Mark-to-market accounting has advantages and disadvantages. While I agree with some comments the author makes, such as "mark-to-market accounting may feed bubbles as well as causing a downward spiral in financial markets in crisis", I disagree when the author states "mark-to-market accounting reflects the true values in the balance sheet of financial institutions and is therefore more informative for investors about true value and risk profile of institution".

Under mark-to-market accounting rules, expected earnings are harder to calculate because an investor cannot tell if gains and losses are due to yield shocks or cash flow shocks, causing the investor to be unaware of the true value. FASB has also attempted to lower, with mark-to-market accounting, the number of companies that "manage" earnings by choosing what and when to sell assets. However, even under mark-to-market accounting, companies can still window dress since markets are not totally liquid.

The theory behind mark-to-market accounting makes perfect sense, but all the information that investors use for determining valuation is not included.

http://www.bloombergview.com/articles/2012-05-02/mark-to-market-accounts-signal-caution-for-investors

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