AS 13 in a Gist: Under Indian GAP, Accounting Standard 13 regulates

Accounting for 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’. It also covers an investment in
property that is an investment in land or buildings that are not intended to
be occupied substantially for use by, or in the operations of, the investing
enterprise. Recognition and measurement based on Current and long term
investments in AS 13: These investments are classified primarily as
Current and long term 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.  On
the other hand, a long term investment is an investment other than a
current investment. This classification is the sheet- anchor to measure the
value of the investments. The carrying amount for current investments is
the lower of cost and fair value. On the other hand, 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.  This conservative approach could be
easily appreciated, since loss is recognised in Profit and Loss; as against
profit that is not that lucky enough to get recognised in P/L. Why? For
simple reason that profit is reckoned when actually realised. Again, is it not
a conservative traditional approach? What a contrast in Ind. AS? While As
13 has within its ambit a. assets that have no physical existence and are
represented merely by certificates or similar documents (e.g., shares) b. as
well assets that exist in a physical form (e.g., buildings), Ind.AS 40 is only
dealing on investment Property, leaving the investments in financial
instruments to the better cares of Ind. ASs 109/1o7/113 relating to
recognition, measurement, disclosures and fair value measurements. As a
result, Ind. AS sails, why? Rather flies on a different fast tract to catch up
with IFRS regime. That is the scenario changing totally from a mere
conservative approach under AS 13, to a pulsating fair value / amortised
cost approach as the case may be for measurement of financial assets. If
we have to move with the time and catch up with global trend, there is no
run away route but to follow suit especially when investors more so
stakeholders are spread across worldwide. India is, in fact, in the list of a
few countries in the word that has to catch up with the global phenomenon.
Investments in Financial Assets could be either in equity or debt
instruments and are valued based on the following Business models.
Equity Instruments: Equity instruments are those that meet the definition of
equity from the perspective of the issuer as defined in Ind. AS 32. i. Equity
instruments that are held for trading are necessarily required to be
classified as FVTPL. ii. For all other equities, management has an option to
make an irrevocable election on initial recognition, on an instrument-by-
instrument basis, to present changes in fair value in OCI rather than profit
or loss.  Therefore, it is not accounting policy. If this election is made, all
fair value changes, excluding dividends that are a return on investment, will
be included in OCI. There is no recycling of amounts from OCI to profit and
loss (for example, on sale of an equity investment), nor are there any
impairment requirements. However, the entity might transfer the cumulative
gain or loss within equity. Investments in Debt instruments: i. Financial
assets held: a)to collect contractual cash flows and (b) they represent  the 
financial  asset  of  cash  flows  that  are  solely  payments  of principal and
interest on the principal amount outstanding(SPPI), is initially measured at
fair value and subsequently at amortised cost. ii. To achieve  by  both 
collecting contractual  cash flows and selling financial assets and (b)  the 
contractual  terms  of  the financial  asset  give  rise  on specified  dates  to 
cash  flows  that  are  solely  payments  of principal and interest on the
principal amount initially  and subsequently measured at fair value  through
Other Comprehensive income (FVTPL). Financial assets included within
the FVTOCI category are initially recognized and subsequently measured
at fair value. Movements in the carrying amount are recorded through OCI,
except for the recognition of impairment gains or losses, interest revenue
as well as foreign exchange gains and losses which are recognized in profit
and loss. Where the financial asset is derecognized, the cumulative gain or
loss previously recognized in OCI is reclassified from equity to profit or
loss. iii. In the case of a residual category in the sense they do not meet the
criteria of FVTOCI or amortized cost. at fair value through profit or
loss(FVTPL) Further, the following factors are to be properly stitched into
the measurement of financial assets. i. Transaction costs depending on
Business Model ii. Impairment of financial assets as per Ind. As 109 to be
applied retrospectively subject to certain exemptions iii. Reclassification of
financial assets under the aegis of the Ind. AS 109 iv. Hedge accounting as
stipulated by the said Ind. As. For detail the said Ind. AS may be consulted.
The author’s earlier article may also be referred. For brevity, the details are
not reproduced. Accounting policies are to be in place as prescribed in the
various Business models as enunciated above. Fair Value Measurement:
Ind. As 113 on Fair Value Measurement does not deal with the issue as to
what should be measured at fair value and at what point of time, that is
within the domain of the respective Ind. ASs. But, Ind. AS 113 dwells on the
multiple valuation models to decide as to which is to be followed on a
particular situation.
The AS-13 on Accounting for Investments clearly states that in case of long term
investments, temporary fluctuation in value should be ignored. However if there is a
permanent diminution/reduction in value then it should be revalued downwards by charging it
to P&L

 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.
Investment Properties 20. An investment property is accounted for in
accordance with cost model as prescribed in Accounting Standard (AS) 10,
Property, Plant and Equipment.