Long-term investments: types and opportunities, prospects, sources of financing. What is a long-term investment: types, sources, analysis and accounting

Long-term investment - what is it and who can benefit from this way of working in the stock market? Before answering these questions, we need to briefly consider two main approaches.

The first is speculation, short-term trading in stocks, commodities and currency in order to obtain speculative income. The speculator should be able to predict changes in asset prices in the short term - a couple of minutes, hours, several days or weeks. Usually this is limited to the horizons of investing a speculator. Indeed, he should not be in a position for a long time: he saw the potential for growth or decline, entered the market, “swept” on the trend and left. At first, when people first see the graph, it seems simple to them. Here he opened a position, then closed and received income. On the historical chart, everything seems quite obvious. But in practice, everything is much more complicated - short-term price fluctuations are very chaotic. Sometimes professionals call this a “hot” market, since any news, any statement by dignitaries, any technical breakdown of levels, any financial event affects the price of an asset. The speculator should always be aware of all the processes taking place, as they say, should be in the market. This always requires a significant amount of time to analyze the current market situation. The main advantage of speculation is its high potential return. Most people involved in short-term trading expect to earn income of 50% per annum or more, sometimes significantly higher. Speculation is primarily suitable for those who are willing to take significant risks for the sake of greater profit.

Now consider the second approach - long-term investment. This implies the purchase of shares with a long-term investment horizon - a year, two, three and even more. The first place is not the stock price chart, but the company behind this security. In the long run, the market is called "cold." The explanation for this is that short-term news affecting the price balance each other, and fundamental data of the company come to the fore. The main principle of long-term investment is business growth, stock growth and company losses, as a result of which the value of the stock is reduced. Of course, this also has its own difficulties, and it is necessary to correctly assess the current state of the business, and also be able to correctly predict its development. But the plus is that you will have much more free time for this, since the investor makes a small number of transactions. As for potential returns, as a rule, investors focus on income of about 20-30% per annum in the long run. Here it must be clarified that stocks do not grow linearly. A security can be sideways for several years, and then grow several times. There are many examples of such situations on the Russian stock market:

Pole Gold

Moscow Exchange

A long-term investor must be patient and wait for the moment when the shares purchased by him grow. First of all, he should be interested in what is happening with the business, since this is a determining factor in the change in stock prices in the long term.

Long-term investment is more suitable for people who do not have much free time and want to receive income from their assets more than a bank deposit.

In order to start investing, as in any other business, you need to start with training and learn the basics of fundamental analysis. This is an analysis of the financial condition of the company, an assessment of the value of the business and the prospect of its development. You also need to study the experience of the most famous and most importantly, successful investors in the world.

First of all, this is Warren Buffett - the third wealthiest person and the best recognized investor in the world. Next come Philip Fisher, Peter Lynch and Jim Rogers. You need to get acquainted with the books, thoughts and advice of these people, study the features of the analysis of the financial statements of companies, because without this you will not be able to assess the financial condition of the business. And then - practice, practice and practice again.

When one of the students asked Warren Buffett how to learn all this, Buffett answered: "Start with the letter A."

The benefits of long-term investing are that most large companies listed on the Moscow Exchange are underestimated in terms of fundamental analysis. Yes, now our economy is going through difficult times, but crises were, are and will be. For every decline there is a rise. The stock market is a reflection of the processes taking place in the economy. Since our economy is still far from developed economies, the stock market has significant growth potential, and hence the growth potential of your investments in the long term.

Without exception, everyone wants to live in abundance. The normal functioning of economic systems is simply impossible without investor money. Each investor wants to get the maximum benefit, while not succumbing to any risks. And in the modern world, the possibilities of investors are almost unlimited.

To date, allocate long-term and short-term investments. Sometimes experts in the economic sphere also allocate medium-term investments - investments for a period of one to three years.

Investments for short periods are used to obtain quick profits up to 20% of projects and programs. The advantage of this type of deposits is the receipt of income in a short period of time. However, experts attribute such projects to a high-risk group.

  - these are investments, the term of which is, as a rule, from 3 to 5 years (occasionally the period is 1 year or more than 5 years).

This term refers to investments in the purchase of structures, construction, the purchase of land, the creation of software products, etc. Such investments are characterized by high stability and minimal risks.

Evaluation of the effectiveness of long-term investments

In order to evaluate the effectiveness of this type of investment, such as long-term investments, a number of factors should be considered:

• Shareholder competitiveness;
• The average market value of a share;
• The ratio of the stock price and its average market value.

