year ending 3/St March, 2017 as per provisions of AS 13.

www.Swapnilpatni.com Bh¡nggarya
CA Anandh R
 |AcCOuntingFor investment
3
13.13
RTP
nter, May 2017 Inter RTP Nov 2019 /
IPCC RTP Nov 2019
has
Bank classified its total investment on 31-3-2016 into three
elavailablefor sale (c) held for trading categories (a) held to maturity
as per the RBI Guidelines.
maturity' investments are carried at acquisition cost less amortised amount. 'Available
yeldto
orsale investments are carried at marked to market. 'Held for trading'
oeklu intervals at market rates. Net depreciation, if any, is investments are valued
charged to revenue and net
areciation, it any, is 19nored, Comment whether the polics of the bank is in accordance with
Solution
e ner AS l3 Accounting for lnvestments', the accounting standard is not applicable to
Bank,
surance Company, Mutual Funds. In this case 2 Bank is a bank, therefore, AS 13 does not apply
n it. For banks, the RBI has issued quidelines for classification and valuation of its investment
and 2 Bank should comply oith those RBI Guidelines/Norms. Therefore, though 2 Bank has not
followed the provisions of AS I3, yet it would not be said as non-compliance since, it is complying
pth the norms stipulated by the RBI,

9, Inter RTP May 20/IPCCRTP May 20

Omega Equity Investments Ltd., wants to re-classity its investments in accordance with
AS I3. State the values, at which the investments have to be reclassified in the following
cases

0 Long term investments in Company A, costing 8.5 lakhs are to be re-classified as

current. The company had reduced the value of these investments to 6.5 lakhs to
recognize a permanent decline in value. The fair value on date of transfer is 6.8
lakhs.
() Current investment in Company C, costing 10 lakhs are to be re-classified as long
term as thecompany wants to retainthem. The market value on date of transfer is
12 lakhs.
(u0) Certain long term investments no longer considered for holding purposes, to be
reclassified as current investments. The oriqinal cost of these investments Was I8
lakhs but had been ritten down to 12 lakhs to recognize permanent decline as per
AS 13.

Answer
As per AS 3 'Accounting for lnvestments, where long-term investments are reclassified
a5 Current investments, transfers are made at the lower of cost and carrying amount at
the date of transfer. And ohere investments are reclassified from current to long term,

www.Swapnilpatni.com CA Anandh RBhanggariya

AS 13 1Aecounting For hvestnnent
transfer
transfers are made at lower of cost and fair value on the date of
the re-classification olbe done on the folloning basis:
() this case, canyng amont of imvestment on the date of transfer is
Acless cthanordingy.
the
cOst; hence this re-classified cwnet vestment should be carried at R 6,5
the books, \akhs in
() d» this case, reclassification of cument investment intolong-term investments oill be
Made at olakhs as cost is less thon its market value ofR 12 lakhs.
() n this case, the book value of the investment is 12 lakhs, which is loner
than its
cost ie. ISlakhs, Here, the transfer should be at carrying amount and hence thi
re-classified cunent investment should be carried at R I2 lakhs.

I0, Inter QP May l9

On ISth June, 2018, y limited wants to re-classify its investments in accordance with A
13 (revised), Decide and state the amount of transfer, based on the following information:
1. Aportion of long tem investments purchased on Ist March, 2017 are to be re- classified as
curent investments, The original cost of these investments Was ? 14 lakhs but had been
oritten don by 2 lakhs (to recognise 'other than temporary' decline in value). The market
value of these investments on 1Sth June, 2018 was I| lakhs.
2. Another portion of long term investments purchased on Isth January, 20I7 are to be re
classified as curent investments. The oriqinalcost of these investments was 7lakhs but hod
been written down to s lakhs (to recognize 'other than temporary' decline in value). The
fair value of these investments on 1sth June, 2018 was 4.s lakhs.
3. Aportion of current investments purchased on Isth March, 2018 for 7 akhs are to be re
classified as long term investnents, as the company has decided to retain them. The market
value of these investments on 31st March, 2018 Was 6 lakhs and fair value on 1SthJune
2018 was 8.S lakhs,
4. Another portion of current investments purchased on 7th December. 2017 for 4 lakhs are to
be re-classified as long term investments. The market value of these investments was:
on 31st March, 20I8 7 3.s lakhs

on 1Sth June, 2018 73.8 lakhs

Solution:
reclassitied
As per AS I3 (Revised) 'Accounting for lnvestments', where long-term investments are
the date
as current investments, transfers are made at the lower of cost and carrying amount at

