tag:blogger.com,1999:blog-5332607313836227710.post3664571790766902703..comments2023-06-10T11:17:55.042+03:00Comments on The Children Of The Revolution: “MARK IT TO MARKET” or “ACCOUNTING PRINCIPLES THAT SHOULDN’T BE ACCEPTED, GENERALLY”Cincinnatushttp://www.blogger.com/profile/16902107238899822299noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-5332607313836227710.post-84028191772782955842008-10-01T18:51:00.000+03:002008-10-01T18:51:00.000+03:00The point missed is that these assets aren't tradi...The point missed is that these assets aren't trading anymore, and the current rules require these items to be recorded at market liquidation value. As a liquid market does not exist, that effectively has forced all these institutions to record the value of these assets as nearly zero. The assets, if held to maturity and allowed to realize the underlaying cashflows are not worth zero - they are worth far more than zero. When a liquid market exists, we can approximate what the actual value may be, and so it is fair to use market prices as the paradigm of measing value. If that market dries up, however, you cannot merely say these assets are worthless. It is more accurate from a standpoint of maintain market transparency (and measuring actual solvency of an institution) to maintain the value of the assets on the book at the last "good" measurement, and then revalue the assets when either their true value is realized (maturity is reach) or an actual liquid market capable of efficiently capturing value once again exists.Aureliushttps://www.blogger.com/profile/07710575615150071351noreply@blogger.comtag:blogger.com,1999:blog-5332607313836227710.post-6100238777960079722008-09-30T00:17:00.000+03:002008-09-30T00:17:00.000+03:00As I am sure Mr Tony will be sure to agree: the do...As I am sure Mr Tony will be sure to agree: the downside of the current arrangement that so recently tanked in congress is that the $700bil was being used, essentially, as a benchmark sum to artificially "mark-to-market" any bad debts so entrusted to the government's authority.<BR/><BR/>Furthermore, the risk surrounding the assets is now realized by the markets, and keeping them on the books at purchase prices is, at best, a gross overstatement of capital, and at worst could lead to bigger scares down the road as they start to go pop with greater frequency.<BR/><BR/>Then again, that's all pie-in-the-sky (PITS?) since the market already knows that there are trillions of sick assets out there, and that knowledge has been built into market expectations.<BR/><BR/>As we are witnessing, proclaiming that the toxic securities will be permitted to remain in the market at any value will drive markets down to the point where they finally reach expectations. And right now, everyone expects a crash...Hariolorhttps://www.blogger.com/profile/08562681760755614913noreply@blogger.com