What is Mark To Market? Definition of Mark To Market, Mark To Market Meaning - The Economic Times (2024)

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    Definition: Mark-to-market refers to the reasonable value of an account that can vary over a period depending on assets and liabilities. Mark-to-market provides a realistic estimate of a financial situation. It has been a part of the generally accepted accounting principles in the United States since 1990 and it is regarded as gold standards in some areas.

    Mark-to-market can also be defined as an accounting tool used to record the value of an asset with respect to its current market price. The mark-to-market principle was largely adopted during the 20th century.

    Description: Mark-to-market is a tool that can change the value on either side of a balance sheet, depending on the conditions of the market. For example, stocks that an individual holds in his/her demat account are marked to market every day. At the time of closing of market, the price assigned to each stock is the price that buyers and sellers decide at the end of the day.

    Many people agree that mark-to-market reflects the true value of an asset as it is decided with respect to the current market price. It can be problematic at times as the value of assets may vary every second due to changing market conditions and because buyers and sellers keep coming in and going out in an irregular fashion.In mark-to-market, problems may occur when market-based measurements do not give the true value of an underlying asset.

    Problems occur mainly when a company or financial institution is forced to calculate selling prices of its assets and liabilities during unfavourable conditions, such as a financial crisis.

    Mutual fund schemes and stocks are marked to market on a daily basis.

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    What is Mark To Market? Definition of Mark To Market, Mark To Market Meaning - The Economic Times (2024)
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