Innovative Garments Manufacturing Company Limited invested in the shares of another company on 1st October, 2022 at a cost of 2,50,000. It also…

As per AS 13 (Revised) ‘Accounting for Investments’, for investment in shares if the investment is purchased with an intention to hold for short-term period (less than one year), then it will be classified as current investment and to be carried at lower of cost and fair value, i.e., in case of shares, at lower of cost (₹ 2,50,000) and market value (₹ 2,25,000) as on 31 March 2023, i.e.,2,25,000. If equity shares are acquired with an intention to hold for long term period (more than one year), then should be considered as long-term investment to be shown at cost in the Balance Sheet of the company. However, provision for diminution should be made to recognise a decline, if other than temporary, in the value of the investments. Gold and silver are generally purchased with an intention to hold it for long term period (more than one year) until and unless given otherwise. Hence, the investment in Gold and Silver (purchased on 1st March, 2020) should continue to be shown at cost (since there is no ‘other than temporary’ diminution) as on 31st March, 2023, i.e.,4,00,000 and - 2,00,000 respectively, though their market values have been increased.