In the previous class, we started with Financial Statement Analysis …
FINANCIAL STATEMENT ANALYSIS
Financial Statement Analysis … <ul><li>No#1…   Understanding </li></ul><ul><li>No#2…   Analysis  </li></ul>CHALLENGES...
First, we proceed for understanding financial statements of Tata Steel …
 
First, we take Balance sheet … … Sources of Funds Side
 
 
 
 
 
 
 
Now, let’s move to … … Application of Funds Side
47,075.52  25,597.50  TOTAL 155.11  202.53  Miscellaneous Expenses (to the extent not written off or adjusted) 30,193.66  ...
47,075.52  25,597.50  TOTAL 155.11  202.53  Miscellaneous Expenses (to the extent not written off or adjusted) 30,193.66  ...
47,075.52  25,597.50  TOTAL 155.11  202.53  Miscellaneous Expenses (to the extent not written off or adjusted) 30,193.66  ...
47,075.52  25,597.50  TOTAL 155.11  202.53  Miscellaneous Expenses (to the extent not written off or adjusted) 30,193.66  ...
47,075.52  25,597.50  TOTAL 155.11  202.53  Miscellaneous Expenses (to the extent not written off or adjusted) 30,193.66  ...
47,075.52  25,597.50  TOTAL 155.11  202.53  Miscellaneous Expenses (to the extent not written off or adjusted) 30,193.66  ...
47,075.52  25,597.50  TOTAL 155.11  202.53  Miscellaneous Expenses (to the extent not written off or adjusted) 30,193.66  ...
47,075.52  25,597.50  TOTAL 155.11  202.53  Miscellaneous Expenses (to the extent not written off or adjusted) 30,193.66  ...
47,075.52  25,597.50  TOTAL 155.11  202.53  Miscellaneous Expenses (to the extent not written off or adjusted) 30,193.66  ...
Now, let’s move towards understanding of …… <ul><li>PROFIT AND LOSS ACCOUNT… </li></ul>
TOP – LINE OF TATA STEEL
BOTTOM – LINE  OF TATA STEEL
APPROPRIATION OF PROFIT OF TATA STEEL
Now, we move to … <ul><li>CASH FLOW STATEMENT … </li></ul>
CASH FROM OPERATIONS  OF TATA STEEL
CASH USED IN INVESTING  OF TATA STEEL
CASH FROM FINANCING  TATA STEEL
All this is ………… our story about understanding financial statements
WHAT NEXT IN OUR AGENDA?
Share Warrants… <ul><li>The preferential issue of equity shares/ Fully Convertible Debentures (FCDs)/ Partly Convertible D...
Security Premium Account … <ul><li>The Securities Premium Account may be applied by the company- </li></ul><ul><ul><ul><li...
Deferred Tax Assets/Deferred Tax Liabilities <ul><li>ACCOUNTING  STANDARD 22 or IAS-12: </li></ul><ul><li>The differences ...
Look at the following information and suggest what should be the cost of plant and machinery purchased!!!!! Suggest at wha...
What is the difference between … <ul><li>Depreciation </li></ul><ul><li>Amortization </li></ul><ul><li>Depletion </li></ul...
All assets are subject to depreciation except freehold land.
Impairment Loss (AS-28) <ul><li>An enterprise should assess at each balance sheet date whether there is any indication tha...
Accounting for Investments…(AS 13) <ul><li>Investments   are assets held by an enterprise for earning income by way of div...
Types of Investments…(AS 13) Current  Investments Long Term  Investments
Current Investments … <ul><li>A current investment is an investment that is by its nature readily realizable and is intend...
Long-Term Investment … <ul><li>A long term investment is an investment other than a current investment. </li></ul><ul><li>...
Disclosure – AS 13 <ul><li>Investments should be disclosed in financial statements as the aggregate amount of  quoted and ...
What’s the difference between Reserve and Provision? <ul><li>Provision   is charged to Profit and Loss Account   where as ...
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Financial Statement Analysis 2

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Financial Statement Analysis 2

  1. 1. In the previous class, we started with Financial Statement Analysis …
  2. 2. FINANCIAL STATEMENT ANALYSIS
  3. 3. Financial Statement Analysis … <ul><li>No#1… Understanding </li></ul><ul><li>No#2… Analysis </li></ul>CHALLENGES...
