Briefly describe the classification and valuation issues related to investments in debt and equity securities

FASB ASC Topic 320, "Investments - Debt and Equity Securities," requires that investments be classified in three categories and accounted for as follows:

-Debt securities that the entity has the positive intent and ability to hold to maturity are classified as held-to-maturity securities and reported at amortized cost.
-Debt and equity securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities and reported at fair value, with unrealized gains and losses included in earnings.
-Debt or equity securities not classified as either held-to-maturity or trading securities are classified as available-for-sale and are reported at fair value, with unrealized gains and losses excluded from earnings and reported in a separate component of shareholders' equity.

The auditor must also determine if there has been any permanent decline in the value of an investment security. Auditing standards provide guidance for determining whether a decline in value below amortized cost is other than temporary.