Question

How are current investments reported?

Answer 1

Investments are assets held by an enterprise -

a) for earning income by way of dividend, interest and rentals,

b) for capital appreciation

c) for other benefits to the investing enterprise.

Assets held as Stock in trade are not "Investments"

Investments are generally classifed into a) Current Investment b) Long term Investment

Current Investment: are investment which are in the nature of Current Asset which by its nature are readily realisable and intended to be held for not more than 1 year from the date of its acquisition and for which active market exists, the market value can be established by the evidence of Fair Value.

An enterprise should disclose Current Investment distinctly in its Financial Statements. Further Classification should be as specified in the statute governing the enterprise. In the absence of statutory requirement, such further classification should disclose wherever applicable, Investment in- a) Government or Trust Securities b) Shares, Bonds, Debentures c) Investment Properties and d) Others- specifying their nature.

Current Investments should be carried at cost or fair value, whichever is lower. Such valuation can be done either category wise or on individual basis. Where an active market exists for an investment, market value is the basis for estimating the fair value.Any reduction to Fair Value of Current Investment and any reversals of such reduction should be included in Profit and loss of the Enterprise.

On disposal of Current Investment the difference between Carrying amount and Net disposal proceeds should be credited to Profit and loss Account.

The following information should be disclosed in Financial Statements:

i) Accounting Policies for determination of carrying amount of investments

ii) Classification of Investment into Current Investments and its further sub classification

iii) Amount included in Profit and loss Statement for:

a) Interest, Dividend and Rental on Investments

b) Profit and Losses on disposal of Current Investment and changes in Carrying amount of Investment

iii) Aggregate amount of quoted and unquoted investment, giving aggregate Market value of quoted investment

iv)Significant restriction on right of ownership, realisability of Investments, remittance of income and proceeds of disposal