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Mark to market Vs Historical Costs

1. Identify and discuss why accounting rules require mark to market accounting for certain financial instruments, but continue to require the use of historical cost for other assets such as land, building, equipment etc.

2. What makes mark to market accounting so controversial? Explain whether you support or oppose the use of mark to market accounting as opposed to the use of historical cost for valuing assets. Your explanation should address whether you think mark to market or historical cost based models more useful.

3. Find an article discussing the impact of mark to market accounting rules on the financial statements of an affected company. Provide a summary of the article and attach a link the article. Identify the impact on the financial statement that the article refers to. Does your article support or oppose the use of mark to market accounting? Explain.

Solution Preview

Mark to market accounting is an accounting treatment to value a financial instrument on the basis of the current fair market ...

Solution Summary

Mark to market accounting is an accounting treatment to value a financial instrument on the basis of the current fair market price for the instrument or similar instruments. The use of the fair value accounting has increased considerably over the recent years.

Fair value accounting has always been considered to provide more transparency and if the rules were being followed spiritually the amount of loss which the investors and the tax payers have suffered could have been minimized.

Detailed answer attached.

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