Mark to Market...the Song that Never Ends

More and more on mark to market accounting. Some controversial views are expressed by various writers in the sources noted below and in other sources quoted in earlier postings. But as an accountant in the post-Enron world, it's tough to understand why anyone would want less informative or less transparent accounting disclosure. It seems counter-intuitive that less conservative accounting would help financial markets. None of the arguments made so far present a clear picture as to why any financial institution has been harmed by mark-to-market rules--what we have seen is mostly dubious scare tactics along the lines of "mark-to market is the next plague, so we need to get rid of it." We need bankers to be more specific about this if they want to justify new or different rules.

Suspend Mark-To-Market Now! By Newt Gringrich
Reform or Bust: Because existing rules requiring mark-to-market accounting are causing such turmoil on Wall Street, mark-to-market accounting should be suspended immediately so as to relieve the stress on banks and corporations. In the interim, we can use the economic value approach based on a discounted cash flow analysis of anticipated-income streams, as we did for decades before the new mark-to-market began to take hold. We can take the time to evaluate mark-to-market all over again. Perhaps a three-year rolling average to determine mark-to-market prices would be a workable permanent system. It is not widely understood that the adoption of mark-to-market accounting rules is a major factor in the liquidity crisis which is leading companies to go bankrupt. But it is destructive to have artificial accounting rules ruin companies that would have otherwise survived under previous rules. Also:The Congress should repeal Sarbanes-Oxley, which failed to warn of every single bankruptcy!!

Mark to Market Accounting: Kill It Before It Eats Us Alive
However, mark to market rules distort financial results and business decisions under the false cloak of conservatism. The rules make little sense, produce inconsistent results, lack a basis in reality and provide lots of room for abuse.

FASB, SEC Discuss Fair Value-Standards
The FASB is in discussions with the U.S. Securities and Exchange Commission about whether additional guidance on fair value accounting rules is needed, according to a person familiar with the matter. SEC spokesman John Nester said the SEC is "working closely with U.S. and international regulators and standard setters on the issues related to fair value." It was unclear whether the SEC and FASB would issue guidance before the end of the third quarter, which ends on Tuesday.