maturity

(noun)

Date when payment is due

Related Terms

Examples of maturity in the following topics:

  • 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.
    • This can result in an investor receiving less or more than his original investment at maturity.
    • Remember the original entry debited the held to maturity investment account and credit cash.
    • This can result in an investor receiving less or more than his original investment at maturity
    • 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.
    • All changes in market value are ignored for debt held to maturity.
    • Debt held to maturity is shown on the balance sheet at the amortized acquisition cost.
    • Explain how a company would apply the amortized cost method to a debt held to maturity

  • Redeeming at Maturity

    • A maturity date is the date when the bond issuer must pay off the bond.
    • Maturity is generally an indication of when you as an investor will get your money back.
    • Typically, bonds stop earning interest after they mature.
    • The carrying value of bonds at maturity will always equal their par value.
    • 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.

  • Characteristics of Bonds

    • The issuer has to repay the nominal amount on the maturity date.
    • The length of time until the maturity date is often referred to as the term or maturity of a bond.
    • In the market for United States Treasury securities, there are three categories of bond maturities:
    • short term (bills): maturities between one to five year (instruments with maturities less than one year are called money market instruments)
    • Callability — Some bonds give the issuer the right to repay the bond before the maturity date on the call dates.

  • 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.
    • Bonds are a form of long-term debt because they typically mature several years after their original issue date.

  • Accounting for Sale of Debt

    • How debt sales are recorded depends on whether the debt is classified as "held-to-maturity," "a trading security," or "available-for-sale".
    • If the company intends to hold the debt until it matures, it must be classified as a "held-to-maturity" security.
    • When debt is acquired and is intended to be held until maturity, it is recorded first by debiting a "Debt Investment Account," and then by crediting "Cash" for the amount the debt was purchased.
    • Debt securities can be classified as "held-to-maturity," a "trading security," or "available-for-sale. "
    • Summarize how to record the sale of a held-to-maturity, trading security and available for sale debt

  • Accounting Methodologies: Amortized Cost, Fair Value, and Equity

    • If a business holds debt securities to maturity with the intent to sell are classified as held-to-maturity securities.
    • Held to maturity securities are reported at amortized cost less impairment.
    • Debt and equity securities not classified as either held-to-maturity securities or trading securities are classified as available-for-sale securities.

  • Types of Cash

    • 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.

  • 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 2020 December 31, the maturity date, the entry would be: