What is Long-Term Investments?
Long-term investments are financial or real assets that a business intends to hold for more than one accounting period in order to earn returns through interest, dividends, equity appreciation, or strategic influence.
How It Works
- Identify the business model for the asset — hold to collect, hold to collect and sell, or trading.
- Classify the investment under IFRS 9 as amortised cost, FVOCI, or FVTPL.
- Initially measure it at fair value plus transaction costs (except for FVTPL).
- Re-measure each period according to the classification.
- Present the asset on the balance sheet under non-current assets and disclose its risks.
Saudi Context
Saudi banks and listed corporates follow IFRS 9 as adopted by SOCPA for financial asset classification. Long-term sukuk and equity investments form a significant part of the balance sheet for many PIF-owned and Tadawul-listed entities.
Example
A company invests SAR 2 million in a sukuk maturing in 5 years, planning to hold it to collect contractual cash flows. It is classified as amortised cost and re-measured each period using the effective interest method.