maturity date

(noun)

the date on which a principal amount of a note, draft, acceptance bond, or other debt instrument becomes due or payable

Related Terms

  • maturity
  • Interest

Examples of maturity date in the following topics:

  • Characteristics of Bonds

    • The issuer has to repay the nominal amount on the maturity date.
    • As long as all due payments have been made, the issuer has no further obligations to the bond holders after the maturity date.
    • The length of time until the maturity date is often referred to as the term or maturity of a bond.
    • Callability — Some bonds give the issuer the right to repay the bond before the maturity date on the call dates.
    • Putability — Some bonds give the holder the right to force the issuer to repay the bond before the maturity date on the put dates.
  • Redeeming at Maturity

    • A maturity date is the date when the bond issuer must pay off the bond.
    • Typically, bonds stop earning interest after they mature.
    • As long as all due payments have been made, the issuer has no further obligations to the bondholders after the maturity date.
    • A description of bonds issued including the effective interest rate, maturity date, terms, and sinking fund requirements are included in the notes to financial statements.
    • Explain how to record the retirement of a bond at maturity
  • Redeeming Before Maturity

    • Bonds can be redeemed at or before maturity.
    • For bond issuers, they can repurchase a bond at or before maturity.
    • Redemption is made at the face value of the bond unless it occurs before maturity, in which case the bond is bought back at a premium to compensate for lost interest.
    • Some bonds give the issuer the right to repay the bond before the maturity date on the call dates.
    • Some bonds give the holder the right to force the issuer to repay the bond before the maturity date on the put dates.
  • Bonds Payable and Interest Expense

    • The borrower promises to pay (1) the face value or principal amount of the bond on a specific maturity date in the future, and (2) periodic interest at a specified rate on face value at stated dates, usually semiannually, until the maturity date .
    • The bonds are dated 2010 December 31, call for semiannual interest payments on June 30 and December 31, and mature on 2020 December 31.
    • On 2010 December 31, the date of issuance, the entry is:
    • On 2020 December 31, the maturity date, the entry would be:
    • For example, assume the Valley bonds were dated 2010 October 31, issued on that same date, and pay interest each April 30 and October 31.
  • Notes Payable

    • The terms of a note usually include the principal amount, interest rate (if applicable), parties involved, date, terms of repayment (which may include interest), and maturity date.
    • Demand promissory notes are notes that do not carry a specific maturity date, but are due on demand by the lender.
  • Accounting for Interest Earned and Principal at Maturity

    • At maturity, firms should debit cash and credit held to maturity investments the balance of the principal payment.
    • The issuer has to repay the nominal amount on the maturity date (which can be any length of time).
    • As long as all due payments have been made, the issuer has no further obligations to the bond holders after the maturity date.
    • During the life of the debt held to maturity, the company holding the debt will record the interest received at the designated payment dates.
    • Summarize the journal entry required to record a debt held to maturity
  • Amortized Cost Method

    • Debt held to maturity is shown on the balance sheet at the amortized acquisition cost.
    • The definition of a debt is held-to-maturity is a debt which the company has both the ability and intent to hold until maturity.
    • Debt held to maturity is classified as a long-term investment and it is recorded at the market value (original cost) on the date of acquisition.
    • All changes in market value are ignored for debt held to maturity.
    • Z Company has both the ability and intent to hold the securities until the maturity date.
  • Current Maturities of Long-Term Debt

    • Long-term liabilities are liabilities with a due date that extends over one year, such as a notes payable that matures in 2 years.
    • The position of where the debt should be disclosed is based on its maturity date in relation to the due date of other current liabilities.
    • For example, a loan for which two payments of USD 1,000 are due--one in the next 12 months and the other after that date--would be split into one USD 1000 portion of the debt classified as a current liability, and the other USD 1000 as a long-term liability (note this example does not take into account any interest or discounting effects, which may be required depending on the accounting rules that may apply).
    • Bonds are a form of long-term debt because they typically mature several years after their original issue date.
  • Types of Bonds

    • A term bond matures on the same date as all other bonds in a given bond issue.
    • Serial bonds in a given bond issue have maturities spread over several dates.
    • These contain a provision that gives the issuer the right to call (buy back) the bond before its maturity date, similar to the call provision of some preferred stocks.
    • A call premium is the price paid in excess of face value that the issuer of bonds must pay to redeem (call) bonds before their maturity date.
    • The bondholder receives the full principal amount on the redemption date.
  • Types of Cash

    • However, unlike with a savings account, whatever funds a consumer puts into a CD generally cannot be withdrawn prior to a certain date without incurring significant penalties.
    • Generally only demand CDs or CDs that will mature within three months of when the financial statements are prepared are cash equivalents.
    • However, these types of instruments are only included in cash if they mature within three months from when the the financial statements are prepared and there is a minimal risk of these investments losing their value.
    • So if a corporate bond matures within three months, but the company that issued it may not be able to settle the debt, one would not be able to include that as a cash equivalent.
Subjects
  • Accounting
  • Algebra
  • Art History
  • Biology
  • Business
  • Calculus
  • Chemistry
  • Communications
  • Economics
  • Finance
  • Management
  • Marketing
  • Microbiology
  • Physics
  • Physiology
  • Political Science
  • Psychology
  • Sociology
  • Statistics
  • U.S. History
  • World History
  • Writing

Except where noted, content and user contributions on this site are licensed under CC BY-SA 4.0 with attribution required.