  4. 4. First, we proceed for understanding financial statements of Tata Steel …
  5. 6. First, we take Balance sheet … … Sources of Funds Side
  6. 14. Now, let’s move to … … Application of Funds Side
  7. 15. 47,075.52 25,597.50 TOTAL 155.11 202.53 Miscellaneous Expenses (to the extent not written off or adjusted) 30,193.66 8,248.23 Net Current Assets 6,768.78 5,453.66   2,913.52 1,930.46 <ul><ul><li>Provisions </li></ul></ul>3,855.26 3,523.20 <ul><ul><li>Current Liabilities </li></ul></ul>    Less: CURRENT LIABILITIES & PROVISIONS 36,962.44 13,701.89   0.20 0.20 <ul><ul><li>Interest Accrued on Investments </li></ul></ul>33,348.74 3,055.73 <ul><ul><li>Loans and Advances </li></ul></ul>465.04 7,681.35 <ul><ul><li>Cash in Hand and at Bank </li></ul></ul>543.48 631.63 <ul><ul><li>Sundry Debtors </li></ul></ul>2,047.31 1,827.54 <ul><ul><li>Inventories: Stock-in-Trade </li></ul></ul>557.67 505.44 <ul><ul><li>Inventories: Stores and Spare Parts </li></ul></ul>    CURRENT ASSETS, LOANS & ADVANCES 4,103.19 6,106.18 INVESTMENTS 12,623.56 11,040.56       <ul><ul><li>Capital Work in Progress </li></ul></ul>12,623.56 11,040.56 Net Block 8,123.01 7,385.96 <ul><ul><li>Less: Depreciation </li></ul></ul>100.47 100.41 <ul><ul><li>Less: Amortization </li></ul></ul>20,847.04 18,526.93 <ul><ul><li>Gross Block </li></ul></ul>    FIXED ASSETS     APPLICATION OF FUNDS 2008 2007 Particulars (Rs. in Crores) BALANCE SHEET OF TATA STEEL LIMITED AS AT 31ST MARCH…
  8. 16. 47,075.52 25,597.50 TOTAL 155.11 202.53 Miscellaneous Expenses (to the extent not written off or adjusted) 30,193.66 8,248.23 Net Current Assets 6,768.78 5,453.66   2,913.52 1,930.46 <ul><ul><li>Provisions </li></ul></ul>3,855.26 3,523.20 <ul><ul><li>Current Liabilities </li></ul></ul>    Less: CURRENT LIABILITIES & PROVISIONS 36,962.44 13,701.89   0.20 0.20 <ul><ul><li>Interest Accrued on Investments </li></ul></ul>33,348.74 3,055.73 <ul><ul><li>Loans and Advances </li></ul></ul>465.04 7,681.35 <ul><ul><li>Cash in Hand and at Bank </li></ul></ul>543.48 631.63 <ul><ul><li>Sundry Debtors </li></ul></ul>2,047.31 1,827.54 <ul><ul><li>Inventories: Stock-in-Trade </li></ul></ul>557.67 505.44 <ul><ul><li>Inventories: Stores and Spare Parts </li></ul></ul>    CURRENT ASSETS, LOANS & ADVANCES 4,103.19 6,106.18 INVESTMENTS 12,623.56 11,040.56       <ul><ul><li>Capital Work in Progress </li></ul></ul>12,623.56 11,040.56 Net Block 8,123.01 7,385.96 <ul><ul><li>Less: Depreciation </li></ul></ul>100.47 100.41 <ul><ul><li>Less: Amortization </li></ul></ul>20,847.04 18,526.93 <ul><ul><li>Gross Block </li></ul></ul>    FIXED ASSETS     APPLICATION OF FUNDS 2008 2007 Particulars (Rs. in Crores) BALANCE SHEET OF TATA STEEL LIMITED AS AT 31ST MARCH…