Bhanggariya
www. Swapnilpatni.com CA Anandh R
 K3IACCOuntingFor Investment
13.15
rnster:ond ohere investments are reclassified from current to long term, transfers are made
of cost Qnd fair value on the date of transfer.
Keondingly,the,re-classification will be done on the following
basis:
this case, carrying amount of investment on the dote of transfer is less than the cost:
Lonce this re-classitied current investment should be carried at 12 lakhs in the books.
nthis case also, carrying amount of invest1ment on the date of transfer is less than the cost;
ce this re-classified current investment should be carried ats lakhs in the b0oks.
in this case, reclassitication of current investment into long-term investments will be made
ot7 lakhs as cost is less than its fair value of 8.s lakhs on the date of transfer.
this case, market value (considered as fair vale) is 3.8 lakhs on the date of transter
ohich is lower than the cost of 4 lakhs. The reclassification of current investment into long
term investments will be made at 3.8 lakhs.

II. Inter QP Nov 20

A
Limited invested in the shares of XY2 Ltd. On st Dec 2019 at a cost of ? s0,000, Out of
these shares 25,000 shares were purchased with an intention to hold for 6 months and
25,000shares Tere purchased oithan intention to hold as long-term lnvestment.
ALimited also earlier purchased Gold of R0,000 and silver of 30,00,000 on l* April 2019.
Market value as on 31st March 2020 of above investments are as follows:
Shares R47,500 (Decline in the value of shares is temporary)
Gold ? 1,80,000
Silver 30,55,000
HOw abOve investments woill be shOwn in the books of accounts of Ms A Limited for the
year ending 31st March 2020 as per the provisions of AS 13 (Revised) ?

12. Inter QP Jan 21

Kunal Securities Ltd. 1Jants to reclassify its investment in accordance with As-13 (Revised).
Stote the values, at which the investments have to be reclassified in the follosing cases:
Long term investment in Company A, costing ? l0,S lakhs is to be re-classified as current
investment, The Company had reduced the value of these investments to 9 lakhs to
recognize apermanent decline in value. The fair value on the date of reclassification is
9.3 lakhs,
Long term investment in Company B, costing 14 lakhs is to be re-classified as current
investment. The fair value on the date of reclassification is l6 lakhs and book value is
14 lakhs.

wSwapnilpatni.com CA Anandh RBhanggarya

AS 13 |Accounting For Investment
Current investment in Company C, costing 12 lakhs is to be re-classified as long term 316
value on
them. The market the date
Wants to retain of
investment as the company
reclassification is I3.S
Current investment lakhs.
in Company D, costing ? 18 lakhs is be re-classified as long term
iv.
of reclassification is R I6.5 lakhs
Investment,The narket volue on the date

13, IPCC QP Nov 20 the intention to hold the

Invested in shares of another company (with shares
M/s. Gowtham Ltd,
cost of 4.25,000, It also earlier purchased Gold of
for short term period) on 30th Nov 19 at a
8,00,000 and silver of 3,50,000 on 3/st March I7.
are as tolloWS:
20 of the above investments
Market values as on 31st March
Shares 3,s0,000
Gold
10,2s,000
Silver 7s,10,0total)
00
investments be shown (îndividualy and in
You are required to explain how will the above per the
in the books of account of M/s, Gowtham Ltd. For the year ending 31st March 20 as
provisions of AS I3.

