Respuesta :
Only debt investments which have a set maturity can be categorized as being held to maturity. On the other hand, equity securities cannot be categorized as held-to-maturity since they lack maturity. An investment that is kept until maturity is first recorded at cost plus any transaction charges.
Holding securities till maturity. Only if the reporting organization has the capability and affirmative purpose to hold the debt securities to maturity may investments in debt securities be classed as held-to-maturity. Being able to keep debt securities till maturity and having a good purpose to do so are two distinct things. The classification of security as being kept until maturity should not be used if the reporting entity's intention is unclear.
Written representation, along with other evidence, such as past performance, board and investment committee minutes, written investment strategies, instructions to portfolio managers, future business plans, and projections of liquidity and capital adequacy, are typically used to demonstrate a reporting entity's desire and capacity to hold debt security until maturity. At the end of each reporting period, the intention and capacity to retain a debt instrument to maturity should be reevaluated.
The categorization of "held to maturity" is constrictive. Specific situations and conditions are listed in ASC 320-10-25-4 and ASC 320-10-25-5 that prevent a reporting entity from categorizing securities as held to maturity. For instance, if security may be contractually prepaid or otherwise resolved in a way that prevents the holder from recovering almost all of its reported investment, it may not be classed as being held to maturity. Securities that a reporting company could sell due to variations in interest rates, the possibility of prepayment, foreign exchange fluctuations, the entity's liquidity or funding sources/terms, or the availability of yield on other assets shouldn't also be categorized as held to maturity.
To learn more about held to maturity:
https://brainly.com/question/14805952
#SPJ4
