How are debt securities classified as held to maturity valued on the balance sheet?

Debt securities classified as held to maturity are valued on the balance sheet at amortized cost. This accounting treatment is based on the intent and ability of the company to hold these securities until they mature. Under this classification, the initial investment cost of the securities is adjusted for any principal repayments and the amortization of any premium or discount over the life of the security.

The specifics of this approach include recognizing the carrying amount of the security, which reflects its original cost adjusted for amortization. This means that even if market conditions fluctuate and the fair value of the securities changes, the assets remain recorded at amortized cost on the balance sheet as long as they are intended to be held to maturity. This reflects a conservative approach in financial reporting, as it focuses on the long-term cash flows rather than the short-term market fluctuations.

In contrast, debt securities classified as available for sale or trading would be marked to market and reflected at fair value, which is not applicable for held-to-maturity securities. Thus, amortized cost provides a clearer picture of the expected value of these investments over their holding period.