14. IPCC Oct 20 Mock Test

'LOng Term Investments'
Whether the accounting treatment 'at cost' under the head
accordance with the
without providing for any diminution in value is correct and in
such a
provisions of AS 13. If not, what should have been the accountinQ treatment in
situation? What methodology should be adopted for ascertaining the provision tor
diminution in the value of investment, if any. Explain in brief.
Answer
The accounting treatment at cost' under the head 'Lono Term lnvestment in the
financial statements of the company without providing for ans diminution in value is
correct and is in accordance with the provisions of AS I3 provided that there is no decline,
other thantemporary, in the value of investment, If the decline in the value of investment
is, other than temporary, compared to the time when the shares were purchaseu,
Drovision is reguired to be made. The reduction in market value should not be considere
provision
in isolation to determine the decline, other than temporary. The amount of the
foctors
for diminution in the value of investment may be ascertained considering the
indicated in AS 13.
 ACCOUntingFor

Mart Ltd., wants to re-classify

its investment in accordance with AS 13. Decide
Aether
market value
be given in each of the following cases assuming that the
treatmentto
he
beendetermined in an arm's length
transaction betWeen knowoledgeable and willing
jas
and seller:
for 25 lakhs to he reclassified as
long- term
portion of current investments purchased
company has decided to retain them, The market value os on the date
kevestments, as the
30 lakhs
of balancesheet Was
investments purchased for? 20 lakhs has to be re- classified as
Another portion of current the date of the balance
of these ivestments as on
lono-ternm investments. The market value
sheet was 12.5 lakhs.
investments, no longer considered for holding purposes, to be
Dne portion of long-term had
investments. The original cost of these was Is lakhs, but
redlassified as current 13.
permanent decline as per AS
ll lakhs to recognize
heen written down to
Solution: current to
lnvestmnents, where investments are reclassified from
As per AS 13 Accounting for and fair value at the date of transfer.
made at the lower of cost
long-tern, transfers are investments, transfers are made at
re-classified as current
Dhen long-term investments are
amount at the date of transfer.
the lower of cost and carrying its
market value of the investments is 30lakhs,which is hiqher than
0 In the first case, the made at
Therefore, the transfer to long term investments should be
cost i.e. 25 lakhs.
cost i.e, 25 lakhs
than
the market value of the investment isI2.S lakhs, which is lower
() ln the second case,
the transfer tolong term investments should be made in
its cost i.e. 20 lakhs. Therefore,
The loss of 7.50lakhs (20-12.S) should
be
at the market value i.e. 12.5 lakhs.
the books
charged to Profit and Loss account.
cost.
third case, the book value of the investments is || lakhs, which is lower than its
(G0 n the
carrying amount, hence this re- classified current
ie. IS lakhs. As the transfer should be at
investment should be carried at I| lakhs.

l6, RTP Nov 2014

Albert Ltd, has made the following investments:
I June, 2013:
0 Purchased the foloing eguity shares from stock exchange on
Particulars Cost

CA Anandh RBhanggariya
inw.Swapnilpatni.com
AS 13 |AccountingFor Investment 3.18
I,80,000
Scrip X s0,000
Scripy ,70,000
Scrip 2 4,00,000

April, 2013.
securities at a cost of R S,00,000 on
(0) Purchased government applicable ASin the books of the company for the
HOw will you treat these investments as per
follows:
2014. if the volues of these investments are as
year ended on 31st March.
Shares 1,90,000
Scrip X 40,000
Scrip y 70,000
Scrip 2
3,00,000
Government securities 7,00,000

SOLUTION
current investments should be corried
As per para14and IS of AS I3 'Accountingfor lnvestments,
basis or by cateaoru
at lower of cost and fair value determined either on an individual investment
the standard
of investment, but not on an overall (or global) basis. Also as per para 17 of
long-terminvestments are carried at cost except when there is a decline, other than temporaru.
in the vaue of a long term investment, the carrying amount is reduced to recognise the decline.
If the investment in shares is intended to be held as current investment then scrip Xshould be
valued at cost i.e. I,80,000 (lower of cost and fair value), scrip Yshould be valued at fair value
ie. 40,00o(lower of costand fair value) and scrip2should be valued at fair value i.e. 70,00
(lower of cost and fair value). The total loss of I00,000 4,00,000 - 3,00,000) on scrip's

purchased on June, 2013 is to be charged to profit and loss account for the year ended 31
March, 2014.
If investment is intended to be held as lon9 term investment then it nill continue tobe shon
at cost in the balance sheet of the company. Hoever, provision for diminution shall be made to
recoqnize adecline, other than temporary, in the value of investments, such reduction being
determined and made for each investment individually.
Value of qovernment securities (purchased on lApril, 2013) is to be shown at cost of S,00,000
in the balance sheet as on 31.3.2014.

