C6 are yet to be completed and approved by the Board of Directors. (a) Investments classified as long term investments should be carried in the financial statements at cost. However, provision for diminution shall be made to recognise a decine, other than temporary, in the value of the investments, such reduction being determined and made for each investment individually. Para 17 of AS 13 "Accounting for investments' states that indicators of the value of an investment are obtained by reference to its market value, the investee's assets and results and the expected cash flows from the investment on these bases, the facts of the given case clearly suggest that the provision for diminution should be made to reduce the carrying amount of long term investment to Rs. 20,000 in the financial statements for the year ended 31st March, 2006. (b) Para 3.2 of AS 4 (Revised) defines "Events occurring after the balance sheet date as those significant events, both favourable and unfavourable, that occur between the balance sheet date and the date on which the financial statements are approved by the Board of Directors in the case of a company. Accordingly, the acquisition of another company is an event occurring after the balance sheet date. However no adjustment to assets and liabilities is required as the event does not affect the determination and the condition of the amounts stated in the financial statements for the year ended 31st March, 2006. Applying para 15 which clearly states that disclosure should be made in the report of the approving authority of those events occurring after the balance sheet date that represent material changes and commitments affecting the financial position of the enterprise, the investment of Rs. 100 lakhs in April, 2006 in the acquisition of another company should be disclosed in the report of the Board of Directors to enable users of financial statements to make proper evaluations and decisions Illustration 9 (a) A Limited Company closed its accounting year on 30.6.05and the accounts for that period were considered and approved by the board of directors on 20th August, 2005. The company was engaged in laying pipe line for an oil company deep beneath the earth. While doing the boring work on 1.9.2005 it had met a rocky surface for which it was estimated that there would be an extra cost to the tune of Rs 80 lakhs. You are required to state with reasons, how the event would be dealt with in the financial statements for the year ended 30.6.05. (b) Y Co. Ltd, used certain resources of X Co Ltd. In return X Co. Ltd. received Rs 10 lakhs and Rs. 15 lakhs as interest and royalties respective from Y Co. Ltd, during the You are required to state whether and on what basis these revenues can be recognised by X Co, Ltd (c) A Ltd. purchased fixed assets casting Rs 3,000 lakhs on 1.1.2005 and the same was fully financed by foreign currency loan (U.S. Dollars) payable in three annual equal Instalments. Exchange rates were 1 Dollar = Rs. 40.00 and Rs. 42 50 as on 1.1.2005 The entire and 31.12.2005 respectively. First instalment was paid on 31.12.2005. difference in foreign exchange has been capitalized. You are required to state, how these transactions would be accounted for