Held to Maturity securities are the debt securities acquired with the intent to be held-to-maturity.
These financial assets are measured at amortized cost. Held to Maturity financial assets are purchased to be owned until it matures.
This type of security is recorded as an amortized cost on the financial statements of
Held to maturity securities company and is usually recorded in the form of the debt security with a particular maturity date. But the interest income which is obtained from a held-to-maturity security is mentioned in the income statement.
Please note that amortized cost is equal to the original issue price minus any principal payments, plus any amortized discount or minus any amortized premium, minus any impairment losses. Subsequent changes in market value are ignored. One of the major categories classification of investments by a corporation in debt or equity securities is held to maturity securities.
The classification consists of the following categories:. The commonest form of held to maturity securities bonds. These "Held to maturity securities" are considered a current asset if the maturity date is of one year or less. But if the maturity date is of a longer time period they are considered as long-term assets and are recorded in the balance sheet of a company as the amortized cost. In a stark contrast to this, held to maturity investment held for trade or available for sale come under fair value.
Held to maturity securities bonds.
Then the investor has two options- either to hold this security until it reaches its maturity date or to sell it at a premium when there is a decline in the interest rate. This debt security is called held-to-maturity if the holder makes a choice of holding it for the entire term till the maturity date.
So if the holder purchases a 10 year treasury bond and makes the choice of holding it till it matures in the tenth year then the Treasury bond comes under held-to-maturity. There are several factors on which the positive and negative sides of held to maturity investment depend on.
Held to maturity securities factors include the fact whether the purchaser decides to hold the held to maturity investment till the maturity date or if they feel that there may be a need to sell or cash in before the particular date.
This has been a guide to what is Held maturity securities. Here we discuss HTM securities example along with its advantages and disadvantages.
You may learn more about basic accounting from the following articles —. Your email address will not be published. Download Colgate's Financial Model. Download Colgate Ratio Analysis Template. Free Investment Banking Course. Leave a Reply Cancel reply Your email address will not be published. Held-to-maturity securities are normally accounted for by the amortized cost method. "Held to maturity securities" types of financial instruments have a fixed maturity date; the most.
Only debt securities can be classified as held to maturity because they have a definite maturity. Equity securities on the other hand have no maturity and hence. When investors purchase debt securities such as bonds, they have two choices: to hold the security until maturity or to sell it at a premium following a relative.