What is the correct valuation method for held-to-maturity securities?

Held-to-maturity securities are financial instruments that a company intends to hold until they mature. The correct valuation method for these securities is at amortized cost. This approach reflects the intent of the holder, which is to keep these securities until they reach their maturity date.

When a company classifies a security as held-to-maturity, it does so with the expectation of receiving the principal amount on the maturity date along with periodic interest payments. By valuing these securities at amortized cost, the company effectively accounts for the principal investment and any premium or discount over time, recognizing interest income while avoiding fluctuations due to market value changes that are characteristic of other classifications such as trading or available-for-sale securities.

In contrast, available-for-sale securities are valued at fair value, while trading securities are also marked to market but are subject to immediate gains or losses in the income statement. Thus, the amortized cost method is uniquely aligned with the held-to-maturity intent, ensuring the financial statements accurately reflect both the return on investment and the company's strategy for asset management.