I7, RTP Nov 201S

M/s. Naren Garments Company Limited invested in the shares of another
November, 2014 at a cost of 3,00,000, It also earlier purchased Gold of
company
3, S0,000 and siverof
RI,50,000 on April, 2014. Market value as on 3 March, 201S of the above investments is as
follons:

www. Swapnilpatrni.com CAAnandh RBh¡nggariya

 13.19
|ACCOuntingFor Investment
AS
I3

Particulars
2,S0,000
Shares s,00,000
2,30,000)
Siver
books of accounts of M/s Naren Garments
he above investments will be shown in the
Accounting
March, 2015 as per the provisions of AS-13
company Limited for the year ending 3}St
for Investments"?

solution
for Investments for Investments in shares - If the Investment is
Ac per AS 13 AccOunting realizable
intention to hold for short - term period then it wil be shown ot the
purchased with an
March, 2015,
walue of R 2,50,000 as on 3
with an intention to hold for long-term period then it willcontinue
if equity shares are acquired shall
in the Balance Sheet of the Company. However, provision for diminution
tobe shoWnat cost lnvestments.
to recognize adecline, if other than temporary, in the value of
be made Gold and
investment acquired for long term period shall be shon at cost.
As per the Standard, it for long term period until and otherwise
with an intention to hold
Silver are generally purchased April 2014 shall continue to be
Gold and silver (purchases on
Qiven. Hence the investment in though their
on 31 March 201S i.e. 3,50,000 and I,S0,000 respectively,
shon at cost as should be valued at lower of
If held as short term then it
realizable values have been increased,
cost or fair value (Market price)

I8,RTP Nov 20l6, RTP Nov 2017

following situations, each being independent of the other.
Give your comments on the being the cost of acquisition, fair value of
atR60 Lakhs,
1. Current lnvestments are valued
Sheet date is 48 Lakhs.
these investments on the Balance
whereas their fair market
investnents were acçuired at a cost of 86 lakhs
2 Current from
Balance Sheet Date was 90 lakhs. Due to insufficiency of profits
value as on the investments for
Company would like to recognize the profit on these
operations, the
improving' its Financial Statements.
Solution
Investments", current investments should be carried at cost
I. As per AS 13 "Accounting for at fair
whichever is lower, Here, the current lnvestment should be caried
or fair value, value).
48 Lakhs, being the lower of 60 Lakhs (cost) or ? 48 Lakhs fair
value of
charqed to profit and loss account.
The difference of I2 Lakhs should be
should be carried at cost or fair value, whichever is lower. ln the qiven
2. Current investment the lower of
investments should be carried at cost of 86 Lakhs, being
Case, the current
86Lakhs (cost) or 90Lakhs (fair value).
CA Anandh RBhanggariya
Vow Swapnilpatni.com
AS 13 |Accounting For Investment
19. RTP Nov 2016, RTP Nov 2017 1320
Paridhi Electronics Ltd. has current investment (X Ltd.'s shares) purchased for s
which the company Want to reclassify as long term investment on 31.3.2018, The
of these market lakhs,
investments as on date of Balance Sheet was 2.5 lakhs. How will uou deal withvalue
as on 3),3.18 with reference to AS-13? this
Solution
As per AS 13 'Accounting for Investments', where investments are reclassified
from current to
long-term, transfers are made ot the lower of cost or fair value at the date of transfor
In the given case, the market value of the investment (X Ltd. shares) is 2.50
lower than its cost ie, s lakhs. Therefore, the transter to long term investmentslakhs, which is
made at cost of 2.50 lakhs, The loss of 2.50 lakhs
should be charoed to
should be
account. profit and loss
 sBAcCOur

Test Oct 21 Series )