  9. 17. 47,075.52 25,597.50 TOTAL 155.11 202.53 Miscellaneous Expenses (to the extent not written off or adjusted) 30,193.66 8,248.23 Net Current Assets 6,768.78 5,453.66   2,913.52 1,930.46 <ul><ul><li>Provisions </li></ul></ul>3,855.26 3,523.20 <ul><ul><li>Current Liabilities </li></ul></ul>    Less: CURRENT LIABILITIES & PROVISIONS 36,962.44 13,701.89   0.20 0.20 <ul><ul><li>Interest Accrued on Investments </li></ul></ul>33,348.74 3,055.73 <ul><ul><li>Loans and Advances </li></ul></ul>465.04 7,681.35 <ul><ul><li>Cash in Hand and at Bank </li></ul></ul>543.48 631.63 <ul><ul><li>Sundry Debtors </li></ul></ul>2,047.31 1,827.54 <ul><ul><li>Inventories: Stock-in-Trade </li></ul></ul>557.67 505.44 <ul><ul><li>Inventories: Stores and Spare Parts </li></ul></ul>    CURRENT ASSETS, LOANS & ADVANCES 4,103.19 6,106.18 INVESTMENTS 12,623.56 11,040.56       <ul><ul><li>Capital Work in Progress </li></ul></ul>12,623.56 11,040.56 Net Block 8,123.01 7,385.96 <ul><ul><li>Less: Depreciation </li></ul></ul>100.47 100.41 <ul><ul><li>Less: Amortization </li></ul></ul>20,847.04 18,526.93 <ul><ul><li>Gross Block </li></ul></ul>    FIXED ASSETS     APPLICATION OF FUNDS 2008 2007 Particulars (Rs. in Crores) BALANCE SHEET OF TATA STEEL LIMITED AS AT 31ST MARCH…
  10. 18. 47,075.52 25,597.50 TOTAL 155.11 202.53 Miscellaneous Expenses (to the extent not written off or adjusted) 30,193.66 8,248.23 Net Current Assets 6,768.78 5,453.66   2,913.52 1,930.46 <ul><ul><li>Provisions </li></ul></ul>3,855.26 3,523.20 <ul><ul><li>Current Liabilities </li></ul></ul>    Less: CURRENT LIABILITIES & PROVISIONS 36,962.44 13,701.89   0.20 0.20 <ul><ul><li>Interest Accrued on Investments </li></ul></ul>33,348.74 3,055.73 <ul><ul><li>Loans and Advances </li></ul></ul>465.04 7,681.35 <ul><ul><li>Cash in Hand and at Bank </li></ul></ul>543.48 631.63 <ul><ul><li>Sundry Debtors </li></ul></ul>2,047.31 1,827.54 <ul><ul><li>Inventories: Stock-in-Trade </li></ul></ul>557.67 505.44 <ul><ul><li>Inventories: Stores and Spare Parts </li></ul></ul>    CURRENT ASSETS, LOANS & ADVANCES 4,103.19 6,106.18 INVESTMENTS 12,623.56 11,040.56       <ul><ul><li>Capital Work in Progress </li></ul></ul>12,623.56 11,040.56 Net Block 8,123.01 7,385.96 <ul><ul><li>Less: Depreciation </li></ul></ul>100.47 100.41 <ul><ul><li>Less: Amortization </li></ul></ul>20,847.04 18,526.93 <ul><ul><li>Gross Block </li></ul></ul>    FIXED ASSETS     APPLICATION OF FUNDS 2008 2007 Particulars (Rs. in Crores) BALANCE SHEET OF TATA STEEL LIMITED AS AT 31ST MARCH…
  11. 19. 47,075.52 25,597.50 TOTAL 155.11 202.53 Miscellaneous Expenses (to the extent not written off or adjusted) 30,193.66 8,248.23 Net Current Assets 6,768.78 5,453.66   2,913.52 1,930.46 <ul><ul><li>Provisions </li></ul></ul>3,855.26 3,523.20 <ul><ul><li>Current Liabilities </li></ul></ul>    Less: CURRENT LIABILITIES & PROVISIONS 36,962.44 13,701.89   0.20 0.20 <ul><ul><li>Interest Accrued on Investments </li></ul></ul>33,348.74 3,055.73 <ul><ul><li>Loans and Advances </li></ul></ul>465.04 7,681.35 <ul><ul><li>Cash in Hand and at Bank </li></ul></ul>543.48 631.63 <ul><ul><li>Sundry Debtors </li></ul></ul>2,047.31 1,827.54 <ul><ul><li>Inventories: Stock-in-Trade </li></ul></ul>557.67 505.44 <ul><ul><li>Inventories: Stores and Spare Parts </li></ul></ul>    CURRENT ASSETS, LOANS & ADVANCES 4,103.19 6,106.18 INVESTMENTS 12,623.56 11,040.56       <ul><ul><li>Capital Work in Progress </li></ul></ul>12,623.56 11,040.56 Net Block 8,123.01 7,385.96 <ul><ul><li>Less: Depreciation </li></ul></ul>100.47 100.41 <ul><ul><li>Less: Amortization </li></ul></ul>20,847.04 18,526.93 <ul><ul><li>Gross Block </li></ul></ul>    FIXED ASSETS     APPLICATION OF FUNDS 2008 2007 Particulars (Rs. in Crores) BALANCE SHEET OF TATA STEEL LIMITED AS AT 31ST MARCH…
  12. 20. 47,075.52 25,597.50 TOTAL 155.11 202.53 Miscellaneous Expenses (to the extent not written off or adjusted) 30,193.66 8,248.23 Net Current Assets 6,768.78 5,453.66   2,913.52 1,930.46 <ul><ul><li>Provisions </li></ul></ul>3,855.26 3,523.20 <ul><ul><li>Current Liabilities </li></ul></ul>    Less: CURRENT LIABILITIES & PROVISIONS 36,962.44 13,701.89   0.20 0.20 <ul><ul><li>Interest Accrued on Investments </li></ul></ul>33,348.74 3,055.73 <ul><ul><li>Loans and Advances </li></ul></ul>465.04 7,681.35 <ul><ul><li>Cash in Hand and at Bank </li></ul></ul>543.48 631.63 <ul><ul><li>Sundry Debtors </li></ul></ul>2,047.31 1,827.54 <ul><ul><li>Inventories: Stock-in-Trade </li></ul></ul>557.67 505.44 <ul><ul><li>Inventories: Stores and Spare Parts </li></ul></ul>    CURRENT ASSETS, LOANS & ADVANCES 4,103.19 6,106.18 INVESTMENTS 12,623.56 11,040.56       <ul><ul><li>Capital Work in Progress </li></ul></ul>12,623.56 11,040.56 Net Block 8,123.01 7,385.96 <ul><ul><li>Less: Depreciation </li></ul></ul>100.47 100.41 <ul><ul><li>Less: Amortization </li></ul></ul>20,847.04 18,526.93 <ul><ul><li>Gross Block </li></ul></ul>    FIXED ASSETS     APPLICATION OF FUNDS 2008 2007 Particulars (Rs. in Crores) BALANCE SHEET OF TATA STEEL LIMITED AS AT 31ST MARCH…
  13. 21. 47,075.52 25,597.50 TOTAL 155.11 202.53 Miscellaneous Expenses (to the extent not written off or adjusted) 30,193.66 8,248.23 Net Current Assets 6,768.78 5,453.66   2,913.52 1,930.46 <ul><ul><li>Provisions </li></ul></ul>3,855.26 3,523.20 <ul><ul><li>Current Liabilities </li></ul></ul>    Less: CURRENT LIABILITIES & PROVISIONS 36,962.44 13,701.89   0.20 0.20 <ul><ul><li>Interest Accrued on Investments </li></ul></ul>33,348.74 3,055.73 <ul><ul><li>Loans and Advances </li></ul></ul>465.04 7,681.35 <ul><ul><li>Cash in Hand and at Bank </li></ul></ul>543.48 631.63 <ul><ul><li>Sundry Debtors </li></ul></ul>2,047.31 1,827.54 <ul><ul><li>Inventories: Stock-in-Trade </li></ul></ul>557.67 505.44 <ul><ul><li>Inventories: Stores and Spare Parts </li></ul></ul>    CURRENT ASSETS, LOANS & ADVANCES 4,103.19 6,106.18 INVESTMENTS 12,623.56 11,040.56       <ul><ul><li>Capital Work in Progress </li></ul></ul>12,623.56 11,040.56 Net Block 8,123.01 7,385.96 <ul><ul><li>Less: Depreciation </li></ul></ul>100.47 100.41 <ul><ul><li>Less: Amortization </li></ul></ul>20,847.04 18,526.93 <ul><ul><li>Gross Block </li></ul></ul>    FIXED ASSETS     APPLICATION OF FUNDS 2008 2007 Particulars (Rs. in Crores) BALANCE SHEET OF TATA STEEL LIMITED AS AT 31ST MARCH…
