Long-term and short-term financial investments
The placement of an organization's free funds for the purpose of subsequent profit in the form of dividends or interest is called financial investments. The investment periods differ between short-term and long-term investments. The latter include objects with a maturity of more than 1 year. What exactly can the company's funds be invested in? The main forms of long-term financial investments include (clause 3 of PBU 19/02):
- State and/or municipal securities.
- Securities of other companies, including bills and bonds with a precisely defined value and maturity date.
- Deposits in banking institutions.
- Contributions to shareholders or share capital of companies; under simple partnership agreements.
- Interest-bearing loans issued to other organizations.
- Accounts receivable under contracts for the assignment of claims.
- Other long-term investments of a similar nature.
Note! Own securities purchased for the purpose of further cancellation or resale are not recognized as financial investments; investments in precious metals; bills of exchange for mutual settlements with counterparties; investments of the organization in property objects used in rental activities (clauses 3, 4 of PBU 19/02).
Conditions for registration
According to paragraph 2 of PBU 19/02, an organization has the right to accept securities and financial investments for accounting if three conditions are simultaneously met. The first condition: the organization has legal rights to investment objects (for example, ownership of a security). The second condition: the transition to organizing the risks associated with financial investments (the risk of falling prices, the risk of non-payment of the security by the issuer, etc.). Note that the second condition is closely related to the first - if the ownership of the object has passed to the buyer, then, as a rule, all the risks associated with this investment also pass to him. And finally, the third condition: the object of financial investment is capable of bringing economic benefits to the organization in the form of interest, dividends, growth in market prices for it, and others.
