Mark To Management

DEFINITION of 'Mark To Management'

The theory that a good, asset/liability or service can be assigned a fair market value based not necessarily on current or historical market price but rather on the holder's assumption of what the good, asset/liability or service could potentially be worth to a buyer in either an actual or hypothetical market. It involves not only evaluating historical market pricing and external market observations but also non-observable assumptions surrounding the good, service or asset/liability based on internal information.

It is cited as a way of determining the potential value of an item, service or asset for which there currently is not an existing market or because the market is experiencing enormous volatility, making fair value assignment difficult if not impossible under standard mark to market accounting.

BREAKING DOWN 'Mark To Management'

Mark to management accounting became a hot topic of discussion regarding bank-owned "toxic assets" following the housing market collapse of 2007-2009. In the spring of '09 the Financial Accounting Services Board (FASB) agreed to "relax" its rules on mark to market accounting and lean toward a mark to management approach to asset/liability valuation. Critics charge that the move was designed to aide banks, lenders and financial services companies soften the perceived losses they incurred after the market collapse.

Charles Bowsher, former chairman of the Federal Home Loan Bank System's Office of Finance, resigned his position over the FHLB's support for a mark to management approach to fair market valuation of troubled assets.

RELATED TERMS
  1. Asset/Liability Management

    A technique companies employ in coordinating the management of ...
  2. Matched Book

    A bank is running a matched book when the maturities of its assets ...
  3. Term

    1. The lifespan assigned to an asset or a liability, over which ...
  4. Economic Value Of Equity - EVE

    A cash flow calculation that takes the present value of all asset ...
  5. Dynamic Gap

    Refers to asset and liability risk management at financial institutions. ...
  6. Mark To Market - MTM

    1. A measure of the fair value of accounts that can change over ...
Related Articles
  1. Retirement

    Mortgage Asset-Liability Management Made Easy

    Should you refinance your mortgage to purchase other assets? Learn how to weigh your risk.
  2. Investing Basics

    Examples Of Asset/Liability Management

    In its simplest form, asset/liability management entails managing assets and cash inflows to satisfy various obligations; however, it's rarely that simple.
  3. Fundamental Analysis

    What's Fair Value?

    Fair value has three different meanings depending on the context.
  4. Investing Basics

    Investment Value Vs. Fair Market Value: How They Differ

    Learn about the differences between an asset's investment value and its fair market value, including why many think fair market value is unrealistic.
  5. Economics

    Explaining Fair Market Value

    Fair market value is the price at which a buyer and seller are willing to exchange a good.
  6. Insurance

    Riding The Market Bubble: Don't Try This At Home

    Riding the bubble takes timing, a clear understanding of the market and, most of all, a lot of luck.
  7. Investing Basics

    Asset Manager Ethics: Valuation Is A Tricky Business

    Asset managers must accurately represent all of a clients assets in the client portfolio. This can be tricky for unique and hard-to-value assets.
  8. Savings

    Assessing Bank Assets: Are Your Savings Safe?

    Learn how to determine if your assets are safe or if your bank has spread itself too thin.
  9. Options & Futures

    Investment Services Stump Investors

    What you're getting isn't easy to determine. Find out how to get your money's worth.
  10. Fundamental Analysis

    Mark-To-Market Accounting

    "Mark-to-market" accounting is a way of valuing assets based on how much they could sell for under current market conditions. In recent decades, it has become the standard way to record financial ...
RELATED FAQS
  1. When is market to market accounting performed?

    Discover when mark to market accounting is performed, to what assets it is applied, and how frequently it must be applied ... Read Answer >>
  2. How is market to market accounting different than historical cost accounting?

    Learn about historical cost accounting and mark to market accounting, the difference between and the limitations of the two ... Read Answer >>
  3. What distinguishes the financial services sector from the banks?

    Learn about the difference between the banking industry and the financial services sector and how to distinguish financial ... Read Answer >>
  4. Why are the fair value accounting rules controversial?

    Find out about the controversial points to fair value trading, ranging from historical concerns to more modern issues in ... Read Answer >>
  5. Where did market to market (MTM) accounting come from?

    Find out how mark to market accounting originated and how it has been forced to evolve to eliminate subjectivity from financial ... Read Answer >>
  6. What does it mean when a derivative is marked to market?

    Learn what it means when a derivative is marked to market. Mark to market rules have been put in place by global regulators ... Read Answer >>
Hot Definitions
  1. Labor Market

    The labor market refers to the supply and demand for labor, in which employees provide the supply and employers the demand. ...
  2. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  3. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  4. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  5. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  6. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
Trading Center