📦Recognition of Investment Income .
👉It is very common for companies to have a significant treasury income given the strong cashflows over time.
👉As per AS 13, investments are classified as long term or current.
▶Current investments are intended to be held for not more than 1 year from the date of investment, and long term investments are those that are not current.
▶Investments are carried in the books at cost under normal circumstances unless there is a diminution in value of a long term investment or the fair value of a current investment is lower than the cost.
▶As a result, appreciation in value of say an investment in a growth mutual fund or a fixed maturity plan is not recognised overtime.
▶Instead there is a lumpy recognition of income from such investments on maturity.
👉There will be a significant change under Ind AS 109 going forward.
▶Investments will need to be recognised at either fair value or amortised cost.
▶In either of the circumstances, income would accrue over time on such investment either in the P&L or Other Comprehensive Income (OCI) of the company.