The easiest way to identify a long-term investment is to determine whether it meets the criteria of being a short-term investment as detailed in the JPAG Practitioners' Guide:
2.22. Short-term investments, which mainly include deposit and savings accounts typically provided by banks, are those that display the following characteristics:
a) are denominated in pounds Sterling;
b) have a maturity of 12 months or less;
c) the whole of the original sum invested can, from the time that the investment is made, be accessed for use by the authority without any reduction; and
d) the authority has assessed the counterparty and is satisfied that the original sum invested is not subject to unreasonable risk.
If the investment doesn't display these characteristics then it is likely a long-term investment, for example a two year fixed bond. The Practitioners' Guide also states that 'If there is any uncertainty as to whether an account classifies as a short- or long-term investment, written advice should be sought in advance of the year-end'.
Long-term investments must be shown on the Asset Register, and therefore included within Box 9 of the Accounting Statements. They should not be listed as bank accounts or included in Box 8.
When a council makes an investment into a long-term investment the investment should be entered as a payment from the bank account the funds are taken from (and will therefore show in Box 6) and the long-term investment should be added as a record on the Asset Register.
The original acquisition cost (purchase price) should be used on the Asset Register and this will remain unchanged until the investment matures/is sold. The actual market valuation of the investment should also be noted on the Asset Register at the year end for informational purposes.
If interest or dividends are paid into a separate bank account (short-term investment) then they should be entered as a receipt in the normal way against the relevant bank account and will be included in Box 3.
If reinvested into the long-term investment then this should be added to the Asset Register to appear in Box 9.
If the funds are returned to a bank account this should be entered as a receipt (and therefore shown in Box 3). At this point the record should also be removed from the Asset Register.
If the funds are reinvested into a long-term investment then this should be a result of a council decision and would require new records to reflect this, e.g. a payment to show the funds being invested and a new record on the Asset Register.
In the financial year where a long-term investment is invested into, or matures and therefore the funds are paid out, it is likely that this will cause a significant variance in Box 6 or Box 3 that will need explaining to the External Auditor. The details and value of the long-term investment can therefore be provided as part of the explanation along with reference to Box 9 that will have increased/decreased accordingly.
If further clarification is needed on the treatment of long-term investments please refer to Section 5 in the JPAG Practitioners' Guide.