ccounting for Investments 137
such as an equity share. Most investments represent financial rights,
u
some are tangible, such as certain investments in land or buildings.
6. For some investments, an active market exists from which a marke
value can be established. For such investments, market value generall
rovides the best evidence of fair value. For other investments, an activ
market does not exist and other means are used to determine fair value.
Classification of Investments
7. Enterprises present financial statements that classify fixed assets,
investments and current assets into separate categories. Investments are
classified as long term investments and current investments. Current
investments are in the nature of current assets, although the common
ractice may be to include them in investments.
2
8. Investments othe
than current investments a
e classifie
as long ter
investments, even though they may be readily marketable.
Cost of Investments
9. The cost of an investment includes acquisition charges such as
brokerage, fees and duties.
10. If an investment is acquired, o
partly acquired,
y the issue of shares
or other securities, the acquisition cost is the fair value of the securitie
issued (which, in appropriate cases, may be indicated by the issue price a
determined by statutory authorities). The fair value may not necessarily b
equal to the nominal or par value of the securities issued.
11. If an investment is acquire
in exchange, o
part exchange, fo
anothe
asset, the acquisition cost of the investment is determined by reference t
the fair value of the asset given up. It may be appropriate to consider the fai
value of the investment acquire
if it is more clearl
evident.
12. Interest, dividends and rentals receivables in connection with a
investment are generally regarded as income, being the return on th
investment. However, in some circumstances, such inflows represent
recovery of cost and do not form part of income. For example, when unpai
2
Shares, debentures and othe
securities held fo
sale in the ordina
ycourseof
usiness
are disclosed as ‘stock-in-trade’ under the head ‘current assets’.