In practice, difficulty arises because stocks do not have a market rate. Profit is calculated according to a special schedule from year to year. Most often, fixed capital does not have time to pay off in the first 3-5 years, so there is no need to expect special profits during this period.

Advantages and disadvantages

If we consider the positive and negative sides of such investments, then we can highlight several beneficial points and several disadvantages.

Among the shortcomings are worth noting:

1. Long-term investments are not able to give quick profits;
2. High risk of loss of funds invested in an interesting, it would seem, really profitable project due to improper management;
3. Loss of liquidity due to unreality to return money and make a profit for several years.

But many positive aspects make this type of investment very profitable for many:

1. Long-term investments are aimed at stable income in the future;
2. Invested funds can pay off repeatedly over a long period, so the investor can hope to return large amounts;
3. Turning around several times, money brings big profits;
4. Long-term investments do not require constant concern for short-term market fluctuations and changes.

Investments for a long period of time, first of all, must be considered as additional income or an opportunity to purchase a block of shares to manage the enterprise. It is especially beneficial to invest in large amounts.

Scopes of investments and their significance

Any type of investment plays a significant role at the microeconomic level. Without cash investments, the development and normal functioning of any company or enterprise is impossible. It is long-term investment that can ensure financial stability and contribute to increased profits.

There are investments that are aimed at the development of socio-cultural objects, including the development of science, sports, education, health care. Also, the list can be supplemented by informatics and modern technologies, ecology, investments in human capital, which is understood as the development of education, healthcare and other important areas in terms of health and spiritual perfection.

Long-term investments are made only for profit, but it is impossible to always invest in the same project, industry or country. Otherwise, inflation may occur. If the investment will occur in insufficient volume, then this can lead to defilation. Therefore, before starting the investment process, it is necessary to think about its feasibility in general and carefully consider the investment plan.

Long-term investments can be classified according to various factors:

1. By attachment object   Allocate financial and real investments. The first include securities, stocks, loans to provide additional income. Real investments mean investments in the purchase of land, real estate, equipment and the development of new technologies.
2. By degree of readiness   (completed and incomplete).
3. By the method of paying income:   payment can be one-time or distributed by year (a one-time payment is convenient for the debtor, and the distribution by year is convenient for the creditor).

Also, these types of investments are divided by ownership, industry, structure, purpose, etc.

Some options for long-term investment

Where to invest the money? - A fairly popular question among most investors who want to get additional income and ensure a happy life. Sometimes long-term investments are really capable of bringing huge returns to the investor. The most popular attachments are discussed below.

• Securities. After carefully studying the prospects and opportunities of the program, in some cases, investing in stocks becomes a very profitable action. Basically, if a certain company tries to invest more money in the purchase of securities, it begins to develop rapidly. And this can facilitate access to the international market.
• Investments in equipment. Such long-term investments can be called reliable, because companies invest in the purchase of vehicles, all kinds of necessary equipment, special equipment and other equipment, which are subsequently leased. Also, purchased equipment after leasing can be resold. The main risk of investment is in accidental breakdowns during operation and maintenance costs.
•   characterized by high risks in our country. To obtain income, it is necessary to conduct accurate calculations and carefully study the possible negative consequences. Here you must also consider the possible bankruptcy of the contractor or a sharp drop in the cost per square meter of housing.
•   characterized by special risks due to the inability to accurately determine the growth / fall of a particular currency.

In order for the investor not to lose too much money, it is better to resort to investing in several different options at the same time, thereby

Long-term investment means the cost of tuition, the acquisition and increase of non-current and current assets. Accounting for such financial investments is carried out in accordance with RAS 19/02. The principal difference with short-term ones is in the investment period: up to or more than one year.

What costs are reflected as financial investments?

The following costs can be reflected in accounting as long-term financial investments:

• Payment under contracts in full accordance with the invoices issued;
• Settlements for information services and consultations (if the purchase of assets as a result of consultations did not take place, the costs are included in other expenses);
• For the services of intermediaries in the acquisition of assets;
• Other payments related to the purchase of assets.

The place of long-term financial investments in the balance sheet

This category of investments includes only expenses that generate profit in the form of interest, acquisition of intellectual property, and increase in assets. Interest-free loans do not have such characteristics - their issuance is recorded on account 76, in the balance sheet are reflected in the receivables.

