Firms sometimes acquire debt securities with the intention of holding these securities until maturity.U.S.GAAP and IFRS require firms to measure marketable securities for which firms have an intent and ability to hold to maturity by _____.A firm initially records these debt securities at acquisition cost.This acquisition cost will differ from the maturity value of the debt if the coupon rate on the bonds differs from the _____.

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U.S. GAAP and IFRS require firms to measure marketable securities for which firms have an intent and ability to hold to maturity by the effective interest method. This method calculates interest revenue based on the effective yield at the time of purchase and amortizes any premium or discount on the bond over its remaining term. The acquisition cost will differ from the maturity value if the coupon rate on the bonds differs from the required market yield on the bonds at the time the firm acquired them. Therefore, the required market yield at the time of acquisition, not the time the bonds were originally issued, is used in the calculation. The straight-line method is a simple method of amortizing a discount or premium, but it is not appropriate for measuring marketable securities held to maturity.

Firms Sometimes Acquire Debt Securities with the Intention of Holding