Held to maturity debt securities - GAAP vs IFRS

CFA Level II FRA
#1

Hello,

Easy one:

I am getting conflicting information from my test provider vs CFAI.

Are HTM debt securities reported on the balance sheet at historical cost, or amortized cost?

Thanks

#2

I think of them as one in the same. The instance where it’ll appear simply as historical cost is when they were purchased at par and amortized cost if they were acquired at a discount or premium which then needs to be pulled up to par (discount) or down (premium) as maturity approaches.

#3

You are mixing up two things which are one. You initially recognize at historic cost, but then you amortize. Just like a PPE item for example, first at historic cost and then you depreciate. Same concept.

#4

HTM is amortized based on the first historical cost, will be the same as TS (Trading Securities) and AFS during initial time (initial record), During the years TS and AFS may change in their fair value and recorded at their fair value (for TS and AFS) HTM will still recorded as amortized cost.

#5

HTM is only amortized if the securities are purchased at a discount or premium of par/face value (happens when coupon rate is not the same as market interest rate). The discount/premium is amortized every year, and the amortization amount is based on Effective Interest method.

the amortization will cause the carrying value of the investment to approach its par value until it actually reach par value on maturity.