In the balance sheet, two lines are intended to reflect financial investments and each has its own purpose:

• 1170 - to reflect the amounts of non-current assets in the 1st part of the balance sheet, that is, investments involving a return no earlier than a year later. This is the purchase of securities, investments in the authorized capital of new enterprises.
• 1240 - for fixing in the 2nd part of the balance of current assets invested for up to 1 year.

The amounts reflected on these lines are taken into account by the accountant on accounts 55, 58, 59 and 73. When posting to accounts, it is immediately worth considering the investment term, using subaccounts for this. This will simplify further balance formation.

Accounts for the accounting of investments and financial investments

Long-term investments are recognized at historical cost corresponding to the actual costs incurred.

Separation into long-term and short-term financial investments is mandatory - this norm is established by order of the Ministry of Finance 94n of 2000. All of them are reflected in the 58th account, which has the following sub-accounts:

• 1 - the amount of shares and shares;
• 2 - investments in securities;
• 3 - loans issued;
• 4 - investments on the terms of a simple partnership agreement.

Each operation on the above sub-accounts must be confirmed by the contract, in which the invested amount, the investment period and its conditions (percent) are prescribed. To distinguish between long-term and short-term investments, second-order sub-accounts are opened.

Inside the company, you can use your own individual list of sub-accounts, corresponding to the specifics of the activity. The only strict rule is the mandatory breakdown of investments up to and over 12 months.

Posting Examples

• Use of shares in the authorized capital - Dt 58.1 - Kt 75.1;
• The increase in the authorized capital due to debt securities - Dt 58.2 - Kt 75.1;
• Sale of securities - Dt 51 - Kt58.1;
• Gratuitous receipt of securities - Dt 58.1 - Kt98.2.

Other financial investments are recorded on the debit of the 58th account and the loan of the 76th. To provide loans to external borrowers at interest, postings are made to the 55th account (for deposits). Internal loans - to employees - are recorded in 73 accounts.

Long-term investments that do not fall into account 58

The following investments are not suitable for the conditions of use of 58 accounts.

• Repurchase of shares for resale;
• Acquisition of bills of exchange as payment for goods delivered and services rendered. Bills of exchange as security for debt obligations are taken into account on account 58 already.
• Buying a property;
• Long-term investments not related to the organization;
• Purchase of intangible assets, replenishment of inventories and fixed assets.

Accounting for retired financial investments

Upon reaching the investment period, they are returned, which is formalized by the relevant postings, as the disposal of investments. They brought returns in the form of profit and returned with it. Amounts received are referred to as other income, and investments that are withdrawn from accounting are recognized in other expenses. Postings are linked by two accounts - Kt58 - Dt91.2.

Upon the expiration of the investment period, they are transferred to short-term (upon reaching the year before the end of the return). The increase in the amount of long-term investments indicates the withdrawal of large amounts from circulation, which may adversely affect the development of the enterprise. Each investment for the long term should be preceded by a thorough analysis with the calculation of possible risks.

Long-term investments are investments of capital for the period from one year to five years.   The main feature of such deposits is increased reliability, the possibility of obtaining stable profits, as well as minimal risks for the investor. The only drawback is that income does not come immediately, but after a certain period of time. Therefore, if you need "quick money", you should give preference to short-term investment options.

Below we consider what are the features of long-term investments, how they work, what types are, and also give detailed instructions on such investments. The information provided is enough to understand this area and start making money.

Essence

Today, there are many opportunities for people planning to receive a stable income and forget about financial problems forever. In general, all investments are divided into two categories - they are short-term and long-term. The peculiarity of the first is to make a quick profit - within a few months (maximum of a year). Another category includes “long-playing” investments designed to make a profit in a few years.

If you evaluate investments based on current risks, short-term options are considered more dangerous. There is always a risk of being left without money. In the case of long-term investments, with proper diversification, it is easier to protect capital, and to compensate for losses in other profitable areas.

When choosing an investment option, you should focus on the goals that you set for yourself. For example, if you do not have enough 70-100 thousand rubles for an apartment, and there is no desire to borrow money from acquaintances or take a loan from a bank, it is better to prefer short-term investments - in PAMM accounts, mutual funds, MFIs and others.

Long-term investments are practically independent of market fluctuations. But it is worth considering that in the case of a deposit, the risk of depreciating money is high, but long-term investments in stocks over the years can bring good profits.

