## Year-End Valuation of Investments under AS 13

### Two Categories of Investments

Category	Valuation Rule
Current Investment	Lower of Cost or Fair Value (Market Value)
Long-Term Investment	At Cost; reduce only for permanent decline

### Current Investments: Lower of Cost or Market Value

Applied on an individual investment basis (or by category — not globally).

Procedure at Year-End:

1. Read the Cost balance from the Investment ledger.

2. Obtain Market Value (quoted price × number of units).

3. Compare: record the lower figure in Balance Sheet.

4. If MV < Cost: create a provision (write down to MV).

5. If MV > Cost: no adjustment — do not write up beyond cost.

> Note: If market price information is not available, do not guess — value at cost.

### Journal for Write-Down (Current Investment)

```

P&L A/c (Provision for dimunition) Dr. [Cost − MV]

To Provision for Dimunition in Value of Investments [Cost − MV]

```

### Long-Term Investments

Normally carried at cost.
Write down only when decline is other than temporary.
Reversals of such write-downs are allowed if the value recovers.

### Reclassification

Current → Long-term: transfer at lower of cost or fair value at date of transfer.
Long-term → Current: transfer at lower of cost and carrying amount at date of transfer.

Worked example

### Example 1

Year-End Valuation – CDR 8% Debentures (Current Investment)

From the Investment ledger:

Cost balance = ₹93,513 (closing balance in Cost column)
Market Value: 950 Debs × ₹99 = ₹94,050

Comparison:

Cost: ₹93,513
MV: ₹94,050
Lower = ₹93,513 (Cost)

Conclusion: No write-down required. The investment is shown in the Balance Sheet at ₹93,513.

Had MV been, say, ₹92,000:

Lower = ₹92,000
Write-down needed = 93,513 − 92,000 = ₹1,513

```

P&L A/c Dr. 1,513

To Provision for Dimunition in Value of Investments 1,513

```

Balance Sheet shows: Investment at ₹93,513 − Provision ₹1,513 = ₹92,000 net

> Note: If market price is unavailable, value at cost (₹93,513) without adjustment.

⚠️ Common exam mistakes

Writing UP the value of a current investment when MV > Cost — AS 13 prohibits this; maximum value is cost.
Applying 'lower of cost or MV' to long-term investments — they are normally held at cost.
Using global MV comparison (netting gains in some investments against losses in others) — the standard requires individual or category-level comparison.
Not creating a provision when MV < Cost for current investments, just showing cost in Balance Sheet.
Ignoring the rule that valuation is only done when market price information is actually available.

Bare-Act text Paragraph 17 · AS 13 – Accounting for Investments · 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. Any reduction to fair value and any reversals of such reductions are included in the profit and loss statement.

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Year-End Valuation – Current vs Long-Term Investments

Worked example

⚠️ Common exam mistakes