  14. 22. 47,075.52 25,597.50 TOTAL 155.11 202.53 Miscellaneous Expenses (to the extent not written off or adjusted) 30,193.66 8,248.23 Net Current Assets 6,768.78 5,453.66   2,913.52 1,930.46 <ul><ul><li>Provisions </li></ul></ul>3,855.26 3,523.20 <ul><ul><li>Current Liabilities </li></ul></ul>    Less: CURRENT LIABILITIES & PROVISIONS 36,962.44 13,701.89   0.20 0.20 <ul><ul><li>Interest Accrued on Investments </li></ul></ul>33,348.74 3,055.73 <ul><ul><li>Loans and Advances </li></ul></ul>465.04 7,681.35 <ul><ul><li>Cash in Hand and at Bank </li></ul></ul>543.48 631.63 <ul><ul><li>Sundry Debtors </li></ul></ul>2,047.31 1,827.54 <ul><ul><li>Inventories: Stock-in-Trade </li></ul></ul>557.67 505.44 <ul><ul><li>Inventories: Stores and Spare Parts </li></ul></ul>    CURRENT ASSETS, LOANS & ADVANCES 4,103.19 6,106.18 INVESTMENTS 12,623.56 11,040.56       <ul><ul><li>Capital Work in Progress </li></ul></ul>12,623.56 11,040.56 Net Block 8,123.01 7,385.96 <ul><ul><li>Less: Depreciation </li></ul></ul>100.47 100.41 <ul><ul><li>Less: Amortization </li></ul></ul>20,847.04 18,526.93 <ul><ul><li>Gross Block </li></ul></ul>    FIXED ASSETS     APPLICATION OF FUNDS 2008 2007 Particulars (Rs. in Crores) BALANCE SHEET OF TATA STEEL LIMITED AS AT 31ST MARCH…
  15. 23. 47,075.52 25,597.50 TOTAL 155.11 202.53 Miscellaneous Expenses (to the extent not written off or adjusted) 30,193.66 8,248.23 Net Current Assets 6,768.78 5,453.66   2,913.52 1,930.46 <ul><ul><li>Provisions </li></ul></ul>3,855.26 3,523.20 <ul><ul><li>Current Liabilities </li></ul></ul>    Less: CURRENT LIABILITIES & PROVISIONS 36,962.44 13,701.89   0.20 0.20 <ul><ul><li>Interest Accrued on Investments </li></ul></ul>33,348.74 3,055.73 <ul><ul><li>Loans and Advances </li></ul></ul>465.04 7,681.35 <ul><ul><li>Cash in Hand and at Bank </li></ul></ul>543.48 631.63 <ul><ul><li>Sundry Debtors </li></ul></ul>2,047.31 1,827.54 <ul><ul><li>Inventories: Stock-in-Trade </li></ul></ul>557.67 505.44 <ul><ul><li>Inventories: Stores and Spare Parts </li></ul></ul>    CURRENT ASSETS, LOANS & ADVANCES 4,103.19 6,106.18 INVESTMENTS 12,623.56 11,040.56       <ul><ul><li>Capital Work in Progress </li></ul></ul>12,623.56 11,040.56 Net Block 8,123.01 7,385.96 <ul><ul><li>Less: Depreciation </li></ul></ul>100.47 100.41 <ul><ul><li>Less: Amortization </li></ul></ul>20,847.04 18,526.93 <ul><ul><li>Gross Block </li></ul></ul>    FIXED ASSETS     APPLICATION OF FUNDS 2008 2007 Particulars (Rs. in Crores) BALANCE SHEET OF TATA STEEL LIMITED AS AT 31ST MARCH…
  16. 24. Now, let’s move towards understanding of …… <ul><li>PROFIT AND LOSS ACCOUNT… </li></ul>
  17. 25. TOP – LINE OF TATA STEEL
  18. 26. BOTTOM – LINE OF TATA STEEL
  19. 27. APPROPRIATION OF PROFIT OF TATA STEEL
  20. 28. Now, we move to … <ul><li>CASH FLOW STATEMENT … </li></ul>
  21. 29. CASH FROM OPERATIONS OF TATA STEEL
  22. 30. CASH USED IN INVESTING OF TATA STEEL
  23. 31. CASH FROM FINANCING TATA STEEL
  24. 32. All this is ………… our story about understanding financial statements
  25. 33. WHAT NEXT IN OUR AGENDA?
