## Valuation of Current Investments under AS 13

### The Rule

> Current investments → carry at lower of Cost and Fair Value (Market Value)

This is assessed investment by investment — you cannot offset a fall in one investment against a rise in another.

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### Contrast with Long-term Investments

Type	Valuation Rule
Long-term	Cost (provision only for permanent diminution)
Current	Lower of Cost and Fair Value (always, even temporary fall)

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### Practical Steps

1. After computing the cost (purchase + brokerage + transfer fees, adjusted for bonus), find the closing market price.

2. Compare:

If Cost ≤ MV → carry at Cost
If Cost > MV → carry at MV, write down the difference to P&L

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### Closing Balance of Investment Account

The closing balance in the Investment Ledger (after sales and adjustments) represents the book value of remaining shares.

For current investments, this closing balance must then be compared with MV to determine the balance sheet value.

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### Journal Entry for Write-Down

```

P&L (Diminution in value of current investments) Dr [write-down amount]

To Investment in Equity Shares A/c [write-down amount]

```

Worked example

### Example 1

Example – Current Investment Valuation After Bonus and Partial Sale (Q23 CDR)

Data:

Original purchase: 1,000 shares @ ₹120, Brokerage 2%, Transfer fees 0.5% → Total cost ₹1,23,000
Bonus 1:2 → 500 bonus shares → Total 1,500 shares, Cost per share = ₹82
Sold 500 shares; remaining = 1,000 shares
Cost of remaining 1,000 shares = 1,000 × ₹82 = ₹82,000
Market value on balance sheet date = 1,000 × ₹90 = ₹90,000
These are current investments

Valuation:

```

Cost: ₹82,000

Market Value: ₹90,000

Lower of the two → ₹82,000 (Cost)

```

No write-down required. Balance sheet shows investment at ₹82,000.

If MV had been ₹75,000 instead:

```

Cost: ₹82,000

Market Value: ₹75,000

Lower → ₹75,000 (MV)

Write-down: ₹7,000

Journal:

P&L Dr 7,000

To Investment A/c 7,000

```

⚠️ Common exam mistakes

Applying the 'lower of cost or MV' rule to long-term investments — this rule applies ONLY to current investments; long-term investments are at cost (except permanent diminution).
Using a portfolio-level comparison — AS 13 requires investment-by-investment comparison, not netting across different scrips.
Forgetting to recompute cost per share after bonus before comparing with MV — always use the post-bonus weighted average cost.
Showing the current investment at MV when MV > Cost — the rule is 'lower of', so when cost is lower, you stay at cost (no upward revaluation).

Bare-Act text Para 23 · AS 13 – Accounting for Investments · click to expand

Investments classified as current investments should be carried in the financial statements at lower of cost and fair value. The comparison of cost and fair value should be done separately for each investment.

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AS 13 – Valuation of Current Investments at Lower of Cost or Market Value

Worked example

⚠️ Common exam mistakes