An investment in debt securities whose holder intends and has the ability to hold till maturity. In practice, such investments are also classified as a financial asset carried at amortized cost. In other words, held-to-maturity investments are non-derivative financial assets that have either fixed or determinable payment patterns and a pre-determined maturity, and for which an entity intends, and is able to hold to maturity. The held to maturity classification does excludes investments that are designed as carried at fair value through profit or loss, as available for sale, or as loans or receivables.

Investments in equity securities (e.g., common stock and preferred stock) are not classified as held-to-maturity investments, since such investments have no definite maturity dates, and therefore cannot be held to maturity. Furthermore, an investment cannot be classified as held to maturity if it has been sold or if a significant amount of a held-to-maturity investment has been reclassified before maturity during the current year or the immediate future (two preceding years). An entity must be certain that it will be able to hold the investment till maturity unless in extraordinary situations (e.g., a significant change in interest rates, credit risk, foreign exchange risk, etc)

If sold before maturity without there being a significant change in the broader environment, this may result in the inability of an entity to classify any future investments as held-to-maturity for a certain period.

In initial recognition, a held-to-maturity investment is recorded at cost plus any transaction costs. Later on, for subsequent measurement, market interest rates may differ from the stated interest rate of the investments, resulting in recognition of discount or premium.