Classification determines the valuation test
For investments within AS 13, current investments are measured at the lower of cost and fair value, either individually or by category, with global portfolio valuation prohibited. Long-term investments are carried at cost with an individual-investment provision for decline other than temporary. A market quotation, a management intention to sell or a broker’s total portfolio value cannot replace the classification and measurement analysis.
Confirm the accounting framework and scope
The applicable source is AS 13, Accounting for Investments, in ICAI’s official compendium. Paragraph 3.2 defines a current investment as readily realisable by nature and intended to be held for not more than one year from the date the investment is made. Other investments are long term. A listed investment is not necessarily current: original holding intention and the standard’s conditions matter. Sources were checked on 22 October 2026.
This article concerns entities applying AS 13, not an Ind AS 109 financial-instrument computation. AS 13 excludes specified specialised entities and arrangements under paragraph 2; it also distinguishes investments from assets held as stock-in-trade. An ordinary company investing its own treasury surplus should not be confused with the mutual fund or bank whose own reporting framework is excluded. Entity-specific regulatory and financial-statement presentation requirements must be assessed separately.
Reconstruct acquisition cost before comparing values
Paragraphs 9 and 28 include acquisition charges such as brokerage, fees and duties in investment cost. A price paid cum-interest may include accrued interest relating to a period before purchase. Paragraph 12 explains the allocation of a later interest receipt between pre-acquisition and post-acquisition amounts, with the former recovered from cost. Retain the contract note, settlement details, coupon dates and allocation; a total bank debit alone does not establish the investment-only cost.
Do not treat every dividend from pre-acquisition profits as an automatic cost adjustment. AS 13 discusses the circumstances and the difficulty of making an allocation other than arbitrarily, including whether the receipt clearly represents recovery of cost. Rights issues and rights sales also have specific treatment in paragraph 13. Those conclusions should be documented from the actual terms rather than inferred from a portfolio app’s income label.
Choose a consistent current-investment valuation unit
Paragraphs 14–16 and 31 prohibit an overall/global lower-of comparison across the entire portfolio. They permit an individual investment basis or a category basis, and describe individual valuation as the more prudent and appropriate method. Categories should represent the relevant nature of investments, rather than a bucket designed to offset a loss with an unrelated gain. State and apply a supported policy consistently; do not change the grouping each year solely to obtain a preferred profit figure.
For an actively traded investment, market value generally provides evidence of fair value under the standard. Use the correct units, valuation date and evidence, considering the applicable definition and necessary disposal expenses where relevant. For unquoted or restricted holdings, retain a supportable valuation instead of inventing a market price. Reconcile any write-down or reversal through profit and loss, separately from cash proceeds and distributions.
Long-term diminution is a documented judgement
Paragraphs 17–19 and 32 use an individual-investment assessment of decline other than temporary, considering market value, investee assets and results, expected cash flows, the investor’s stake and relevant restrictions. A lower closing quotation alone does not establish that every long-term investment must be marked down. Conversely, calling an investment strategic is not evidence that a sustained deterioration can be ignored. Record the conclusion and the supported amount, and revisit the reasons for earlier reductions.
On a partial disposal, paragraph 22 uses the average carrying amount of the total holding of that individual investment to allocate the amount sold. Reconcile net proceeds, allocated carrying amount, disposal profit or loss, and the remaining holding. Tax cost, securities-tax identification rules and capital-gains calculations may differ; do not export the book disposal gain as the tax figure without a separate working.
A closing schedule should explain movement, not only the closing number
For each holding show opening units and carrying amount, purchases, acquisition-cost adjustments, disposals, reductions or reversals, and closing units and amount. Distinguish realised disposal results from valuation movements. Reclassification has its own rules in paragraphs 23–24 and should not be used to avoid an otherwise required assessment. Disclose the valuation policy, the applicable investment classes, relevant income and disposal/valuation results, and ownership or realisation restrictions under the standard and the entity’s statutory framework.
Worked illustrations
The following cases use fictional figures and stated assumptions. Amounts are Indian rupees unless a different unit is expressly shown. They illustrate preparation controls and do not represent real client results.
Illustrative example 1: include the acquisition charge in cost
An investment purchase price is ₹1,00,000 and qualifying acquisition brokerage is ₹2,000, giving cost ₹1,02,000. Assume the holding is current, the individual basis is used and supported closing fair value is ₹98,000. Carrying amount is ₹98,000 and the reduction charged to profit and loss is ₹4,000, not ₹2,000 calculated from the price alone.
Illustrative example 2: global netting across different categories is inappropriate
A current equity investment costs ₹1,00,000 and has fair value ₹1,30,000. A current preference-share investment costs ₹1,00,000 and has fair value ₹80,000. Under the stated individual/category separation, carrying amounts are ₹1,00,000 and ₹80,000, total ₹1,80,000. A global comparison of cost ₹2,00,000 with fair value ₹2,10,000 would give ₹2,00,000 and hide the ₹20,000 reduction; global valuation is prohibited.
Illustrative example 3: a supported category policy can differ from individual valuation
Assume two related current equity investments in one properly determined category: each costs ₹1,00,000 and their fair values are ₹1,30,000 and ₹80,000. Under a consistently applied supported category policy, category cost ₹2,00,000 is compared with category fair value ₹2,10,000, giving ₹2,00,000. Under an individual policy the total would be ₹1,80,000, a ₹20,000 difference. The example explains the permitted valuation units; it is not permission to switch policies opportunistically.
