Held to maturity securities are debt securities which the enterprise has the intent and ability to hold to maturity. These are reported at amortized cost.

Trading securities are debt and equity securities held principally for selling them in the near term. They are reported at fair value, with unrealized gains and losses included in earnings.

Available for sale securities include all other debt and equity securities, and are reported at fair value. Unrealized gains and losses are excluded from earnings and reported in a separate component of shareholders’ equity.

Trading securities are current assets. Cash flows from trading securities are operating cash flows.

The usual current/noncurrent criteria are used to determine the category in which to report held to maturity and available for sale securities. Cash flows from purchases and sales of available for sale and held to maturity securities are investing cash flows.

The transfer of a security between categories of investments is accounted for at fair value. At the date of the transfer, if the security is transferred:

  • Into trading, unrealized holding gain or loss is recognized in earnings immediately.
  • From trading, unrealized holding gain or loss will have already been recognized and is not reversed.
  • From held to maturity into available, unrealized holding gain or loss is recognized as a separate component of shareholders’ equity.
  • From available into held to maturity, unrealized holding gain or loss continues to be reported in a separate component of shareholders’ equity, but is amortized over the remaining life as an adjustment to yield.

A decline in value below carrying value that is other than temporary is recognized as a loss for available for sale or held to maturity securities. The cost basis of the individual security is written down to fair value. The new cost basis is not changed for subsequent recoveries in fair value.