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.