Mark-to-Market Accounts Signal Caution for Investors

May 3 (Bloomberg) -- Mark-to-market accounting has longbeen viewed in academia as the gold standard for preparingfinancial statements. The rule makers, the Financial AccountingStandards Board and the International Accounting StandardsBoard, are coming to the same view. Yet shifting to those normshas some adverse consequences for investors.

For centuries, assets generally had been recorded onbalance sheets at their actual “historical” costs. Criticsargued that this method provided investors with staleinformation that was irrelevant to decision-making (“sunk”costs). Instead, they advocated marking assets to theirestimated market prices, or “fair values.”