Market-to-Market
Market-to-market is an accounting method used to value assets and liabilities on a company’s balance sheet. It is a process of revaluing assets and liabilities to their current market value, rather than their original cost. This method is used to ensure that a company’s financial statements accurately reflect its current financial position. Market-to-market accounting is used by companies in the financial services industry, such as banks and insurance companies, as well as by companies that trade in derivatives and other financial instruments.
History of Market-to-Market
Market-to-market accounting was first introduced in the 1970s as a way to provide more accurate financial statements. The method was adopted by the Financial Accounting Standards Board (FASB) in the 1980s and is now used by many companies in the financial services industry. The method is also used by companies that trade in derivatives and other financial instruments, as it allows them to accurately reflect their current financial position.
The method is also used by companies that are subject to mark-to-market accounting rules, which require them to value their assets and liabilities at their current market value. This is done to ensure that a company’s financial statements accurately reflect its current financial position. The method is also used by companies that are subject to fair value accounting rules, which require them to value their assets and liabilities at their fair value.
Table of Comparisons
| Accounting Method | Original Cost | Current Market Value |
|---|---|---|
| Market-to-Market | Original cost | Current market value |
| Fair Value Accounting | Original cost | Fair value |
Summary
Market-to-market is an accounting method used to value assets and liabilities on a company’s balance sheet. It is a process of revaluing assets and liabilities to their current market value, rather than their original cost. This method is used to ensure that a company’s financial statements accurately reflect its current financial position. For more information about market-to-market accounting, you can visit the websites of the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB).
See Also
- Fair Value Accounting
- Financial Accounting Standards Board (FASB)
- International Accounting Standards Board (IASB)
- Derivatives
- Financial Instruments
- Balance Sheet
- Mark-to-Market Accounting
- Revenue Recognition
- Income Statement
- Cash Flow Statement