For successful investment over long distances it is important to have several important qualities - patience, prudence, the ability to control emotions. It is worth considering that the shares of large companies can go down and rise in price, so it is important not to panic and not rush to sell existing securities. The decline in asset value ends sooner or later, after which growth begins again.

Many are sure that long-term investments are only a purchase of shares, but this is not so. This term refers to investments in the construction sector, the purchase of real estate for rent or sale, investment in precious metals, equipment and even your own training.

Let's make a small comparison of the two investment options in several categories:

1. Short-term investments have a payback period of 2-3 months to a year, the rate of return is medium, the risks are maximum, and the entry threshold is small.
2. Long-term investments pay off in the period from one to five years, have low risks, a high level of profit and require solid capital when investing.

The human nature is such that when investing, you want to see the result after a short period of time, and not all investors think about future prospects. There is also an opinion that long-term investments are too risky due to instability in the political and economic situation. No one knows what can happen in such a long period of time.

What types of long-term investment are there?

Today, dozens of types of investments can be distinguished, depending on the volume of working capital, the level of literacy, as well as personal preferences. Below we consider only those long-term financial investments that are time-tested and give results:

• Investments in securities. Today, investments in stocks of companies that have earned popularity or are only gaining momentum are in great demand. The advantage of this method is that a small amount is enough to start an investment - up to 100 thousand rubles. Today brokerage companies operate that open accounts for smaller amounts (up to 3-5 thousand rubles), but in this case one cannot count on large profits.

Shares are not worth buying directly - they are purchased through brokers. Otherwise, there is a high risk of losing money due to investments in start-up and unpromising companies. Working through a broker guarantees the legitimacy of transactions on the exchange, as well as cooperation with qualified consultants. The latter, in turn, are interested in obtaining benefits for the client.

To make a profit from investing in stocks, it is important to understand this market, be able to recognize signals for buying and selling, determine the level of profitability and learn how to evaluate stocks.

• Buying a controlling stake. The next investment option involves the acquisition of a large stake in a promising company in order to become one of its co-owners. Such projects have been working for 2-3 years. To understand how this happens, just analyze the situation on the market. Small and medium-sized companies are often absorbed by larger corporations.
• Investments in the construction sector and the purchase of buildings. Many investors work with real estate, considering this market the most promising from the perspective of long-term investments. Whatever the situation in the country, people need housing, and entrepreneurs need offices and premises for trade.

Purchased objects can be used in two ways - to rent or immediately resell at a higher price. Investments in real estate at the construction stage are the most profitable, but here it is important to carefully check the developer and calculate future profits before acquiring the property. There is always a risk of running into an unscrupulous contracting company and a sharp decline in property prices.

• Investment in production. This investment option involves the acquisition of new equipment in order to improve the production and production of better products. The disadvantage of investments is that they are expensive. Globally, investment in production contributes to the creation of new jobs, additional goods for the population, as well as improving the welfare of the country.
• Investments in technology and cars. The main task is to identify material assets that are in greatest demand today and will be even more in demand in the future. Purchased equipment or cars are rented or resold over time at a higher price. But there are also risks that the equipment will fail or break down ahead of time. In addition, no one is protected from reduced demand due to the appearance on the market of other, more modern models.

In addition to those discussed above, other investment options can be distinguished - in precious metals, antiquities, coins, and others. Each of the options requires a separate consideration, has its advantages and disadvantages.

Where to get the money?

If you have decided on the type of investment, you need to find money for the implementation of plans. As noted above, long-term investments do not give immediate profits, but the income received is stable and constant. The main thing is to correctly determine the sources for financing. Below are the main options:

• Personal funds. In this case, the company uses its own assets or takes money from personal savings (in the case of a private investor). This category includes the company's net income, its authorized capital, special funds, depreciation capital, insurance payments, and accumulative funds. Funds can be taken from one or several sources at once, depending on current needs. To avoid losses, you need to invest only in the most reliable instruments - stocks, debt assets, construction and the manufacturing sector.
• Budget money. When searching for money for investments, it is worth recalling the state and various programs aimed at supporting promising business projects. Today, many novice entrepreneurs enjoy state assistance in agriculture. Money for the development of this area is issued most willingly.
• Loans. If there are no funds for investments, they can be borrowed. As an option - a loan at the bank. To achieve favorable conditions, you can use one of the existing government programs. Borrowed money can also be obtained from public funds or private individuals. In the latter case, you must be careful not to get into scammers and not get into a debt hole.
• Money from the side. For your own investment, you can use the funds raised from the side. This category includes shares, equity participation, sale of debt securities and company shares. In some cases, funds can be obtained directly if the project is very interesting and can attract other people.

