Marking to Market

While the argument for mark to market has been less audible than in September. There are still proponents in the accounting, real estate and banking sector that feel it should be banned permanently. Some feel that mark to market caused a housing slump to spread into other sectors causing the Great Repression. While the arguments have reason they lack fundamentals and the conservatism US GAAP accounting is known for. Ironically this argument was only presented when prices were falling sharply. Land developers who used the increase in property values to expand lines of credits had no problem when values were skyrocketing but when the free fall started marking properties to market was absurd. The reason mark to market was enacted was for stakeholder transparency. FASB allows some assets to be marked at historical cost and an impairment test conducted annually. However, other assets are marked to the market or fair value to reflect true value. Marking to market saves money and time and avoids the subjectivity of an appraisal. Removing mark to market will overstate bookvalues for some companies that have no going concern. Companies that write up financial assets when there is economy expansion will be the same companies the write down financial assets when there is economy retrenchment.