Mark-to-market accounting entered the national debate during the financial crisis, when the SEC’s rules about mark-to-market accounting (also known as fair value accounting) were criticized for exacerbating problems for the nation’s banks. How does fair value differ from the historical cost of assets, and why would these valuations fluctuate? Salman Khan of the Khan Academy explains in a simplified example.
From this video, you’ll understand:
- The rationale behind mark-to-market accounting
- How mark-to-market and fair value accounting differ from historical cost