Held to Maturity Investments

These are the investments in financial assets with:
· Fixed or determinable payments.
· Fixed maturities (debt securities).
Under both IFRS and U.S. GAAP, the investor must have a positive intent and ability to hold the security to maturity.
Under both IFRS and U.S. GAAP, an entity is not permitted to classify any financial assets as held-to maturity if it has during the current or two preceding financial reporting years, sold or reclassified more than an insignificant amount of held-to-maturity investments before maturity (unless the sale or reclassification meets certain criteria).


Accounting Treatment under IFRS:
· Held-to-maturity securities are initially recognized at Fair value + Transaction costs
· At each reporting date (subsequent to initial recognition), Held-to-maturity securities must be reported at amortized cost using the effective interest rate method.
Amortized cost = Original Cost of the debt security + discount - premium
· Any discount (par value> fair value) or premium (par value < fair value) existing at the time of purchase is amortized over the life of the security.
· Any interest payments received are adjusted for amortization and are reported as interest income.
· If the security is sold before maturity, any realized gains or losses arising from the sale are recognized in Income Statement of the period.


Accounting Treatment under U.S. GAAP:
· Held-to-maturity securities are initially recognized at Historical Cost + Transaction costs
· At each reporting date (subsequent to initial recognition), Held-to-maturity securities must be reported at amortized cost using the effective interest rate method.
· Any discount (par value> fair value) or premium (par value < fair value) existing at the time of purchase is amortized over the life of the security.
· Any interest payments received are adjusted for amortization and are reported as interest income.
· If the security is sold before maturity, any realized gains or losses arising from the sale are recognized in profit or loss of the period.