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Mark to Market Valuation on a Financial Investment

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I would like ideas for an essay on mark to market valuation of financial investment explaining how this change in accounting law will effect future earnings. In case of any uses of source, please use references.

Mark to Market valuation of financial investment

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Mark to market valuation on a financial investment is examined in the solution.

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Mark to Market

It is interesting that the topic of this paper is the mark to market generally accepted accounting standards used in the valuation of financial investments. It is interesting in that in light of the current financial crisis, the financial press had pointed their fingers on mark to market accounting as the reason, partially that is, why several financial institutions experienced problem and some even bankruptcy at the height of the subprime mortgage crisis (Harter, 2009, p. 119).

However, Lonergan (2009) opines that the mark to market was introduced by the United States' Financial Accounting Standards Board or FASB "to provide the users of financial statements with better and more transparent information with respect to the value of a companies' assets and liabilities and to reduce the scope for 'cherry picking' unrealized profits and losses" (p. 22). Marking to market means adjusting the book value of the financial investment to its fair value based on its trading price in the market.

Fair value is defined by Loregan (2009) as "[the] amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction" (p. 22). This means that when the market that the financial investment is experiencing a bull market, then ...

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