Long-term investment, instructions for use

Regardless of the type of investment, the investment rules remain unchanged. In addition, each option has its own nuances and subtleties that are already experienced. Below we consider step-by-step instructions on how to invest money in order to minimize risks and increase the likelihood of profit.

Proceed as follows:

1. Decide on a suitable investment tool. This is where the long-term investment path begins. When choosing an option, you should focus on several criteria - the amount of available funds in your hands, personal preferences, the size of the desired profit and other nuances.

If you are a private investor and do not have a small amount in your hands, the best solution is a long-term investment in stocks or other securities. You can choose another way if you have more serious financial opportunities - investments in real estate, the manufacturing sector or the purchase of large blocks of shares.

To minimize surprises, it is advisable to analyze the effectiveness of the project before investing, determine the profitability (at least approximately), and if there is a good result, proceed with the action. In no case do not act at random, because this is fraught with a loss of capital.

1. Collect tool data. Keep in mind that information plays a key role in investing. Experienced millionaires know the importance of this component in the matter of investment. That's why first you need to collect all the information on the asset of interest, study its potential and relevance of the purchase, and then invest.

Gather all the data that could be of practical use. Preference should be given to information that is presented from insiders, first-hand. The opinions of investors, experts or customers of the company whose shares you plan to buy can provide some help.

Remember the importance of self-education. Read useful literature, study current research, delve into analytical reviews of experienced investors. Take your time to invest. You must act for sure, because it is about your benefit.

1. Predict the future. To estimate the further development of events, it is not necessary to have a clairvoyance talent. After choosing the appropriate option, predict the further development of events for at least 1-2 years. If this does not work out, ask for help from an experienced consultant who is an ace in such matters. Once the confidence in the profitability of the event has strengthened in your head, proceed to the next step.
2. Buy stocks. For example, consider the purchase of this type of securities, although in practice there may be anything. It is recommended to buy stocks when demand for them falls and the price decreases. The same principle can be applied to currency, real estate and other assets. It is important to understand that cost reduction is a temporary phenomenon, and over time this parameter will return to its previous course. At the peak of growth, it can be sold for the benefit of the wallet.
3. Control the market. Long-term investments require utmost attention and control. You can not invest money and do other chores, forgetting about control. Knowledgeable investors advise, from time to time, to analyze the market in order to catch existing changes. Minor fluctuations in the economy do not affect the overall profitability of the selected instruments, but it is important to identify long-term trends that carry higher risks.
4. Organize an audit of your own investments. To determine the price of an investment portfolio, it is necessary to evaluate them from time to time and monitor the literacy of the distribution of funds. Such work is especially relevant if the portfolio contains not one, but immediately a group of different tools. If money allows, you can entrust the work to a specialist who has similar work experience. In this case, the risk of making mistakes can be minimized.

Which brokerage companies should be preferred?

The effectiveness of investments in securities largely depends on the reliability and conditions of the selected intermediary (broker). The best organizations guarantee the security of deposits and help novice users quickly understand the topic. Below we consider only trusted brokers who advise if necessary, offer favorable conditions and make stable payments.

• BCS Broker   - The largest brokerage company that has been operating for more than twenty years. The reliability of the organization can be judged by its AAA rating assigned by the best rating agency of the Russian Federation. The total number of clients of the organization is 130 thousand people. Almost a third of transactions on the Moscow Exchange are transactions through this brokerage company. In 2016, the volume of operations reached 60 billion rubles.

Advantages of the intermediary include favorable conditions for customers, access to the best exchange platforms, analytics from professionals and a wide selection of services to increase the efficiency of trade transactions. Clients of a brokerage company can quickly open an investment account and provide remote purchase and sale of options, stocks, debt securities and futures.

• Finam- Another large company that has branches in more than 90 cities on the planet, and the total number of users is about half a million people. To date, the mediator has received more than fifty awards and diplomas. At the same time, customers receive unique conditions - up to 18% per year.

It takes several minutes to open an account and the same amount to withdraw funds. After registration, a client of a brokerage company receives phone recommendations of specialists aimed at conducting profitable transactions. If you have sufficient experience, you can proceed to the direct purchase of shares, without involving intermediaries.

