Are realized gains or losses recorded for held-to-maturity debt securities?
If a debt security is classified as held-to-maturity, then the security holder intends to hold the debt security until it matures. Examples of held-to-maturity debt securities includes government securities, corporate bonds, or certificates of deposit (CD). Held-to-maturity debt securities are reported at cost and amortized over the life of the security. Any unrealized gains or losses would not be recorded to the income statement or balance sheet for held-to-maturity debt securities since fair value measurement is not applicable.
At maturity, there should not be a realized gain or loss as the maturity value will equal the carrying amount on the balance sheet.
The only time that a realized gain or loss would be recorded for a held-to-maturity debt security is if the security is retired or redeemed before the original maturity date. If the price paid is greater than the carrying amount of the debt when it is retired early, then a realized loss is recorded. If the price paid is less than the carrying amount of the debt when it is retired early, then a realized gain is recorded.
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