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5. Conclusion This paper has used the gold industry to examine trade-o's between mark-tomarket accounting and historical cost accounting. The results of this paper indicate that the effect of the elimination of mark-to-market accounting in this industry is ambigu- ous. Inventory on the balance sheet is more value-relevant at market than at cost. This result conforms well to the intuition that for a commodity such as gold, where the price is set in well-established markets, rm value should be more related to the selling price of the commodity than to its cost. There is no compelling indication that rms who used the production method of accounting while it was still allow- able used excessive levels of nished goods inventory to inate earnings. These ndings support the marking to market of completed gold inventory on the balance sheet. On the other hand, the paper nds support for the contention that income as CAR Vol. 26 No. 4 (Winter 2009) 1228 Contemporary Accounting Research calculated under the sales method is more value-relevant than income calculated under the production method. This paper highlights the trade-offs inherent in focusing on relevance of the balance sheet versus persistence of operating earnings on the income statement. Although balance sheets that contain an inventory gure that is marked to market are more value-relevant than those reporting inventory at cost, use of mark-to- market accounting on the income statement generates a bottom-line gure that is less value-relevant than one obtained through the use of historical cost accounting. As fair value accounting becomes more prevalent, this latter nding reinforces the importance of segregating transitory markto-market adjustments in the income calculation, as mandated under the recent accounting standards on comprehensive meome. pu . - 0.1- c 1| .. A..- n