• GlobalFinance- the opportunity to become part of a large “pie” and earn on such giants as Amazon, Nike and other companies. A brokerage firm provides access to more than two dozen of the largest exchanges in the world. Experienced consultants and timely and accurate analytics are at the disposal of clients.

Additional advantages of GlobalFinance include assistance in the selection of profitable investment tools, the use of competent forecasts, professional calculation of future income and so on. Each client has the right to rely on a personal approach to drawing up a strategy and financial plan for a long period of time.

To get real income, you need to seriously approach the field of investment, and deal with it for several years. Many make mistakes, and in a hurry get rid of existing assets during the first fluctuations in the stock market. All that is required of the investor is to wait in the wings, which is sure to come.

Practice shows that people who know how to hold a pause and soberly look at short-term market fluctuations get good profit. In addition, do not make hasty decisions until you consult with specialists. You do not need to focus only on your intuition - it sometimes fails even experienced market players.

To succeed, follow simple rules:

1. Work through a brokerage company. If you are new to investing, this is the only way to protect your capital and avoid losing money in the short term. A good broker knows everything about the market, the status of customer accounts and even the amount of tax payments. When choosing an intermediary, focus on companies with a transparent principle of work, an average commission (do not pursue savings), and a responsive support service. If for some reason the broker does not suit you, choose another option.
2. Follow the principle of diversification. Try not to invest in stocks of only one company. The best solution is to invest in securities of 7-10 different enterprises. In addition, investments in stocks can be combined with currency trading and options. With this approach, you can reduce risks and expand your own horizons.
3. Take stocks when they have the lowest price and are in minimum demand. Buy securities when others sell them, and sell when everyone buys them. Such work against the "current" gives the greatest result. In this case, do not worry in case of short-term price spikes.
4. Evaluate your capabilities. Do not invest in the absence of free capital. It is recommended to invest only those funds, the loss of which will not affect the general standard of living.

Summary

Now you know what long-term investments are, how you can earn using such a tool, and which broker company you prefer to get the expected return. Remember that making money on deposits alone will not work, and money under the pillow does not bring any income at all.

In the modern world, many individuals and legal entities carry out investment activities. The most attractive are long-term financial investments. This is explained by the mass of their advantages over other earning options. It is worth knowing what financial investments are.

Definition of a concept

Long-term financial investments are investments of a financial asset or capital by an individual, legal entity or enterprise for a period exceeding one year. They are funds that are directed to the authorized capital of other companies. They can be invested in the purchase of securities. They are also long-term loans received from third parties.

Classification of financial investments

The object of investment is fixed and current assets. They can also be targeted financial deposits, securities, intellectual property in which investments are made. For the object, long-term investments are divided into:

• Securities. This type is considered portfolio investment. In this case, bonds and shares are purchased for a period of more than a year. Most often, with such investments, the investor has no desire to earn money on speculation. Long-term investments of this type are divided into two groups:

Investing in securities to carry out a partial acquisition of a joint stock company. This will allow the investor to participate in the management of the organization.

Investing capital to preserve it. This option is not common, due to the fact that securities are highly liquid assets. However, investors still use them if they belong to stable joint-stock companies and do not undergo significant fluctuations.

In addition, securities can be private and public, depending on who issues them.

• Debt securities. The most common type of them are bills. The holder of the bill receives capital, which is transferred to the holder at a predetermined time. Long-term investments of this type are usually large amounts. They are provided for a period of more than a year, since during this period it is possible to improve the financial condition of the company.
• Contributions to the authorized capital of third parties contribute to profit after the development of this company. This investment is also long-term, as a small number of organizations can recoup all expenses in a short time.
• Loans. Their provision is similar to - bills. However, in this case, debt obligations are formed on the basis of a guarantee or contract.

Having familiarized yourself with the main types of investments, you should determine what contributions to enterprises can be.

Other types of investments

Long-term financial investments also include deposits in enterprises that issue loans. The investor provides funds issued to citizens as a loan. This investment involves the receipt of a certain part of the percentage of the payment. This type of investment is mainly carried out for several years.

Investments can also be made in the authorized capital of partnerships. They are a legal form. The latter allows you to get enough capital to start an entrepreneurial activity by summing up the money contributed by the co-founder. Accordingly, the investor will receive a percentage of the partnership’s profits.

