Why is FASB Reconsidering Mark- to-Market?
The Financial Accounting Standards Board (FASB) is looking into a possible reimplementation of the mark to market rules that just about destroyed the financial system in 2008. How is it possible that they would even reconsider this concept? Didn't the recent flash crash further remind us that markets can be very irrational short term? Markets can and will become disconnected from the financial benefits of the instruments they track. In some instances they can be an indicator of future cash flows of the fixed income instruments they track, but do we really want to use a system proven to be wildly inaccurate just because the other main option gives management leeway to manipulate data. Data manipulation falls into the category of fraud and hence the management team can be fired and prosecuted. All detriments to widespread adoption of false reporting. Why doesn't the FASB instead work on solutions that would reduce the ability to engage in fraudulent reporting? Instead they are ...