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Advanced Accounting · AS 13 Accounting for Investments

Valuation and Carrying Amount of Investments under AS 13

Updated 4 October 2026 · Fact-checked

Under AS 13, current investments are carried at the lower of cost and fair value, usually scrip by scrip. Long-term investments are carried at cost, with a reduction only for a diminution other than temporary. Investment property is treated as a long-term investment and carried at cost less such diminution.

Understand Valuation and Carrying Amount of Investments

AS 13 asks one question at the balance sheet date: at what amount should an investment be shown? The answer depends on why you hold it.

A current investment is readily realisable and intended to be held for not more than one year from the date of making it. A long-term investment is any investment that is not current. The test is your intention and the nature of the asset, not just the market price.

Current investments follow prudence. You compare cost with fair value and carry the lower figure. A fall is charged to the Statement of Profit and Loss. The standard lets you do the comparison for each investment individually, or by category, or for the total portfolio. In exams, the safe approach is investment by investment unless the question says otherwise.

Long-term investments are meant to be held for a long time, so short-term market swings do not matter. You carry them at cost. You write them down only when the fall in value is other than temporary, and the write-down is charged to profit and loss. Each investment is assessed on its own.

If the reason for the earlier reduction no longer exists, the reduction is written back. For long-term investments the write-back is made to the extent of the original cost. Investment property is property held mainly to earn rent or for capital appreciation, not for use in business. AS 13 treats it as a long-term investment, so it is carried at cost less diminution other than temporary. Any gain above cost is not recognised.

Key rules to remember

Current investments
Carrying amount = Lower of (Cost, Fair value)
Compare scrip by scrip unless told otherwise. Any reduction goes to the Statement of Profit and Loss.
Long-term investments
Carrying amount = Cost − Provision for diminution other than temporary
Do not reduce for a temporary fall. Never write up above cost.
Write-down loss
Loss = Carrying amount before − Revised carrying amount
Charged to profit and loss. Disclose it separately.
Write-back limit
Reversed amount ≤ amount earlier written down
The reversal is made only when the reason for the reduction no longer exists.
Investment property
Carrying amount = Cost − Diminution other than temporary
Treated as a long-term investment under AS 13.

How to solve Valuation and Carrying Amount of Investments questions

Use this order for any valuation question on investments.

  1. 1Classify each investment as current or long-term from the wording: intention, holding period, ease of sale.
  2. 2List the cost of each investment, including brokerage and other acquisition costs, and excluding interest or dividend accrued before purchase.
  3. 3For current investments, find the fair value (market price) at the balance sheet date for each scrip.
  4. 4Compare and take the lower of cost and fair value for each current investment. Do not offset gains in one scrip against losses in another unless the question asks for the category or total method.
  5. 5For long-term investments, decide whether the fall is temporary or other than temporary. Reduce to the recoverable value only if it is other than temporary.
  6. 6Compute the loss or write-back and show it in the Statement of Profit and Loss.
  7. 7State the final carrying amount and add a one-line reason.

Quickest way: Classify, compare, then charge

When to use it: Use it in MCQs and in short written answers when time is limited.

  1. Underline the words that show the type: held for under a year means current; held for the long term or property for rent means long-term.
  2. Current: pick the smaller of cost and market value. Stop.
  3. Long-term: the answer is cost unless the question says the fall is permanent or other than temporary.
  4. In MCQs, remove options that show a long-term investment written up above cost or reduced for a temporary fall.
  5. In written answers, write: the rule, the working per investment, the loss, the conclusion. Each part earns step marks.

Common mistakes in Valuation and Carrying Amount of Investments

  • Writing down a long-term investment for any market fall

    Students apply the current investment rule to everything.

    Fix: Check the word temporary. Reduce only for a fall other than temporary.

  • Offsetting a gain in one current investment against a loss in another

    The portfolio total looks like a simpler comparison.

    Fix: Compare each scrip separately unless the question says to use category or total.