  26. 34. Share Warrants… <ul><li>The preferential issue of equity shares/ Fully Convertible Debentures (FCDs)/ Partly Convertible Debentures (PCDs) or any other financial instruments which would be converted into or exchanged with equity shares at a later date, by listed companies whose equity share capital is listed on any stock exchange, to any select group of persons under Section 81(1A) of the Companies Act 1956 on private placement basis shall be governed by these guidelines. </li></ul><ul><li>An amount equivalent to at least ten percent of the price fixed as per Chapter-XIII of DISCLOSURE AND INVESTOR PROTECTION GUIDELINES, SEBI shall become payable for the warrants on the date of their allotment. </li></ul>
  27. 35. Security Premium Account … <ul><li>The Securities Premium Account may be applied by the company- </li></ul><ul><ul><ul><li>(a) in paying up unissued shares of the company to be issued to members of the company as fully paid bonus shares; </li></ul></ul></ul><ul><ul><ul><li>(b) in writing off the preliminary expenses of the company; </li></ul></ul></ul><ul><ul><ul><li>(c) in writing off the expenses of, or commission paid or discount allowed on, any issue of shares or debentures of the company; or </li></ul></ul></ul><ul><ul><ul><li>(d) in providing for the premium payable on the redemption of any redeemable preference shares or of any debentures of the company. </li></ul></ul></ul>
  28. 36. Deferred Tax Assets/Deferred Tax Liabilities <ul><li>ACCOUNTING STANDARD 22 or IAS-12: </li></ul><ul><li>The differences between taxable income and accounting income can be classified into PERMANENT DIFFERENCES and TIMING DIFFERENCES . </li></ul><ul><ul><li>Permanent differences are those differences between taxable income and accounting income which originate in one period and do not reverse subsequently. </li></ul></ul><ul><ul><li>Timing differences are those differences between taxable income and accounting income for a period that originate in one period and are capable of reversal in one or more subsequent periods. </li></ul></ul><ul><li>The tax effects of timing differences are included in the tax expense in the statement of profit and loss; and as deferred tax assets or as deferred tax liabilities, in the balance sheet. </li></ul>
  29. 37. Look at the following information and suggest what should be the cost of plant and machinery purchased!!!!! Suggest at what cost the asset will be shown in the Balance Sheet.
  30. 38. What is the difference between … <ul><li>Depreciation </li></ul><ul><li>Amortization </li></ul><ul><li>Depletion </li></ul><ul><li>Impairment </li></ul>
  31. 39. All assets are subject to depreciation except freehold land.
  32. 40. Impairment Loss (AS-28) <ul><li>An enterprise should assess at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the enterprise should estimate the recoverable amount of the asset. </li></ul><ul><li>An impairment loss is the amount by which the carrying amount of an asset exceeds its recoverable amount. </li></ul><ul><li>This Standard defines recoverable amount as the higher of an asset’s net selling price and value in use. </li></ul>
  33. 41. Accounting for Investments…(AS 13) <ul><li>Investments are assets held by an enterprise for earning income by way of dividends, interest, and rentals, for capital appreciation, or for other benefits to the investing enterprise. Assets held as stock-in-trade are not 'investments'. </li></ul><ul><li>A Current Investment is an investment that is by its nature readily realizable and is intended to be held for not more than one year from the date on which such investment is made. </li></ul><ul><li>A Long Term Investment is an investment other than a current investment. </li></ul><ul><li>An Investment Property is an investment in land or buildings that are not intended to be occupied substantially for use by, or in the operations of, the investing enterprise. </li></ul>
  34. 42. Types of Investments…(AS 13) Current Investments Long Term Investments
  35. 43. Current Investments … <ul><li>A current investment is an investment that is by its nature readily realizable and is intended to be held for not more than one year from the date on which such investment is made . </li></ul><ul><li>The carrying amount for current investments is the lower of cost and fair value . In respect of investments for which an active market exists, market value generally provides the best evidence of fair value. </li></ul><ul><li>For current investments, any reduction to fair value and any reversals of such reductions are included in the profit and loss account. </li></ul>
  36. 44. Long-Term Investment … <ul><li>A long term investment is an investment other than a current investment. </li></ul><ul><li>Long-term investments are usually carried at cost . However, when there is a decline, other than temporary, in the value of a long term investment, the carrying amount is reduced to recognize the decline . </li></ul><ul><li>Where there is a decline, other than temporary, in the carrying amounts of long term investments, the resultant reduction in the carrying amount is charged to the profit and loss statement. </li></ul>
  37. 45. Disclosure – AS 13 <ul><li>Investments should be disclosed in financial statements as the aggregate amount of quoted and unquoted investments , giving the aggregate market value of quoted investments. </li></ul>
  38. 46. What’s the difference between Reserve and Provision? <ul><li>Provision is charged to Profit and Loss Account where as Reserve is an appropriation of profit. </li></ul><ul><li>Provision is charged to Profit and Loss Account before calculating the net profit or loss , but Reserve can be made only when there is profit. </li></ul><ul><li>Provision is created for specific purpose, while Reserve may be created for general purpose as well. </li></ul><ul><li>Provision are not invested in outside securities. Reserves reduces divisible profit can be invested in outside securities. </li></ul>

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