AS 13 & IndAS 109

🙏💪🏼💪🏼🇮🇳 AS💪🏼💪🏼🙏

📦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.