Income is distributed among the co-founders in accordance with the amount of capital contributed by each of them. Long-term community investments enable you to effectively manage your business. Profits will have to wait more than one year. However, this depends on the specific case.

What values \u200b\u200bdo not apply to financial investments?

It is worth noting that financial investments are not:

• Own shares that were redeemed by the shareholder of the company with the aim of canceling or reselling them.
• Bills received by the seller organization from the drawer company in the process of settlement for the services rendered, products provided or work performed.
• Investments in property represented in material form by the company. However, only temporary use is available for profit.
• Works of art, precious metals and similar values \u200b\u200bthat are acquired to generate income.

In case of purchase of the listed values, the investor cannot accept them as a financial investment.

Actual asset purchase costs

Assets that are cash, financial investments or other values \u200b\u200brequire the acquisition of the following actual costs:

• Amounts paid to the seller in accordance with the contract.
• Costs related to the provision of consulting and information services related to the purchase of assets. Their value relates to the financial results of a commercial organization, and non-profit - to increase costs. It takes into account the reporting period during which a decision was made regarding the acquisition of financial investments.
• Remuneration paid to the person or company that completed the asset purchase task.

It is worth noting that long-term financial investments do not include the costs listed above, aimed at the acquisition process.

Financial investments in financial statements

The following information is subject to disclosure taking into account the materiality requirement in the financial statements:

• The method according to which financial investments are assessed in the balance sheet upon their disposal.
• The consequences of the change in the method of appropriate assessment.
• The price of financial investments that determines their current market value.
• The difference between the indicators that helped to obtain an assessment of financial investments and current market value.
• The difference between the initial and nominal value when purchasing debt securities during the term of their repayment.
• The type and price of the deposit, which is encumbered with a pledge.
• Type and price of retired securities after their transfer to another person or company through a gratuitous transaction.
• Information on the reserve for depreciation of deposits with an indication of its type, amount and amount.
• Information on loans and debt securities. Such financial investments in the balance sheet must be displayed without fail.

All necessary information should be provided in a timely manner in order to avoid violation of the law.

Conditions for the adoption of assets for accounting

To take financial investments into account, the following conditions must be observed without fail:

• The presence of reliable documents with the correct execution, which indicate the existence of the company's rights to make deposits and receive assets.
• Organization of financial risks associated with making financial investments.
• Long-term financial investments should be able to bring economic benefits to the company. It is expressed in the form of dividends, interest or value addition.

In the presence of all of the factors listed above, it is possible to book assets of this type.

The tasks of the analysis of financial investments

The assessment of financial investments is aimed at solving the following problems:

• Assessment of the effectiveness of investments.
• Analysis of the structure and composition of financial investments.
• Determination of their direction.
• Analysis of sources of financing assets of this type.

To carry out the accounting of deposits in the Chart of Accounts, an active inventory account 58 is used, for which the following accounts are opened:

• Debt securities.
• Shares and shares.
• Loans granted.

Depreciation of financial investments

The depreciation of investments is a significant and sustainable decrease in their value. Estimated value is the difference determined between the book value and the amount of decrease in the value of financial investments. This indicator should be determined by those deposits for which market value is not calculated. The depreciation of long-term financial investments is characterized by the following conditions:

• The book value of investments significantly exceeds the estimated cost at the reporting date.
• The estimated investment value has been reduced during the reporting period.
• There is no likelihood of a significant increase in estimated cost.

Signs of depreciation of financial investments

Depreciation of assets most often occurs when a company that is issuing securities shows signs of bankruptcy. It is also possible when making securities purchase and sale transactions at a price that is less than their real value. A significant impact on the depreciation will be provided if the sources of long-term investments do not generate income, as well as if it is significantly reduced.

In the presence of such conditions, the company should check for signs of a steady decline in the value of assets. If the fact of depreciation is confirmed by verification, the organization must form a special reserve between the accounting and estimated cost.

The reflection of the depreciation reserve for investments in the financial statements

The created reserve should be reflected in the debit of account 91. The account 59 is specially allocated for the loan. Moreover, its amount is used to form the cost of financial investments in the balance sheet. It is the difference between the carrying amount and the established reserve. Moreover, the reserve under consideration allows you to cover the resulting losses on operations with assets.

The composition of long-term financial investments should be checked by the organization for depreciation at least once a year (if the above symptoms are present). The amount of the created reserve should increase if the audit reveals a high probability of a decrease in the estimated value of the investment.