Debt securities represent a creditor relationship with another entity. Debt securities include government securities, municipal securities, corporate bonds, convertible debt, and commercial paper.
Trade accounts receivable and loans receivable are not debt securities because they do not meet the definition of a security.
Companies categorize investments in debt securities into three separate categories for accounting and reporting purposes:
• Held-to-maturity: Debt securities that the company has the positive intent and ability to hold to maturity.
• Trading: Debt securities bought and held primarily for sale in the near term to generate income on short-term price differences.
• Available-for-sale: Debt securities not classified as held-to-maturity or trading securities.
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