A held-for-trading security, also known as a trading security, is a financial asset that a company holds with the intention of selling it in the short term for profit. These securities are classified as current assets on a company’s balance sheet, and their fair values are reported at market prices. Held-for-trading securities are actively traded, and companies engage in frequent buying and selling of these assets as part of their trading activities.

Key features of held-for-trading securities include:

1. **Short-Term Intent:** The defining characteristic of held-for-trading securities is the company’s intention to sell them in the short term to capitalize on short-term price fluctuations. This short-term holding period distinguishes them from other types of investments, such as held-to-maturity securities or available-for-sale securities.

2. **Active Trading:** Companies actively engage in trading activities involving these securities. They buy and sell them with the primary goal of generating profits from changes in market prices.

3. **Valuation at Fair Value:** Held-for-trading securities are reported on the balance sheet at their fair value, which is determined by the current market prices. Changes in the fair value of these securities are typically recognized in the income statement.

4. **Financial Statement Presentation:** On the balance sheet, held-for-trading securities are classified as current assets. The fair value is reported in the current asset section, and any unrealized gains or losses are reported in the income statement.

5. **Common Examples:** Common examples of held-for-trading securities include stocks, bonds, derivatives, and other financial instruments actively traded in the financial markets.

6. **Marketable Securities:** Held-for-trading securities are a type of marketable security because they can be easily converted into cash due to their liquidity. The marketability allows companies to quickly adjust their investment portfolios based on market conditions.

7. **No Amortization:** Unlike held-to-maturity securities, held-for-trading securities are not held until maturity, and there is no amortization of their carrying value. Changes in their fair value are recognized in the income statement as they occur.

8. **Disclosure Requirements:** Companies are generally required to disclose their accounting policies regarding held-for-trading securities in their financial statements. This includes information about the fair value measurement process and any significant assumptions used in determining fair values.

It’s important for investors and financial analysts to carefully review a company’s financial statements and notes to understand the composition and valuation of held-for-trading securities. Changes in the fair value of these securities can impact a company’s reported financial performance, and the information provides insights into the company’s trading and investment activities.