when a holding company or other firm purchases bonds or shares of common stock as investments the decision about whether to classify it as short term or long term has some fairly important implications for the way those assets are valued on the balance sheet short term investments are marked to market and any declines in value are recognized as a loss 
however increases in value are not recognized until the item is sold therefore the balance sheet classification of investment whether it is long term or short term has a direct impact on the net income that is reported on the income statement held to maturity investmentsif an entity intends to keep an investment until it has matured and the company can demonstrate the ability to do so the investment is noted as being held to maturity the investment is recorded at cost although any premiums or discounts are amortized over the life of the investment for example a classic held to maturity investment was the purchase of paypal by ebay in 2002 1 once paypal had significantly grown its infrastructure and user base it was then spun out as its own company in 2015 with a five year agreement to continue processing payments for ebay this investment helped paypal grow and at the same time allowed ebay the benefit of owning a world class payment processing solution for nearly two decades 2the long term investment may be written down to properly reflect an impaired value however there may not be any adjustment for temporary market fluctuations since investments must have an end date equity securities may be not be classified as held to maturity available for sale and trading investmentsinvestments held with the intention of resale within a year for the purpose of garnering a short term profit are classified as current investments a trading investment may not be a long term investment however a company may hold an investment with the intention to sell in the future these investments are classified as available for sale as long as the anticipated sale date is not within the next 12 months available for sale long term investments are recorded at cost when purchased and subsequently adjusted to reflect their fair values at the end of the reporting period unrealized holding gains or losses are kept as other comprehensive income until the long term investment has been sold 