CA Inter P1 · Chapter 3 · Question 7 of 16
Case: Harit Agro Ltd holds equity shares acquired as a long-term investment at a cost of ₹5,00,000. At the balance sheet date their market value is ₹4,20,000. Management has assessed that the fall is temporary and caused by general market volatility. Under AS 13, the investment should be carried at:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) ₹5,00,000
Explanation
Long-term investments are carried at cost under AS 13, with a provision made only for a decline in value that is other than temporary. Since the decline here is temporary, the investment remains at its cost of ₹5,00,000. Lower of cost and fair value applies to current investments, not long-term ones.
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