How are held-to-maturity debt investments accounted for in financial statements?

Held-to-maturity debt investments are accounted for using the amortized cost method, which means these investments are recorded at their initial purchase cost, adjusted for the amortization of any premium or discount over the life of the investment. This approach reflects the intention of the company to hold the investment until maturity, thus avoiding the volatility of fluctuating market values. Therefore, any unrealized gains or losses arising from changes in fair value are not recognized in the financial statements; instead, the investment is consistently reported at amortized cost in the balance sheet.

This method aligns with the accounting principles that emphasize stability and predictability for investments that a company intends to hold for the long term. Thus, only realized gains and losses—those that occur when the investment is sold—will impact the income statement, while the carrying value remains steady until maturity or sale.