Accounting Standard 13 - The standard deals with accounting for investments in the financial statements of enterprises and related disclosure requirements. The enterprises are required to disclose the current investments (realisable in nature and intended to be held for not more than one year from the date of its acquisition) and long terms investments (other than current investments) distinctly in their financial statements. The cost of investments should include all acquisition costs (including brokerage, fees and duties) and on disposal of an investment, the difference between the carrying amount and net disposal proceeds should be charged or credited to profit and loss statement
This Standard does not deal with :
- The basis for recognition of interest, dividends and rentals earned on investments which are covered by AS 9
- Operating or finance leases
- Investments on retirement benefit plans and life insurance enterprises
- Mutual funds, venture capital funds and/ or the related asset management companies, banks and public financial institutions formed under a Central or State Government Act or so declared under the Companies Act, 2013
Ind AS 40 Investment Property
The objective of Ind AS 40 is to prescribe the accounting treatment for investment property and related disclosure requirements.
Investment property is property (land or a building—or part of a building—or both) held (by the owner or by the lessee under a finance lease) to earn rentals or for capital appreciation or both, rather than for:
- (a) use in the production or supply of goods or services or for administrative purposes; or
- (b) sale in the ordinary course of business.
Difference Between AS 13 and Ind AS 40
AS 13 provides limited guidance on investment properties. As per AS 13, an enterprise holding investment properties should account for them as per cost model prescribed in AS 10, Property, Plant and Equipment. However, Ind AS 40 is a detailed standard dealing with various aspects of investment property accounting.
Recognition Investment property shall be recognised as an asset when, and only when:
- (a) it is probable that the future economic benefits that are associated with the investment property will flow to the entity; and
- (b) the cost of the investment property can be measured reliably.
Measurement at recognition
An investment property shall be measured initially at its cost. Transaction costs shall be included in the initial measurement.
The initial cost of a property interest held under a lease and classified as an investment property shall be as prescribed for a finance lease by paragraph 20 of Ind AS 17, i.e., the asset shall be recognised at the lower of the fair value of the property and the present value of the minimum lease payments. An equivalent amount shall be recognised as a liability in accordance with that same paragraph.
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