Held to maturity securities

Held to maturity securities
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The definition of held to maturity securities determines debt investments like bonds or notes, that a company contemplates holding until their maturity date. Mainly held to maturity securities are purchased to earn interest revenue. A held to maturity security if will mature within a year so in the report it is as a current asset on the balance sheet. Noncurrent assets are reported if held to maturity securities maturing beyond a year. Only securities with maturity dates like bonds and corporate notes are classified as held to maturity securities. Equity securities do not have a maturity date because they are not held to maturity securities. Held to maturity bond investments are registered at their cost. If the interest rate on the bonds is different from the market rate of interest, the bonds might be purchased at a discount or premium. In such cases, the discount or premium is amortized over the life of the bonds as a decrease ( premium) or an increase (discount) to the investment account. Investments held to maturity bond are reported on the balance sheet at their amortized cost[1].

Held to Maturity Securities (amortized cost)[edit]

This category includes only requires the positive intent, capacity to hold the securities to maturity (not only an absence of intent to sell) and debt securities. Held to maturity securities are carried at amortized cost (purchase cost adjusted for amortization of discount or premium) using effective interest method, therefore losses and unrealized holding gains are not reported. However, realized losses and gains are included in earnings, the same as:

  • an interest premium,
  • income and
  • discount amortization.

Foregoing securities are classified on the balance sheet as noncurrent or current on an individual basis and on the pronouncement of cash flow as investing activities. Rarely, the intention of the investor company's hold a security to maturity might change without casting doubt on its purpose for holding other debt securities to maturity. The circumstances have to be unforeseeable and nonrecurring such as the continuing deterioration of the issuer's credit. Held to maturity securities of premature sale might be considered as maturities if also of the following conditions is met[2]:

  • the sale takes place so close to the maturity date that interest rate risk is nearly eliminated, or
  • the sale takes place after at least 85% of the principal has been collected.

Are held to maturity securities profitable?[edit]

Held to maturity securities have predetermined return which is not dependent on market changes. They are associated with low risk level. As the date and sum of return is known, it is easier to create financial plans. However, it is very difficult to sell them before the date and the return isn't very high (low risk, low profit). The investor should calculate which type of securities is more profitable for him[3].


  1. (C. Warren, J.M. Reeve, J. Duchac 2016)
  2. (T. Smith 2011)
  3. (S.F. Najeeb, O. Bacha, M. Masih 2017)


Author: Alicja Ryszka