What are held-to-maturity securities?
Held-to-maturity securities are debt securities that will be held by the company until the debt matures. Therefore, unrealized gains and losses will not be recognized in the financial statements because they do not mark to market at the end of the period. Instead, the security is recorded on the balance sheet based on the carrying value and amortized over the period. In order for an investment to be classified as held-to-maturity, the company must have both positive intent and the ability to hold the debt security to its maturity.
The visual below lists out the key financial reporting aspects of held-to-maturity securities:
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What are the three classifications for debt securities?
A debt security is any security that is representing a creditor relationship with an outside entity. The three classifications under U.S. GAAP are trading, available-for-sale, and held-to-maturity.