Mart -to- Market Accounting Essay Example | Topics and Well Written Essays - 250 words

market -to- Market Accounting - Essay ExampleThus all the assets and liabilities recorded on the balance yellow journalism of the firm are recorded at their cost protect and are further adjusted by the esteem of the depreciation or any impairment.However, as the overall complexity of the assets and liabilities increased, it became evident that that the values of these assets and liabilities behind also vary due to the changes in their market values. A veridical decline in the value of the asset can actually erode the profitability of the firm and as such if their values are not recorded properly, they may give a different picture to the investor than the actual. It is in this perspective that the region of mark to market storeying emerges wherein the values of the assets are periodically recorded at their market value and all gains or losses are subsequently adjusted in the profit and loss account of the firm. (Schuetze and Wolnizer). During current financial crisis, mark to market accounting played critical role because due to step-down in the values of the assets, firms were forced to record them at lower level thus they booked substantial losses.3) It may be prudent to relax this idea during the time of crisis because if the overall risk return characteristics of the assets keep same during the crisis, they should not be written down to their market