Question by  tschebyshev (252)

What is Mark-to-Market Accounting?

Everyone discusses it in the business press, but why is this such a big deal?


Answer by  rjuliet (44)

Normally, if you bought 10,000 shares of stock for $25 a share, you will record $250,000 on your balance sheet. This amount will remain the same until you sold it. In market to market accounting, if the value fell to $10, you would show $100,000 a difference of $150,000.


Answer by  PGR (74)

"Marking to market" is an accounting entry that reduces the carrying value of an asset on a company's books when its value has been impaired. If the asset is eventually sold the mark-down can be reversed. Marking to market has no impact on cash flow, it is simply a subjective predictor of a loss.


Answer by  olive49 (424)

Mark-to-market accounting is assignment of a fair value to financial instruments held by a company. This is intended to reflect the actual value of the instrument, rather than what was originally paid. With many instruments dropping in value, mark-to-market accounting provides a more realistic view of a company's balance sheet.


Answer by  tamarawilhite (17883)

An asset is worth what it sells for on the market at that moment. When your home value crashes, you can no longer able to get loans on the equity.


Answer by  pyritejenny (347)

Mark-to-market is an accounting standard that requires that companies carry assets on their books at the current price, not at the price they paid for them. If they paid a thousand dollars for a bond now salable for ten cents, then they must carry it at ten cents.


Answer by  tamarawilhite (17883)

Mark to market accounting says the value of an asset is what the item sells for at that time. With mark to market accounting, many companies values plummeted with the stock market at the same time these rules required their loans to also close because their net worth was marked so low.


Answer by  Antbak (28)

Financial instruments have a face value. If markets believe the instrument might not be fulfilled, its spot value can drop. Mark-to-market accounting uses the (lower) spot value.


Answer by  Carol37 (569)

Mark to market accounting is simply giving a value to the item you have based on the last times that particular type of asset was sold.

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