Mark to market

Mark to market is the recognition of certain types of securities at their period-end market values at the end of a reporting period. The amount recognized may be a gain or a loss when compared to the acquisition cost of the security. The mark to market process is used to give the readers of an organization's financial statements the most current view of the entity's asset and liability valuations. However, this process can give readers a pessimistic view of a firm's financial situation if there is a sudden downturn in asset values at month-end, from which market prices subsequently recover.

The concept is also used by brokerages to adjust the margin accounts of clients for daily profits and losses. Losses may trigger a margin call that requires clients to put more funds into their accounts.

Related Courses

Fair Value Accounting