Illustrative example 4: a current-investment recovery cannot create an uplift above cost
A current investment originally cost ₹2,00,000 and was carried at ₹1,50,000 after a ₹50,000 reduction. At the next close, supported fair value is ₹2,25,000. Lower of cost and fair value is ₹2,00,000. Reverse ₹50,000 through profit and loss, rather than recording a ₹75,000 gain and carrying the asset above cost under this stated method.
Illustrative example 5: different long-term evidence gives different conclusions
Consider two separate long-term investments, each costing ₹5,00,000. For A, a ₹4,50,000 market value is supported as a temporary decline with no other required diminution on the stated evidence, so carrying amount remains ₹5,00,000. For B, documented decline other than temporary supports value ₹3,20,000, requiring a ₹1,80,000 reduction. Combined carrying amount is ₹8,20,000. The temporary/non-temporary conclusion is a factual assumption requiring evidence, not a percentage test.
Illustrative example 6: allocate a partial sale using average carrying amount
A holding contains 1,000 units with total carrying amount ₹1,50,000, or ₹150 per unit. Sell 400 units for gross ₹68,000 and incur disposal expenses ₹2,000. Net proceeds are ₹66,000 and allocated carrying amount is ₹60,000, giving disposal profit ₹6,000. The remaining 600 units carry ₹90,000 before any further valuation adjustment. Do not allocate the full original holding cost to the partial sale.
Illustrative example 7: separate pre-acquisition interest from the later return
Assume a bond is acquired for ₹2,06,000 including ₹6,000 identifiable accrued pre-acquisition interest, plus ₹2,000 acquisition charges. Total cash outflow is ₹2,08,000. Under the stated supported allocation, investment cost excluding the pre-acquisition interest component is ₹2,02,000. A later ₹12,000 coupon is split into ₹6,000 recovering that pre-acquisition component and ₹6,000 post-acquisition income. Do not record all ₹12,000 as earned investment income while leaving the accrued component embedded in cost. If the ₹6,000 was recorded separately as accrued-interest receivable on purchase, the later receipt settles that receivable; do not deduct it again from the ₹2,02,000 investment cost. If it was initially included in cum-interest investment cost, remove the pre-acquisition portion once to arrive at the same net investment cost.
Ten-step verification table
| Step | Verification | Evidence to retain |
|---|---|---|
| 1 | Confirm AS 13 and entity-specific scope. | Framework and regulatory applicability memo. |
| 2 | Establish holding nature and original intention. | Investment approval and classification evidence. |
| 3 | Reconcile units to independent holding records. | Custodian, depository or other ownership evidence. |
| 4 | Reconstruct acquisition cost and accrued components. | Contract notes, charges and coupon working. |
| 5 | Apply the documented individual/category policy. | Consistent valuation-unit record. |
| 6 | Support fair values at the reporting date. | Quotes or reasoned unquoted valuation. |
| 7 | Assess long-term decline other than temporary. | Investee, cash-flow and restriction evidence. |
| 8 | Calculate reductions and reversals separately. | Profit-and-loss movement schedule. |
| 9 | Reconcile partial disposals and remaining holdings. | Average carrying amount and net-proceeds working. |
| 10 | Complete presentation, disclosures and separate tax bridge. | Final notes, ledger reconciliation and tax computation. |
Sixteen practitioner FAQs
1. Is a listed investment automatically current?
No. AS 13 considers its nature and the intention to hold for not more than one year from acquisition.
2. Does one year remaining at the reporting date settle classification?
No. Apply the standard’s definition and actual classification facts rather than only remaining marketability.
3. Can all portfolio gains and losses be globally offset?
No. AS 13 prohibits overall/global lower-of valuation.
4. Does AS 13 permit category valuation?
Yes, alongside individual valuation, subject to a proper supported category and consistent policy.
5. Which method does the explanatory text describe as more prudent?
It describes individual lower-of-cost-and-fair-value valuation as more prudent and appropriate.
6. May categories be changed just to avoid a write-down?
Do not select or alter grouping opportunistically. The policy and any change need an appropriate basis.
7. Are acquisition brokerage and duties ignored?
No. Qualifying acquisition charges enter cost under the standard.
8. Does every pre-acquisition-profit dividend reduce cost automatically?
No. Apply paragraph 12’s actual circumstances and recovery-of-cost analysis rather than an arbitrary allocation.
9. How is identifiable pre-acquisition accrued interest treated?
Separate it from the post-acquisition return and apply the supported cost-recovery allocation.
10. Must every fall in a long-term quoted price be expensed?
No. Assess whether the decline is other than temporary using the relevant evidence.
11. Can the label strategic prevent diminution?
No. The label does not replace the required evidence and individual assessment.
12. Where do current-investment reductions and reversals go?
AS 13 includes those changes in the profit and loss statement.
13. Can a current-investment reversal take the asset above cost?
Under the stated lower-of-cost-and-fair-value model, recovery does not justify carrying it above cost.
14. How is carrying amount allocated on a partial sale?
Use the average carrying amount of the total holding of that individual investment under paragraph 22.
15. Is book disposal profit necessarily the capital gain for tax?
No. Tax basis, identification and statutory computation require a separate reconciliation.
16. Does this schedule apply to Ind AS 109 entities?
No. Confirm the applicable framework; Ind AS financial-instrument classification and measurement are separate requirements.
Organising the supporting working
Keep the underlying records, calculation and conclusion linked to the same entity and period. When organising work with assureFinancials and the assureOffice tools, retain these supporting schedules alongside the final output and use only the features confirmed for the version available to you.
Conclusion
Make the investment schedule reproduce each decision from classification through cost, valuation and disposal. A documented valuation unit and a unit-and-value roll-forward expose global netting, double-counted income and partial-sale cost errors before the financial statements are finalised.