  • Writing up an investment above cost

    Fair value is higher, so students show it.

    Fix: The carrying amount is capped at cost. Unrealised gains are not recognised.

  • Including pre-acquisition accrued interest in cost

    The full price paid is taken as cost.

    Fix: Treat the accrued interest in a cum-interest purchase as a receivable or reduction of interest income, not as cost.

  • Treating investment property as a fixed asset under AS 10

    It is a building or land, so it looks like PPE.

    Fix: If it is held to earn rent or for appreciation, treat it as a long-term investment under AS 13.

Worked examples

Example 1

At 31 March, a company holds current investments: A Ltd shares, cost ₹2,40,000, market value ₹2,10,000; B Ltd shares, cost ₹1,50,000, market value ₹1,80,000; C Ltd shares, cost ₹90,000, market value ₹84,000. Compute the carrying amount, comparing scrip by scrip.

Show the solution
  1. A Ltd: market value ₹2,10,000 is lower than cost ₹2,40,000, so carry at ₹2,10,000. Loss ₹30,000.
  2. B Ltd: cost ₹1,50,000 is lower than market value ₹1,80,000, so carry at ₹1,50,000. No gain is recognised.
  3. C Ltd: market value ₹84,000 is lower than cost ₹90,000, so carry at ₹84,000. Loss ₹6,000.
  4. Total carrying amount = ₹2,10,000 + ₹1,50,000 + ₹84,000 = ₹4,44,000.
  5. Total write-down = ₹30,000 + ₹6,000 = ₹36,000, charged to the Statement of Profit and Loss.

Answer: The carrying amount is ₹4,44,000. The write-down of ₹36,000 is charged to profit and loss.

Example 2

A company holds a long-term investment in X Ltd, cost ₹5,00,000. Market value is ₹4,20,000 and the fall is judged temporary. It also holds long-term shares in Y Ltd, cost ₹3,00,000. Y Ltd is under liquidation and its shares are worth ₹1,10,000, a fall other than temporary. Find the carrying amounts.

Show the solution
  1. X Ltd is a long-term investment and the fall is temporary, so no reduction is made. Carrying amount = ₹5,00,000.
  2. Y Ltd has a fall other than temporary, so reduce it to ₹1,10,000.
  3. Diminution on Y Ltd = ₹3,00,000 − ₹1,10,000 = ₹1,90,000, charged to profit and loss.
  4. Total carrying amount = ₹5,00,000 + ₹1,10,000 = ₹6,10,000.

Answer: X Ltd is carried at ₹5,00,000 and Y Ltd at ₹1,10,000. The total is ₹6,10,000, with a ₹1,90,000 charge to profit and loss.

Exam tips

  • Read the first line of a question for words like held for sale soon or long term. Classification drives the whole answer.
  • If the question gives no method for current investments, compare scrip by scrip and say so.
  • Always show the loss separately. Step marks are given for the working of each investment.
  • Remember that MCQs often test the cap at cost: the correct option never shows an investment above cost.
  • For investment property, write that it is a long-term investment under AS 13 and give the cost less permanent diminution.

Practice questions from AS 13 Accounting for Investments

Valuation and Carrying Amount of Investments: frequently asked questions

How are current investments valued under AS 13?

They are carried at the lower of cost and fair value. The comparison can be done for each investment, by category, or for the total. Exam answers usually compare each investment separately.

When can a long-term investment be written down?

Only when the decline in value is other than temporary. A fall that is expected to reverse does not need a write-down. The reduction is charged to the Statement of Profit and Loss.

Can I reverse a write-down?

Yes, when the reason for the reduction no longer exists. For long-term investments, the reversal is limited to the amount earlier written down, so the carrying amount does not exceed original cost.

What is the difference between current and long-term investment valuation?

Current investments use the lower of cost and fair value, so even a temporary market fall is recognised. Long-term investments stay at cost unless the fall is other than temporary.