The American Spectator : Mark to Market Means Mayhem
Good, quick explanation.
Here is FASB 157. Note that the issue date was September 2006 and the required, effective date was November 1, 2007. My! how fast bad ideas do their damage. We have gone how many centuries with recognizing gains and losses when a transaction took place. In 2 short years of ignoring the tried-and-true, the whole system falls down around our ankles!
Some of this was even foreseen. Not the whole consequence but the first necessary steps of writing off billions of dollars at banks. FASB 157 has been a mess throughout. FASB couldn't even agree how to implement it after it went into effect.
What we do is not easy, but the answer is definitely give up on this revolutionary concept that adds little benefit to the system.
Does it make sense for a performing asset like a mortgage to be artificially devalued on the books because similar assets go down in value? It is performing! Why force a re-evaluation unless an actual transaction that can be recorded as history occurs.
The problem with this whole process is that it started with the presumption that accountants could guess what market value was at any moment for any asset. Now we learn that accountants can only track history well. Everything else is an educated guess.
To me as a businessman, I need to know what is history and what is a guess. Good accounting practice makes history clear and labels all else as pro formas.
This FASB mess has muddled the two concepts.
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