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All marketable debt securities are held at cost on a company's balance sheet as a current asset, until a gain or loss is realized upon the sale of the debt instrument. Marketable debt securities are held as short-term investments and are expected to be sold within one year. If a debt security is expected to be held for longer than one year, it should be classified as a long-term investment on the company's balance sheet.
The first necessity for every debt security is certainty in its terms. For corporate and municipal. debt securities this means clear drafting of the issuerâs promise to pay. For asset-backed securities, this. means clear drafting of the provisions which establish the trusteeâs security interest in the financial assets.