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The company maintains a held-to-maturity portfolio because they want some investments to be realized only after they had fully matured and has no need until it has been so, (Held-to-Maturity Securities, 2007). These investments are those wherein they used they own excess money and that they are using their excess financial capacity to gain something from the financial needs of the other companies by buying the bonds issued from these companies. They might also have an available-for-sale portfolio for those securities that they themselves have created and intend to sell to other investors. These available for sale bonds are the ones that the company itself will be selling in case that the company will be the one that needs more infusion of capital for its operation to continue. Lastly, they are keeping traded securities because they too can aim to invest in other stocks owned by other companies that they deem to be generating healthy returns good enough for them. This is a healthy for the company to ensure that they too can manage to control their own cash flows and needs. This will also be another added assurance that they are not going to need some cash flows in the future and that they are not going to be in a situation wherein they will be forced to declare bankruptcy.

The company maintains separate portfolios for the held-to-maturity, available for sale, and trading securities because they all operate and behave differently when they reach their maturation date. Both their uses and their behavior in the balance sheet differs greatly that is why the company has to maintain separate accounts for each of them in order to make sense of what is going on each of the different type of security they are holding on to. It would also be very inconvenient if the records for each of these securities are mixed up with each other because it would be very confusing to try to compute and analyze what happened to the investment of the company in case the management wants to see where their efforts are taking them finally.

B. The identifying factors that can identify a held-to-maturity security are those securities that a firm is holding to and intend to hold until its maturity. These held-to-maturity securities are considered as default categories because they were bought in the first place with the intention of holding them until they reach their maturation date. The available for sale security are obviously those securities that the firm is still holding until such time that the firm can dispose of it. It is increased with a debit and decreased by a credit. The trading securities on the other hand are those considered as an asset and are increased with a debit and decreased by a credit, (Securities Trading, 2007).

When there is an unrealized loss for those held-to-maturity securities, they are usually charged or credited directly to a debit account. Usually though, all of these investments are directly credited to the income or loss account when there is any “realized” gain or loss on them. As a rule, they are classified as according to the intent by which they were held in the first place. They are widely classified by their purpose according to the intention of the corporation that holds them. These losses are created from the difference of the interest rate at the time from which the bond was issued on a fixed rate and the current prevailing market rate.

Bibliography:

Held-to-Maturity Securities, (2007)

http://www.investopedia.com/terms/h/heldtomaturity.asp

Securities Trading, (2007)

http://www.encyclopedia.com/doc/1E1-securtrd.html