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Market Accounting Process - Essay Example

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The paper "Market Accounting Process" discusses that generally speaking, as per mark-to-market accounting procedures, firms were required to record their assets at new values and book the losses arising due to the reduction in the value of these assets. …

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Subject: Marketing
Type: Essay
Level: Masters
Pages: 1 (250 words)
Downloads: 2
Author: kovaceknorris

Extract of sample "Market Accounting Process"

It is important to note that the firms have to show the gains or losses arising from this process in their books of accounts also.
2) It has been discussed and debated very thoroughly that the mark to market accounting is basically responsible for the creation of the current financial crisis. This method of accounting affected the value of the companies during the current financial crisis because, with the crash in the property market, the values of the assets held by the firms also declined in their value.

As a result of this, firms recorded heavy losses and their company values started to decline thus creating a financial crisis.
It has been argued that the mark to market accounting does not work when markets are basically inactive and illiquid. (Katz). In such a situation, it is therefore proposed that the rules regarding the mark-to-market process shall be suspended in order to provide more flexibility to the companies.

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