Held-to-maturity investments are recorded at their cost, which would include broker's commissions true or false

Held-to-maturity investments are recorded at their cost, which would include broker's commissions
true or false

Expert Solution

Answer : True

Explanation :

Held to maturity securities are securities that companies purchase and intend to hold until they mature. This is unlike trading securities or available for sale securities, where companies don’t usually hold on to securities until they reach maturity. Companies mostly use these investments to protect themselves against interest rate fluctuations, diversify their investment portfolios, and realize a small, low-risk capital gain over a longer period of time. Held to maturity securities are usually debt instruments such as government or corporate bonds.

The biggest difference between held to maturity securities and the other security types mentioned above is in their accounting treatment. As opposed to being recorded and updated on the company’s balance sheet according to the security’s fair market value, held to maturity securities are recorded at their original purchase cost. This means that from one accounting period to another, the value of the securities on the company’s balance sheet will remain constant.

Any gains or losses resulting from changes in interest rates (for bonds and other debt instruments) will be recorded when the securities reach maturity.

Conclusion :

Held to maturity bonds are recorded at purchase cost i.e. it should include all the expenses incurred to purchase the bonds.

ekkarill92 answered 2 years ago

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Held-to-maturity investments are recorded at their cost, which would include broker's commissions true or false

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