Mark To Management

AAA

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.

INVESTOPEDIA EXPLAINS '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. Market Value

    The price an asset would fetch in the marketplace. Market value ...
  2. Peter Principle

    An observation that in an organizational hierarchy, every employee ...
  3. Current Market Value - CMV

    The resale valuation attached to a security held long in an investor's ...
  4. Fair Market Value

    The price that a given property or asset would fetch in the marketplace, ...
  5. Asset Valuation

    A method of assessing the worth of a company, real property, ...
  6. Valuation

    The process of determining the current worth of an asset or company. ...
RELATED FAQS
  1. What are some of the advantages and disadvantages of absorption costing?

    Companies must choose between using absorption costing or variable costing in their accounting systems. There are advantages ... Read Full Answer >>
  2. What is the difference between the cost of capital and the discount rate?

    The cost of capital refers to the actual cost of financing business activity through either debt or equity capital. The discount ... Read Full Answer >>
  3. Why does zero-based budgeting require ongoing evaluation and management?

    Zero-based budgeting must have ongoing evaluation and management due to the fact a zero-based budget requires management ... Read Full Answer >>
  4. What is the prime cost formula?

    The term "prime cost" refers to the direct costs of manufacturing an item. It is calculated by adding the cost of raw materials ... Read Full Answer >>
  5. How can I lower my effective tax rate without lowering my income?

    There are lots of ways to lower your effective tax rate, although your individual circumstances determine whether you can ... Read Full Answer >>
  6. How does the use of International Financial Reporting Standards (IFRS) affect key ...

    While much has been achieved since 2002 in convergence between international financial reporting standards (IFRS) and U.S. ... Read Full Answer >>
Related Articles
  1. Retirement

    Footnotes: Early Warning Signs For Investors

    These documents hold very important information, but reading them takes skill.
  2. Bonds & Fixed Income

    Accounting Rules Could Roil The Markets

    FAS 142 is an accounting rule that changes the way companies treat goodwill. Be aware of the impact it has on reported earnings to avoid making bad investment decisions.
  3. Active Trading Fundamentals

    Understanding Investor Behavior

    Discover how some strange human tendencies can play out in the market, posing the question: are we really rational?
  4. Investing

    Off-Balance-Sheet Entities: An Introduction

    The theory and practice of these entities varies greatly. Investors need to learn what they're getting into.
  5. Markets

    Intangible Assets Provide Real Value To Stocks

    Intangible assets don't appear on balance sheets, but they're crucial to judging a company's value.
  6. Retirement

    Common Clues Of Financial Statement Manipulation

    Search for the "bloody" fingerprints in accounting crimes.
  7. Bonds & Fixed Income

    Mark-To-Market: Tool Or Trouble?

    Mark-to-market accounting can be a valuable practice, but all bets are off when the market fluctuates wildly.
  8. Retirement

    Navigating Government And Nonprofit Financial Statements

    Learn how to trace where your tax dollars and charitable donations are going.
  9. Options & Futures

    Mark-To-Market Mayhem

    Did this accounting convention contribute to the credit crisis of 2008? Find out here.
  10. Options & Futures

    Financial Regulators: Who They Are And What They Do

    Find out how these government agencies govern the financial markets.

You May Also Like

Hot Definitions
  1. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  2. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  3. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  4. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  5. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  6. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
Trading Center