Ministry of Finance, Enterprise Accounting Guidelines - Investments (Revised)

Issued: January 18 2001
Effective: January 1 2001
Applicability: These Guidelines do not apply to the conversion of foreign currency investment, securities business, consolidated accounting statements and enterprise mergers (Section Two).

Main contents: The Guidelines standardize the accounting treatment of investments and the disclosure of related information (Section One). Investments are divided into long-term investments and short-term investments. Long-term investments are further divided into long-term debt investments and long-term equity investments (Sections Three and Four). The Guidelines then stipulate the procedures for determining the initial costs of investments and adjusting the book value of investments. While all investments shall be initially valued on the basis of their initial costs, long-term equity investments may be adjusted by using the equity method or the cost method for each accounting period depending on the extent of control the investing enterprise has over the invested entity (Sections 6, 15, 16 and 18). Where such control materially changes, the accounting method shall also change (Sections 20 and 21). The Guidelines require enterprises to disclose in their financial reports such matters related to investments as their valuation method and, where the equity method is adopted, any significant differences in accounting policies as compared with those of the invested entities (Section 26).
Related legislation: Ministry of Finance, Enterprise Accounting Guidelines - Non-monetary Transactions (Revised), Jan 18 2001, CLP 2001 No.2 p5 and Ministry of Finance, Enterprise Accounting Guidelines - Debt Restructuring (Revised), Jan 18 2001, CLP 2001 No.2 p6