Mock
invested in the shares of another COmpany on Ist May 2019 at a cost of 3,00,000 with
jintention of holding for more than a year. The published accounts of Nidhi Ltd. received in
202/reveals that the cOmpany has incurred cash losses with decline in market share and
Mrch,
pVestment of Nidhi Ltd. may not fetch more than 45,000, HOw you will deal with the above in
financialstatements of the Paridhi Electronics Ltd., as on 31.3. 2l with reference to AS-13?
he

Solution:
ong term investments
Ac ner AS 13, AccOunting for lnvestments lnvestments classified as
provision for diminution shall be
chould be carried in the financial statements at cost, HOever,
value of the investments, such reduction
made to recognise a decline, other than temporary, in the
individually. The standard also states that
being determined and made for each investment
reference to its market value, the
indicators of the value of an investment are obtained by
from the investment.
investee s assets and results and the expected cash flos
question clearly suggest that the provision for
On this basis, the facts of the case given in the financial
of shares to 4S,000 in the
diminution should be made to reduce the carrying amount
charge the difference of loss of? 2,55,000
statements for the year ended 3lst March, 202l and
to profit and loss account.

21. QP DEC 21
Mutual Funds. Following lnformation in this
Mr. Mohan has invested somne money in various
regard is given: Market Value
Mutual Fund Date of Purchase Cost Brokerage Stamp duty
As on
Purchase ) Cost )
31.03.2021

200 20
A 01.05.2017 So,000
0S.08.2020 25,000 25 24,220
01.01.2021 75,000 300 7S 78,190
07.05.2020 70,000 275 SO 65, 380
You are required to:
(Revised).
. Classity his investment in accordance with AS-13
2. Value of investment in mutual fund as on 31,03.2021

Ww Swapnilpatni.com CA Anandh RBhanggariya

 |AccOuntinq For Invcstmcnt 13.23
1
hton

"Accounting for investments", a current investment is an investment that is by

readily realizable and is intended to be held for not more than one year from the
which
such investment is made. The carrying amount for current investments is the
Wateon
wer,ofcost and fair value.
ong-teminvestment is an investment other than a current investment. Long term
mestments,are usually carried at cost. If there is a decline, other than temporary, in the value
long -term investment,; the carrying amount is reduced to recognize the decline.
MutualFunds Classification Cost O | Market value ) Carrying value J
Long-term lnvestment s0,220 48,225" S0,220
Current lnvestment 25,17S 24,220 24,220
Current Investment 75,37S 78,190 75,375
Current Investment 70,32S 65, 880 65,280
Total 2,15,695
Note: "The reduction in value of Mutual tund Ais cOnsidered to be temporary. If reduction in
Market value is assumed as other than temporary in nature, then the carrying value of 48,225
ill be considered.

22. RTP May 22

JVR Limited has made investment of 97.84 Crores in Eguity Shares of QSR Limited in 2016
the last
17, The investment has been made at par. QsR Limited has been in continuous losses for
2 years. VR Limited is willing to re-assess the carrying amount of its
investment in QSR Limited

and wish to provide for diminution in value of investment for the year ended 3/st March, 2021.
Discuss whether the connection of JVR Limited to bring down the carrying Amount of investment
in QSR Limited is in accordance with Accounting Standards.

Solution
The investments are classitied into two categories as per AS 13, w, Current lnvestments and
Long-term investments. Acurrent Investment is an investment that is by its nature readily
realizoble ond is intended to be held for not more than one year from the date on ohich such
imvestment is made. The carrying amount for current investments is the lower of cost and fair
value. Any reduction to fair value and any reversals of such reductions are included in the
Statement of profit and loss. A long - term investment is an investment other than a current
vestment, The investments referred in the question can be classified as long-term invest1ments
d long-term investments are usually carried at cost. HOwever, when there is a decline, other

WiN.Swapnilpatni.com CA Anandh RBhanggariya

AS 13 |Accounting For Investment
than temporary, in the value of a long-term investment, the carrying amount is 1324
recognize the decline. The contention of the company to bring down the value of reduced mauto
be correct if the decline in value is permanent in nature and the reduction ininvestmentamount
carrying
may be charged to the stotement of profit and loss. The reduction in carying amount is revere..
when there is a rise in the value of the
investment, or if the reasons for the reduction no
exist. longer