## Year-End Valuation of Investments under AS 13

### Classification and Measurement

Category	Carried at	Write-down Rule
Current Investments	Lower of Cost or Market Value (LOCM)	Write down if MV < Cost
Long-Term Investments	Cost	Provide for diminution only if permanent

### Current Investments at Year-End

At every balance sheet date, compare cost with market value:

If MV < Cost → reduce carrying amount to MV, charge difference to P&L
If MV > Cost → do NOT write up (prudence principle)

Journal for write-down:

```

P&L A/c Dr (MV shortfall)

To Investment A/c (MV shortfall)

```

### Long-Term Investments at Year-End

Carried at cost unless decline in value is other than temporary
Temporary fluctuations: no entry
Permanent decline: provide in P&L

```

P&L A/c Dr (permanent diminution)

To Provision for Diminution in Value of Investment A/c

```

### Reversal

For current investments: reversal is permitted when MV recovers
For long-term investments: reversal to original cost if decline reverses

Worked example

### Example 1

Example (Page 56 — Year-end of Q27):

Remaining shares after all transactions: 17,500 shares
Cost (WAM basis) = ₹2,01,886
Market Value = ₹1,92,500 (17,500 shares × market price)
Investment assumed to be Current (as noted: 'Assumed to be current')
MV < Cost → write-down required
Shortfall = 2,01,886 − 1,92,500 = ₹9,386

Journal:

```

P&L A/c Dr ₹9,386

To Investment A/c ₹9,386

```

Year-end balance sheet value = ₹1,92,500 (MV)

⚠️ Common exam mistakes

Applying LOCM to long-term investments — LOCM is only for current investments
Writing up current investments above cost when MV rises — AS 13 does not permit upward revaluation for current investments
Treating all value declines in long-term investments as P&L — only permanent declines are recognised for long-term investments
Forgetting to apply LOCM at every year-end, not just at acquisition date

Bare-Act text Para 16 (Carrying Amount of Current Investments) · AS 13 – Accounting for Investments (ICAI) · click to expand

Current investments should be carried in the financial statements at the lower of cost and fair value determined either on an individual investment basis or by category of investment, but not on an overall (or global) basis.

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AS 13 – Year-End Valuation of Current Investments (LOCM Rule)

Worked example

⚠️ Common exam mistakes